GTL Summary:

Ministerial Decision No. 55 of 2025, implementing Kuwait's DMTT framework under Decree-Law No. 157 of 2024, outlines rules for allocating income between a Main Entity and a Permanent Establishment (PE) in this Article. It mandates calculating the PE's Financial Accounting Net Income or Loss (FANIL) based on its separate financial accounts, subject to specific adjustments aligned with applicable tax treaties or the OECD Model Tax Convention. The Article clarifies that a PE's FANIL is generally excluded from the Main Entity's GloBE income, providing a key exception for treating PE losses as an expense for the Main Entity, with a subsequent recapture provision.

Document Type: ERS - Executive Regulations
Law: QDMTT Law (Decree-Law no. 157 of 2024)
Decision Number: executive-regulations-55-article-31
Year: 2025
Country: 🇰🇼 Kuwait
Official Name: Article 31 - Allocation of Income or Loss between a Main Entity and a PE
Last updated at: 2026-02-23 12:13:40 UTC

CHAPTER 3 - GLOBE INCOME OR LOSS

Article 31 - Allocation of Income or Loss between a Main Entity and a PE

The FANIL of the CE that is considered a PE shall be calculated in accordance with clauses (1) to (3) of paragraph four of Article 2, based on the net income or loss reported in the separate financial accounts of the PE.

If the PE does not have separate financial accounts, the FANIL shall be calculated based on the amount that would have been reported in those accounts if they had been prepared separately, in accordance with the accounting standard used to prepare the Consolidated Financial Statements of the UPE.

The FANIL of this PE must be adjusted as follows:

  1. For the PE referred to in clauses (1) and (2) of paragraph four of Article 2, the adjustment must include only the amounts and items of income and expenses attributable to that PE according to the applicable Tax Treaty or the local law of the jurisdiction where it is located, regardless of the amount of taxable income or the amount of deductible expenses for tax purposes in that jurisdiction.

  2. For the PE referred to in clause (3) of paragraph four of Article 2, the adjustment must include only the amounts and items of income and expenses that could be attributed to that PE according to the provisions of the Article addressing "Business Profits" in the Model Tax Convention issued by the OECD.

  3. If the CE is considered a PE according to clause (4) of paragraph four of Article 2, the income used in calculating the FANIL is the income exempt in the Jurisdiction where the Main Entity is located and attributable to operations conducted outside that Jurisdiction. The deductible expenses in calculating the FANIL are equal to the expenses that were not deducted for tax purposes in the jurisdiction where the Main Entity is located and attributable to those operations.

The FANIL of the PE shall not be considered when determining the GloBE income or loss for the Main Entity unless otherwise specified in paragraphs five and six of this Article.

The GloBE loss of the PE shall be treated as an expense for the Main Entity, not the PE, for the purpose of calculating the GloBE Income or Loss for that Main Entity, to the extent that the loss of the PE is treated as an expense in calculating the locally taxable income of that Main Entity and has not been deducted against any taxable income item under the laws of both the Jurisdiction of the Main Entity and the Jurisdiction of the PE.

The GloBE income realized later by the PE must be treated as GloBE income for the Main Entity and not for the PE, up to the amount of the GloBE loss previously considered as an expense for the Main Entity.

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