GTL Summary:

Ministerial Decision No. 55 of 2025 operationalises Kuwait's DMTT framework under Decree-Law No. 157 of 2024. Article 37 establishes precise rules for allocating Covered Taxes between Constituent Entities (CEs). It explicitly prohibits certain cross-border allocations, including taxes from a foreign Main Entity to a Kuwaiti Permanent Establishment (PE) or from a foreign CE-Owner under a CFC Tax Regime to a local CE. The article provides specific guidance for Tax-Transparent and Hybrid Entities, and caps the allocable tax on passive income, ensuring tax attribution aligns with GloBE principles.

Document Type: ERS - Executive Regulations
Law: QDMTT Law (Decree-Law no. 157 of 2024)
Decision Number: executive-regulations-55-article-37
Year: 2025
Country: 🇰🇼 Kuwait
Official Name: Article 37 - Allocation of Covered Taxes from One CE to Another
Last updated at: 2026-02-23 12:13:40 UTC

CHAPTER 4 - CALCULATION OF ADJUSTED COVERED TAXES

Article 37 - Allocation of Covered Taxes from One CE to Another

Covered taxes of one CE are allocated to another CE as follows:

  1. Regarding Covered Taxes on income attributable to a PE, the following must be considered:

    1. No amount of Covered Taxes recorded in the Financial Accounts of the Main Entity may be allocated to a PE located in the State, provided that the Main Entity is located outside the State and those taxes were imposed by another jurisdiction.

    2. No amount of Covered Taxes recorded in the Financial Accounts of a Main Entity located in the State and allocated to a PE located outside the State shall be allocated to that Main Entity.

  2. Any amount of Covered Taxes recorded in the Financial Accounts of a Tax Transparent Entity, related to GloBE income or loss allocated to a CE-Owner, must be allocated to that CE-Owner in accordance with clause (2) of paragraph 1 of Article 32 of these ERs, after allocating to any PE, and based on their Ownership Interest.

  3. No amount of Covered Taxes recorded in the Financial Accounts of a CE-Owner located outside the country may be allocated to another CE located within the State, in cases where the Covered Taxes arise from a CFC Tax Regime.

  4. In the case of a CE that is a Hybrid Entity and is located within the State, no amount of Covered Taxes recorded in the Financial Accounts of a CE-Owner located outside the State, and imposed on the income of the Hybrid Entity, may be allocated to that Hybrid Entity located in the State.

  5. No amount of Covered Taxes payable outside the country on distributions or deemed distributions made by a CE located in the State to a CE-Owner located outside the State may be allocated to the distributing CE located in the State.

The provisions of the preceding paragraph of this Article apply to the allocation of Covered Taxes related to PEs, Tax-Transparent Entities and Hybrid Entities, in addition to the allocation of taxes from CFC regimes and taxes imposed on distributions from one CE to another.

Covered taxes allocated to a CE under clauses (3) and (4) of the first paragraph of this Article, with respect to passive income, are included in the Adjusted Covered Taxes of that CE in an amount equal to the lesser of:

  1. The amount of covered taxes allocated in relation to that passive income; or

  2. The Top-Up Tax rate imposed in the jurisdiction of the CE determined without considering the Covered Taxes incurred by the CE-Owner in relation to that passive income, multiplied by the amount of passive income of the CE subject to any CFC regime or financial transparency rule.

If there is an excess amount of Covered Taxes incurred by the CE-Owner in relation to such passive income after applying this Article, that excess may not be allocated pursuant to clause (3) or (4) of the first paragraph of this Article.

If the GloBE income of a PE is treated as the GloBE income of the Main Entity, in accordance with paragraphs (5) and (6) of Article 31 of these ERs, then any Covered Taxes arising in the location of the PE and related to that income shall be treated as Covered Taxes of the Main Entity, but only up to an amount not exceeding that income multiplied by the highest regular corporate income tax rate in the state or jurisdiction where the Main Entity is located.

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