GTL Summary:

Ministerial Decision No. 55 of 2025, under the DMTT Law, specifies the rules for addressing temporary tax differences in Article 38. This article establishes the methodology for calculating the Total Deferred Tax Adjustment Amount, a key component of Adjusted Covered Taxes. It requires recasting deferred tax expenses to the 15% minimum rate if the domestic rate is higher and excludes items like uncertain tax positions. Crucially, it introduces a five-year recapture rule for unpaid Deferred Tax Liabilities (DTLs), mandating a recalculation of a prior year's Top-up Tax, aligning with OECD GloBE model rules.

Document Type: ERS - Executive Regulations
Law: QDMTT Law (Decree-Law no. 157 of 2024)
Decision Number: executive-regulations-55-article-38
Year: 2025
Country: 🇰🇼 Kuwait
Official Name: Article 38 - Mechanism to Address Temporary Differences
Last updated at: 2026-02-23 12:13:40 UTC

CHAPTER 4 - CALCULATION OF ADJUSTED COVERED TAXES

Article 38 - Mechanism to Address Temporary Differences

The total Deferred Tax Adjustment Amount for the CE in the Tax Period shall be equal to the Deferred Tax Expenses recognized in the financial accounts related to the Covered Taxes for that Tax Period, if the applied tax rate is less than the minimum tax.

If the applied tax rate is higher than the minimum tax, the Deferred Tax Expenses shall be adjusted to be calculated based on the minimum tax.

The total Deferred Tax Adjustment amount for a CE in the Tax Period excludes the following items:

  1. Deferred Tax Expenses related to items excluded from the calculation of GloBE Income or Loss according to Chapter 3 of these ERs.

  2. Deferred Tax Expenses related to Disallowed Accruals and Unclaimed Accruals.

  3. The effect of revaluation or adjustment in accounting recognition of a DTA.

  4. Deferred Tax Expenses arising from a re-measurement with respect to a change in the applicable domestic tax rate in the State.

  5. Deferred tax expenses related to the creation and use of tax credits.

Clause (5) does not apply to foreign tax credits that create DTAs arising from loss carryforwards.

The total Deferred Tax Adjustment amount shall be adjusted as per the following items:

  1. Increased by the amount of any Disallowed Accrual or Unclaimed Accrual paid during the Tax Period;

  2. Increased by the amount resulting from any Recaptured DTL determined in a previous Tax Period and paid during the Tax Period; and

  3. Reduced by the amount that would have been considered a reduction in the total Deferred Tax Adjustment amount due to recognition of a DTA loss as a tax loss for the current Tax Period, if the DTA loss was not recognized due to failure to meet accounting recognition criteria.

If the Taxpayer proves that the DTA recorded at a rate lower than the minimum tax relates to a GloBE Loss, the DTA may be adjusted to the minimum tax rate in the Tax Period in which it was recorded. The total deferred tax adjustment amount shall be decreased by the amount of the DTA increase due to the provisions of this Article.

If a DTL is calculated and it does not qualify as a “recaptured excluded accrual” and remains unpaid for five subsequent Tax Periods, that amount must be recovered in accordance with the provisions of this Article.

The Recaptured DTL Amount under the preceding paragraph shall be considered a reduction in the covered taxes for the fifth preceding Tax Period. Consequently, the effective tax rate and Top Up Tax for that period shall be recalculated in accordance with paragraph (1) of Article 47 of these ERs.

Recaptured DTL means the increase previously included in the Deferred Tax Liabilities category within the Total Deferred Tax Adjustment Amount for the fifth preceding Tax Period, which has not been reversed or settled by the end of the current Tax Period—unless it relates to a Recaptured Excluded Accrual.

Recaptured Excluded Accrual means the Deferred Tax Expense Amounts related to changes in Deferred Tax Liabilities associated with the following:

  1. Cost recovery allowances related to tangible assets;

  2. The cost of licensing or similar arrangements with the government for the use of immovable property or exploitation of natural resources requiring substantial investment in tangible assets;

  3. Research and development expenses;

  4. Decommissioning and remediation expenses;

  5. Fair value accounting for unrealized net gains;

  6. Net foreign exchange gains;

  7. Insurance reserves and deferred insurance acquisition costs;

  8. Gains from the sale of tangible property located in the same jurisdiction as the CE, which are reinvested in tangible property in the same jurisdiction; and

  9. Additional amounts resulting from changes in accounting principles related to any of the above items.

Disallowed Accruals is defined as any movement in deferred tax expenses recognized in a CE’s Financial Accounts that relates to uncertain tax positions or dividend distributions from a CE.

Unclaimed Accruals means any increase in deferred tax liabilities recorded in a CE’s Financial Accounts during a Tax Period that is not expected to be settled within five subsequent Tax Periods, for which the DCE makes an election not to include it in the total deferred tax adjustment amount for that period.

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