State

:

The State of Kuwait including all its rights in the divided area and the submerged zone with shared natural resources or wealth to be distributed equally between the State of Kuwait and the Kingdom of Saudi Arabia in accordance with borders and coordinates confirmed by agreements and Memoranda of Understanding (MOUs) concluded in this regard.

Minister

:

The Minister of Finance

Law

:

Tax Law on Multinational Entities (MNEs)

Executive Regulation

:

The executive regulation of this law.

Tax Department

:

The competent Department responsible for the implementation of tax laws.

Tax

:

The supplementary tax on Multinational Entities (MNEs) imposed by the provisions of this law.

Multinational Entities (MNEs)

:

Any group of companies situated in more than one state or a jurisdiction of which the state is a member -even if through a permanent establishment- with turnover number reaching the revenues threshold.

Revenue Threshold

:

The annual revenues of a group of Multinational Entities (MNEs) that equal or exceed 750 million euros in the consolidated financial statements of the ultimate parent entity for at least two tax periods within the four tax periods immediately preceding the relevant tax period. The consolidated financial statements must include all revenues generated by the controlled participating entities, including revenues of the excluded entities that are taken into account when determining whether the revenue threshold has been met, in accordance with the controls and conditions set by the executive regulations.

Group

:

Refers to any of the following two forms:

1. Entities linked through ownership or control, where all assets, liabilities, income, expenses, and cash flows of those entities are included in the consolidated financial statements of the ultimate parent entity or excluded from the same based on size or materiality, or the linked entities are held for sale.

2. An entity located in one state or jurisdiction with one or more permanent establishments in other states or jurisdictions, provided that this entity is not part of the linked entities referred to in item (1).

Entity

:

Includes the following:

1. Companies.

2. Any agreement that does not take the form of a company, where the concluding individuals are responsible for the arising obligations.

3. Any body, public institution, fund, or any legal person.

Resident Entity

:

An entity that meets either of the following two requirements:

1. If it is established in the state.

2. If its main or actual headquarters is in the state.

Parent Entity

:

Includes either of the following two situations:

1. The ultimate parent entity.

2. Any participating entity that is not considered an ultimate parent entity, or is not considered a partially-owned parent entity, permanent establishment, or investment entity, and directly or indirectly owns equity in another entity within the same multinational entities group.

Ultimate Parent Entity

:

An entity within a multinational entities group that directly or indirectly holds controlling interest(s) in another entity or entities and is not controlled by any other entity within the group. It is also the main entity that is not part of any other group, except for sovereign wealth funds.

Participating Entity

:

Any entity that is a member of a group, and any permanent establishment of a parent entity, according to controls and conditions defined by the executive regulations.

Parent Entity

:

A participating entity in a group that has permanent establishments, and whose financial statements include the income or loss of its permanent establishments.

Joint Venture

:

An entity whose financial results are disclosed through the equity method in the consolidated financial statements of the ultimate parent entity, provided that the ultimate parent entity directly or indirectly holds at least 50% of its equity.

Subsidiary of the Joint Venture

:

An entity whose assets, liabilities, revenues, expenses, and cash flows are consolidated in the financial statements of the joint venture.

Stateless Entity

:

An entity that is considered a permanent establishment under paragraph two of Article 2 of this law, or an entity that passes income but is not an ultimate parent entity.

Pass-Through Entity

:

An entity through which revenues, costs, profits, and losses flow to its owners or investors, and is not a tax resident in the state or jurisdiction where it was established.

Minority-Owned Participating Entity

:

A participating entity in a multinational entities group in which the ultimate parent entity holds an ownership stake of 30% or less.

Investment Entity

:

Includes any of the following forms:

1. An investment fund or real estate investment vehicle.

2. An entity that is at least 95% directly owned by an investment fund or real estate investment vehicle and operates exclusively or primarily to hold assets or invest funds for the benefit of these investment entities.

3. An entity that is at least 85% directly owned by an investment fund or real estate investment vehicle, provided that all of its income consists of dividends or equity gains or losses that are excluded from the calculation of net income or loss.

Investment Fund

:

An entity that meets all the following criteria:

1. Designed to pool assets from several investors, one of whom should be unrelated.

2. Invests according to a defined investment policy.

3. Allows investors to reduce transaction costs, research, and analysis, or to collectively distribute risks.

4. Aims to generate income or investment gains, or to provide protection against a specific or general event.

5. Provides investors with returns from the fund's assets or income generated from those assets, based on the contributions they make.

6. Subjects to the laws of the state or jurisdiction where it is established or managed.

7. Is managed by specialists in investment fund management on behalf of the investors.

Pension Fund Entity

:

An entity established for the purpose of investing funds for the benefit of a pension fund, either within the state or in any other state or jurisdiction.

Real Estate Investment Vehicle

:

An entity owned by multiple investors, holds immovable property and that is subject (whether it or its investors) to a single level of taxation, with at most one year of deferral.

Governmental Entity

:

Refers to an entity which fulfills the following criteria:

1. It should be partially or wholly owned by the government regardless of its legal form.

2. Its main purpose of establishment should be represented in performing a governmental function, managing or developing the governmental assets through investment, possessing investments or managing assets or investment activities related to the state's assets. It shouldn't practice any trade or activity.

3. It should be responsible for its overall performance before the government.

4. Upon liquidation or dissolution, its assets shall devolve to the government while the net profits shall be distributed to the government only. In this item, the word 'Government' means the government of State of Kuwait or the government of any other state or jurisdiction.

Non-Profit Organization

:

Refers to an entity established and operated exclusively for religious, charitable, scientific, artistic, cultural, sports, or educational purposes or any other similar non-profitable purposes, in accordance with terms and conditions defined by the executive bylaws.

Pension Fund

:

An entity established primarily to manage or provide pension benefits for individuals.

Related Entities

:

They are entities linked with mutual relation with each other or with other entity. Also, it refers to any entity with effective influence or control over other entity or two or more entities under a shared control.

Activity

:

Any trade in commodities, services, industry, profession, craftsmanship, agency, brokerage, real estate development, exploiting movable and immovable properties, speculation, or any activity with commercial or investment nature.

Taxpayer

:

A taxable group of entities under the provisions of Article 3 of this law.

Tax Payable

:

A tax due under this law, whether declared in the tax declaration by the taxpayer or calculated through the actual tax assessment.

Minimum Tax Rate

:

An effective tax rate of 15%.

Covered Tax

:

The taxes recognized in the financial accounts of an entity with respect to its income or profits, or its share of the income or profits of an entity in which it holds an ownership interest, which are paid to the state or any other state or jurisdiction. A tax is not considered a covered tax if it does not meet these criteria.

Adjusted Covered Tax

:

The covered tax based on tax costs calculated on an accrual basis, or losses, recorded in the taxpayer's financial statements during the tax period, along with any adjustments made to it, in accordance with the controls and conditions set by the executive regulations.

Tax Declaration

:

For purposes of the imposed tax in accordance with the provisions of this law, it is the data and information to be disclosed by the taxpayer for the tax period, in accordance with the forms prepared by the Tax Department.

Tax Assessment

:

Determining the payable tax due, and grounds of its calculation or assessment.

Tax Debt

:

A tax due plus penalties imposed under this law.

Pillar Two

:

A global measure within combating the Base Erosion and Profit Shifting (BEPS) project, issued by the Organization for Economic Co- operation and Development (OECD), stipulates a global minimum tax rate imposed on multinational groups of entities.

Income Inclusion Rule

:

A tax mechanism defined by Pillar Two that grants a state or a jurisdiction where the parent entity is located the right to collect the tax differential for taxes paid below the minimum tax by participating entities in other states or jurisdictions, in proportion to their equities in those entities.