GTL Summary:

This Rule establishes the maximum allowable costs for design and consultancy expenses incurred abroad by an Incorporated Body under inspection. It specifies distinct percentage caps based on revenue for design and consultancy works. For design work, allowable costs are capped at 75% for head offices, 80% for related companies, and 85% for unrelated companies. For consultancy, the caps are 70%, 75%, and 80% respectively. The Rule mandates compliance with Article 37 for related party transactions, provides a formula to determine revenue when not specified, and requires separate treatment for exceptional cases after consulting the Tax Department.

Document Type: ER - Executive Rules & Instructions
Law: KIT (Law No. 2 of 2008 amending Decree No. 3 of 1955)
Decision Number: 26
Year: 2013
Country: 🇰🇼 Kuwait
Official Name: Executive Rule No. 26 Concerning design and consultancy expenses incurred abroad
Last updated at: 2025-12-19 09:23:03 UTC

Executive Rule No. 26 Design and consultancy expenses incurred abroad

Article No. 3 of the Executive Regulations

First: Design work executed abroad shall be treated as follows:

  1. For design works conducted in the head office, allowed costs shall not exceed 75% of the design revenues.

  2. For design works conducted by companies related to the Incorporated Body under inspection, the allowable cost shall not exceed 80% of design revenue.

  3. For design works conducted by companies unrelated to the Incorporated Body under inspection, the allowable cost shall not exceed 85% of design revenue.

Second: consultancy work executed abroad shall be treated as follows:

  1. The maximum cost to be allowed for consultancy works carried out in head office shall not exceed 70% of the consultancy revenues.

  2. As for consultancy works conducted by companies related to the Incorporated Body under inspection, the maximum cost to be allowed shall not exceed 75% of consultancy revenue.

  3. As for consultancy works conducted by companies unrelated to the Incorporated Body under inspection, maximum cost shall not exceed 80% of consultancy revenue.

Third: With regard to items (2-3), of First and second, consideration should be made for compliance with the stipulation of Article 37 of the Executive Rule.

Fourth: In case there is no separate revenue for the design or consultancy work although the nature of the contract requires the existence of design or consultancy work, the following formula shall be applied:

Design or consultancy revenue = Design or consultancy costTotal direct costs × Contract revenue

Fifth: Special and exceptional cases related to design or consultancy expenses incurred abroad shall be separately treated after consulting the Tax Department in this regard.

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