[World Tax News] Kuwait Set to Launch New Corporate Tax Initiative Across All Entities and More

Editorial Team – [2023] 156 taxmann.com 303 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Kuwait set to launch a new corporate tax initiative across all entities

Kuwait is gearing up for a tax system overhaul as it strives to join the OECD/G20 Inclusive Framework on base erosion and profit shifting, making it the sole Gulf Cooperation Council state yet to become a member.

The proposed “Business Profits Tax (BPT) Law” is a key component of Kuwait’s comprehensive plan to revamp its existing tax framework. The reform will unfold in two stages, aiming for full implementation as early as 2025. Currently, only foreign companies engaged in business or trade in Kuwait face taxation on their profits and capital gains income.

BPT law will levy a 15% tax on the profits of various operating structures, encompassing corporate entities, partnerships, and legally distinct businesses established, incorporated, or operating in Kuwait. Notably, individuals and small enterprises will enjoy exemptions.

Starting from January 1, 2025, Kuwaiti multinational companies, including government entities operating internationally and generating annual revenues surpassing €750 million ($806 million), will fall under the purview of the proposed BPT.

The plan outlines the BPT as an amendment to existing tax laws, aligning with the globally implemented Pillar Two framework.

The existing Kuwait corporate income tax law imposes a tax on the income of any body corporate, wherever incorporated, earning income from Kuwait sources.In practice, no income tax is currently imposed on companies incorporated in the GCC and entirely owned by citizens of the GCC. Corporate income tax is currently only imposed on income earned by non-GCC (foreign) companies.

Source: News

2. Argentina offers tax benefits to encourage the growth of organic food farming

Argentina unveiled Law 27734 in the Official Gazette, introducing a tax incentive program to foster the growth of organic food production. These incentives are accessible to eligible individuals and entities engaged in producing and processing organic food products in Argentina as long as their annual sales do not surpass the Category 1 medium enterprise threshold. The incentives encompass:

(a) A tax credit bond equivalent to 50% of employer social security contributions paid for employees involved in the production and preparation of organic products, which can be used to offset national taxes, their advances, and customs duties, with the exception of income tax.

(b) A 50% reduction in income tax liability related to earnings generated from activities endorsed by this law.

This incentive regime remains in effect for 10 years, commencing from the publication date of Law

Source: Law 27734

3. Lithuania proposed legislation for the partial adoption of pillar 2 global minimum tax with deferral provision

Lithuania has released a preliminary legislative proposal, aligning with Council Directive (EU) 2022/2523 dated December 14, 2022, to partially enact the Pillar 2 global minimum tax, consistent with Lithuania’s intentions declared in September 2023. Notably, the proposal entails a deferral mechanism for the primary regulations, encompassing the Income Inclusion Rule (IIR) and the Undertaxed Payment/Profit Rule (UTPR).

The Directive offers member states the flexibility to defer the application of the IIR and UTPR for six consecutive fiscal years when fewer than 12 ultimate parent entities covered by the Directive are located within their jurisdiction. Consequently, the draft legislation only partially incorporates the Directive’s prerequisites, encompassing definitions, criteria for determining the location of group members, reporting obligations, and transitional measures relating to the deferral.

In addition, Lithuania has also introduced a draft law that outlines penalties in connection with global minimum tax compliance. This includes fines ranging from EUR 1,800 to EUR 3,800, to be imposed on managers of legal entities or other accountable individuals who fail to adhere to the prescribed requirements. For repeat violations, these penalties can be increased to a range of EUR 3,800 to EUR 6,000.”

Source: Draft Law for the partial Implementation of Pillar 2 global minimum tax