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Document Type: ER - Executive Rules & Instructions
Law: KIT (Law No. 2 of 2008 amending Decree No. 3 of 1955)
Decision Number: 25
Year: 2013
Country: 🇰🇼 Kuwait
Official Name: Executive Rule No. 25 Concerning supplies

Ministry of Finance - Tax Department - 2013 [Executive Rules & Instructions]

Executive Rules and Instructions of Kuwait Income Tax Decree No. 3 of 1955 as amended by law No. 2 of 2008

Executive Rule No. 25 Concerning Supplies

Article No. 3 of the Executive Regulations

First: Materials and equipment imported from abroad shall be treated as follows:

  1. As for materials and equipment imported from the Head Office, the maximum allowable cost should not exceed 85% of the imported materials and equipment revenues.

  2. As for materials and equipment imported from companies related to the incorporated body, under inspection, the maximum allowable cost should not exceed 90% of the imported materials and equipment revenues.

  3. As for materials and equipment imported from companies not related to the Incorporated Body, under inspection, the maximum allowable cost should not exceed 95% of the imported materials and equipment revenues.

  4. As for supplementary materials imported from abroad for installation purposes, they should be treated as per the results of the documentary inspection.

  5. In case the documentary inspection revealed that the cost is less than the abovementioned percentages, the cost shall be taken as per the documentary inspection.

Second: The costs of supplies include the following:

  1. The invoice amount CIF or (FOB + freight expenses + insurance).

  2. Custom duties.

  3. Custom clearance expenses.

  4. Bank charges for bank guarantees.

  5. Expenses of materials transportation from the port to the storage facility.

  6. Any other expenses related to the imported materials and equipment.

Taking into consideration the reimbursed custom duties and custom clearance expenses, that are reimbursed by the main contractor, which should be excluded from the supply costs and revenues.

Third: In case the value of imported materials and equipments is not specified in the contract, revenues of such materials shall be determined by the following formula:

Material and equipment revenues = Material and equipment costsTotal direct costs of the year × Contract revenues

Fourth: Provisions and rules of this executive rule shall not apply to the Incorporated Bodies utilizing avoidance of double taxation concluded with their countries, and involve exemption of supplies, given that the cost of supplies is what stipulated in item “Second” above.

Fifth: As for materials locally purchased for Incorporated Bodies, whether the conventions for avoidance of double taxation concluded with their countries are in effect, or not, they shall be accounted as per the results of the documentary inspection of these materials.

Sixth: Special and exceptional cases related to supplies shall be treated separately after consulting the Tax Department in this regard.