GTL Summary:

Ministerial Decision No. 55 of 2025, implementing Kuwait's DMTT framework, defines the scope of 'Eligible Payroll Costs' in Article 44. These costs are integral to calculating the Substance-Based Income Exclusion. The definition encompasses employee compensation such as salaries, benefits, and social security contributions, provided they are reflected in financial statements for determining FANIL. The Article explicitly excludes capitalised payroll costs and those allocated to excluded international shipping income. It also defines 'Eligible Employees', including certain independent contractors, and mandates a pro-rata formula for part-time activities in Kuwait.

Document Type: ERS - Executive Regulations
Law: QDMTT Law (Decree-Law no. 157 of 2024)
Decision Number: executive-regulations-55-article-44
Year: 2025
Country: 🇰🇼 Kuwait
Official Name: Article 44 - Eligible Payroll Costs
Last updated at: 2026-02-23 12:13:40 UTC

CHAPTER 5 - EFFECTIVE TAX RATE AND TAX (TOP-UP TAX)

Article 44 - Eligible Payroll Costs

The term Eligible Payroll Costs means employee compensation expenditures, including Salaries and wages and any other expenses that provide a direct and separate personal benefit to the employee, such as health insurance, employee stock option plans, Pension Fund contributions, payroll and employment taxes, employer-paid social security contributions, provided that these expenditures are included in the Taxpayer’s financial statements for the purpose of determining FANIL.

The following costs are excluded from Eligible Payroll Costs:

  1. Payroll costs that have been capitalized and included in the carrying value of Eligible Tangible Assets.

  2. Payroll costs allocated to International Shipping Income and Qualified Ancillary International Shipping Income that has been excluded from the calculation of Taxable Income for the Tax Period.

“Eligible Employees” means employees who carry out activities for the benefit of the MNE Group in the State, including but not limited to:

  1. Full-time or part-time employees of the CE; and

  2. Independent contractors involved in the ordinary operational activities of the MNE Group and working under its supervision and direction. Independent contractors mean natural persons, including those hired through staffing companies, who perform their daily tasks under the supervision and management of the MNE Group. It does not include employees of companies that supply goods or services to the MNE Group.

If the percentage of time that an Eligible Employee of a CE within an MNE Group spends performing activities for the Group in the State during the Tax Period is 50% or less of their total working time spent on such activities, the Eligible Payroll Costs for that CE for that Tax Period, related to that employee, must be calculated according to the following formula:

Proportional Payroll Costs = Eligible Payroll Costs × Total days the Eligible Employee spent in the State during the Tax PeriodTotal number of days in the Tax Period

If the percentage of time that an Eligible Employee of a CE within an MNE Group spends performing activities for the Group inside the State during the Tax Period exceeds 50% of their total time spent performing such activities for that Group, then the entire amount of Eligible Payroll Costs for that employee shall be fully allocated to the CE for that Tax Period.

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