GTL Summary:

Ministerial Decision No. 55 of 2025 details Kuwait's DMTT framework under Decree-Law No. 157 of 2024. Article 45 defines 'Eligible Tangible Assets,' a key component for the Substance-Based Income Exclusion. It includes property, plant, and equipment located in Kuwait but excludes assets generating specific shipping income or held for investment. The Article outlines the methodology for calculating the carrying value, which is the average of beginning and end-of-period values from the UPE's consolidated financial statements, adjusted for depreciation, impairment, and capitalized payroll costs.

Document Type: ERS - Executive Regulations
Law: QDMTT Law (Decree-Law no. 157 of 2024)
Decision Number: executive-regulations-55-article-45
Year: 2025
Country: 🇰🇼 Kuwait
Official Name: Article 45 - Eligible Tangible Assets
Last updated at: 2026-02-23 12:13:40 UTC

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

Article 45 - Eligible Tangible Assets

Eligible Tangible Assets means the following:

  1. Property, plant, and equipment located in the State.

  2. Natural resources located in the State.

  3. The lessee’s right of use to tangible assets located in the State.

  4. Licenses or similar arrangements issued by the government to use immovable property or exploit natural resources in the state, provided they require a significant investment in tangible assets.

The following are not considered part of these assets:

  1. The carrying value of properties, including land or buildings, held for sale, lease, or investment purposes.

  2. The carrying value of tangible assets used to generate International Shipping Income or Qualified Ancillary International Shipping Income. The carrying value of tangible assets attributable to the CE’s income exceeding the maximum Qualified Ancillary International Shipping Income is included in the calculation of Eligible Tangible Assets.

The carrying value of Eligible Tangible Assets is the average carrying value of the tangible assets at the beginning and end of the Tax Period, as reported for the purpose of preparing the CFS of the UPE, after deducting accumulated net depreciation, amortization, or depletion, and adding any amount related to capitalized payroll costs.

The capitalization of payroll costs means the conversion of payroll costs into fixed assets included in the statement of financial position instead of being expensed in the income statement.

When applying the provisions of this Article, the following shall be considered:

  1. The carrying value of Eligible Tangible Assets must be the value recorded in the accounts of the CE that are used in preparing the CFS of the MNE Group.

  2. Tangible assets transferred between members of the MNE Group are not considered.

  3. The carrying value of tangible assets must include adjustments arising from impairment losses.

When accounting standards require the reversal of an impairment loss stated in clause (3) of the previous paragraph, the resulting amount shall be included in the carrying value of the Eligible Tangible Asset at the end of the reported Tax Period, provided that it does not exceed the carrying value of the Eligible Tangible Asset that would have been calculated after depreciation or amortization if the impairment loss had not been recognized.

The average carrying value of tangible assets acquired or disposed during the Tax Period shall be calculated based on half the carrying value of those assets at the beginning or end of the Tax Period.

If the percentage of the duration during which an Eligible Tangible Asset is located in the State during the Tax Period is equal to 50% or less of the total duration of that Tax Period, the amount of that tangible asset for the CE for that Tax Period shall be calculated according to the following equation:

Proportional Carrying Value of Tangible Assets = Average Carrying Value of Tangible Assets Ă— Total Days the Tangible Asset spent in the State during the Tax PeriodTotal number of days in the Tax Period

If the time the Eligible Tangible Asset spends in the State during the Tax Period exceeds 50% of the total Tax Period, then the value of the Eligible Tangible Asset for that Tax Period shall be calculated as the full amount of the average carrying value of the Eligible Tangible Asset.

Without prejudice to the definition of "Eligible Tangible Assets," the following provisions apply to leased assets:

  1. Eligible Tangible Assets held by a CE within the MNE Group as a lessor under a lease agreement shall be considered Eligible Tangible Assets for the lessor, not the lessee, if the lessee of those Eligible Tangible Assets is another CE within the same MNE Group and located in the same state or jurisdiction as the lessor.

  2. In the case stated in clause (3) of the first paragraph of this Article, the value of Eligible Tangible Assets for the lessor shall be determined for the Tax Period based on the average carrying value of those assets at the beginning and end of the Tax Period, taking into account any accounting derecognition adjustments resulting from lease contracts between members of the MNE Group related to Eligible Tangible Assets.

  3. Notwithstanding the preceding clause, Eligible Tangible Assets held by a CE as a lessor under an operating lease are considered Eligible Tangible Assets for that lessor, provided that those assets are located in the same state or jurisdiction where the lessor is located. In this case, the value of the Eligible Tangible Assets for the lessor for the Tax Period related to those assets must be determined according to the following provisions:

    First: If the Eligible Tangible Asset is not leased under a short-term lease, and the lessee is another CE within the same MNE group, the excess (if any) is calculated by comparing the average carrying value of the Eligible Tangible Asset for the lessor at the beginning and end of the Tax Period with the average book value of the asset for the lessee, determined at the beginning and end of that Tax Period.

    Second: If the Eligible Tangible Asset is not leased under a short-term lease, and the lessee is not a CE within the same MNE group, the excess (if any) is calculated by comparing the average carrying value of the Eligible Tangible Asset for the lessor at the beginning and end of the Tax Period with the average undiscounted amount of remaining lease payments due under the lease contract during the Tax Period, including any renewals or extensions considered in determining the right to use the Eligible Tangible Asset according to the financial accounting standard used to determine the lessor’s Net GloBE Income.

    Third: If the Eligible Tangible Asset is leased under a short-term lease, the carrying value of the Eligible Tangible Asset for the lessor for the Tax Period is recognized, and the Eligible Tangible Asset value for the lessee is considered zero.

The average undiscounted amount of remaining lease payments due under the lease contract during the Tax Period is calculated based on the average of the following amounts:

  • The undiscounted amount of remaining lease payments due under the lease contract at the beginning of the Tax Period.

  • The undiscounted amount of remaining lease payments due under the lease contract at the end of the Tax Period.

If a portion of the Eligible Tangible Asset held by a CE in the MNE Group is allocated for leasing, and the other part of that Eligible Tangible Asset is retained for use by the CE, the following provisions apply:

  1. Different components of an asset shall be treated as separate assets for the purposes of these ERs.

  2. The carrying value of the asset shall be allocated among the separate components on a fair and reasonable basis.

An operating lease means any lease agreement for an Eligible Tangible Asset that does not substantially transfer the risks, rewards, and benefits associated with ownership of the asset to the lessee.

Eligible Tangible Assets leased for a short term are those assets that are regularly leased to multiple different lessees during the Tax Period, with the average lease duration for each lessee, including any renewals or extensions, not exceeding 30 days.

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