Article 33 - Covered Taxes

Covered taxes mean the following:

1. Taxes included in the financial accounts of a CE related to income, profits, or shares of income or profits of any other CE in which it holds an Ownership Interest.

2. Taxes imposed in lieu of corporate income tax, including withholding taxes on interest, rents, and royalties.

3. Taxes imposed on retained earnings and corporate equity, including taxes imposed on the basis of income and equity that are not considered Top-Up Tax.

Excluded from covered taxes are the following amounts:

1. Tax payable by the Parent Entity under the Qualified Income Inclusion Rule (Qualified IIR);

2. Tax payable by the CE under a Qualified Domestic Minimum Top-Up Tax in a state or jurisdiction;

3. Taxes attributed to adjustments made by a CE as a result of applying the Qualified Under-Taxed Payments Rule (Qualified UTPR);

4. Taxes imposed on the MNE Group according to the DMTT Law;

5. A Disqualified Refundable Imputation Tax;

6. Taxes paid by an insurance company in respect of returns to policyholders;

7. Contributions paid to any Entity that is not part of the General Government under the GloBE rules, as well as controls and conditions set by the Tax Administration in the executive rules and instructions.

8. Amounts imposed under the following laws:

   1. Decree No. (3) of 1955 regarding Kuwaiti Income Tax and its amended laws;

   2. Kuwaiti Income Tax Law in the (designated area) No. (23) of 1961;

   3. Law No. (19) of 2000 regarding the support and encouragement of national employment in Non-Governmental Entities, as amended by Law No. (32) of 2003;

   4. Law No. (46) of 2006 regarding Zakat and the contribution of public and closed joint-stock companies to the State budget.

The following expenses are also considered as Excluded Covered Taxes;

1. Expense of the CE-owner subject to the Controlled Foreign Corporation (CFC) regime allocated to a local CE under clause (3) of the first paragraph of Article 37 of these ERs.

2. Expenses incurred by the Main Entity allocated to a PE located in the State under clause (1) of the first paragraph of Article 37 of these ERs.

3. Expense incurred by the CE owner on the income of a Hybrid Entity according to clause (4) of the first paragraph of Article 37 of these ERs, allocated to a Hybrid Entity whether located in the State or under the scope of the DMTT Law.

4. Expenses incurred by the CE-owner (such as taxes based on net income), except withholding tax imposed by the State (if applicable), allocated to a distributing CE located in the State under clause (5) of the first paragraph of Article 37 of these ERs.

Taxes imposed in lieu of Corporate Income Tax means those taxes imposed on gross income or payments instead of income tax imposed on net income.

For the purposes of Qualified Imputation Tax, taxes imposed on the dividend recipient and withheld by the distributing corporation on the payment of that dividend are not considered Disqualified Refundable Imputation Taxes, even if the withholding tax is partially or fully refunded to the shareholder by the tax department in a jurisdiction.

Qualified Imputation Tax means the covered taxes due or paid by a CE that are refundable or can become a credit for the beneficial owner of dividends distributed by that CE or the share of profits distributed by the Main Entity. In the case of covered taxes due or paid by a PE, to the extent that the refunded amount is due for payment, or the credit is provided as follows:

1. Paid in another Jurisdiction different from the Jurisdiction imposing the covered taxes under a foreign tax credit system.

2. To a beneficial owner of dividend distributions subject to tax at a rate equal to or exceeding the Minimum Tax on dividends currently under the local law of the Jurisdiction imposing the covered taxes on the CE.

3. To an individual beneficial owner of dividend distributions who is tax resident in the country imposing the covered taxes on the CE and taxed on dividends as ordinary income.

4. To a Government Entity, an International Organization, a non-profit resident organization, a resident Pension Fund, a resident Investment Entity not considered a controlled Group Entity, or a resident life insurance company, and that is to the extent that the receipt of dividends relates to the operations of a Pension Fund, and is subject to tax in a similar manner as dividends received by a Pension Fund.

A Non-Profit Organization or Pension Fund is considered resident in a Jurisdiction if it is established and managed in that Jurisdiction. An Investment Entity is considered resident in a Jurisdiction if it is created and organized in that Jurisdiction. A life insurance company is considered resident in the Jurisdiction where it is located.

Qualified Domestic Minimum Top-Up Tax (QDMTT) means a minimum tax imposed under the provisions of the local law of a Jurisdiction that meets the following conditions:

1. The taxable income of the CEs in the jurisdiction (i.e., local excess profits) is determined in a manner consistent with the GloBE rules.

2. It contributes to increasing local tax liability related to local excess profits so that the tax imposed on CEs in the Jurisdiction reaches the Minimum Tax during a Tax Period.

3. It is applied in a manner consistent with the outcomes of GloBE rules and commentary, provided that the jurisdiction does not provide any special benefits related to these rules.

The QDMTT on domestic excess profits may be calculated based on an Acceptable Financial Accounting Standard allowed by the accounting authority or on an Authorized Financial Accounting Standard adjusted to prevent any Material Competitive Distortions, instead of the financial accounting standard used for preparing CFS.