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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: 40
Year: 2013
Country: 🇰đŸ‡ŧ Kuwait
Official Name: Executive Rule No. 40 Concerning grants and donations

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. 40 Concerning grants and donations

Article No. 3 of the Executive Regulations:

Includes all grants and donations given in cash or in kind, by the donor without compensation.

First: Tax Treatment:

  1. Donations, grants or aids granted to governmental institutions in the State of Kuwait are fully deductible whether in cash or in kind.

  2. Donation, grants, or monetary aids paid to private licensed Kuwaiti bodies in the State of Kuwait, such as organizations, charitable and social associations, shall be allowed provided that deduction does not exceed 2.5% of the Incorporated Body's net income in accordance with the tax declaration, before this deduction is allowed.

  3. Verifying that the donation is genuine and supported with documents and is not offset by any services.

  4. Donations, grants or aids given to natural individuals shall not be accepted.

Second: Special and exceptional cases relating to donations and grants shall be treated separately after consulting the matter with the Tax Department.

Example:

An Incorporated Body submits its tax declaration with a net profit of KD 90,000. The following was shown from the declaration's attachments:

Total revenues

KD 1,000,000

Total costs

KD 910,000

KD 10,000 grants thereof

The tax treatment of grants item for the following cases:

First: grants fully paid to governmental bodies:

The grants shall be fully approved as they are paid to a governmental body, provided that supporting documents are presented.

Second: grants fully paid to private licensed Kuwaiti bodies:

Net profit before deducting the grant = KD 90,000 + 10,000 = KD 100,000.

The approved grant value = 100,000 X 2.5% = KD 2,500

The disallowed = 10,000 – 2,500 = KD 7,500 added back to the profit.

From the above, an amount of KD 2,500 shall be approved as grants paid to licensed Kuwaiti bodies, provided that supporting documents are presented.

Third: part of the grant is paid to a governmental body and the other part is paid for licensed private Kuwaiti bodies:

In the previous example, assuming that KD 3,000 of the grant is paid to a governmental body and the remaining amount of KD 7,000 is paid to a licensed Kuwaiti body, the tax will be treated as follows:

  1. Grants paid to a governmental body in the amount of KD 3,000 shall be approved in full provided that supporting documents are presented.

  2. Grants paid to a licensed Kuwaiti body shall have the following tax treatment: Net profit before deducting the grant = 90,000 + 7,000 = KD 97,000

    The approved grant value = 97,000 X 2.5% = KD 2,425

    The disallowed = 7,000 – 2,425 = KD 4,575 added back to profit.

From the above, an amount of KD 2,425 shall be approved as grants paid to a licensed Kuwaiti body, provided that supporting documents are presented.

Fourth: grants not supported with documents:

  • In the previous example, assuming that of the KD 3,000 of grants paid to a governmental body, only KD 2,000 were supported with documents during inspection of the Incorporated Body. In this case, the grants of KD 2,000 supported with documents shall be accepted and KD 1,000 will be disallowed.

  • The same applies to grants for private licensed Kuwaiti bodies. KD 2,425 shall be approved provided that supporting documents are presented.