Kuwait election means VAT implementation unlikely soon

Opposition election win extends deadlock on introduction of 5%

Kuwait’s parliamentary elections this week has increased opposition party hold on the legislature meaning a break-through on the introduction of a Value Added Tax regime is now unlikely soon.  Opposition parties are against the tax and other economic reforms on the basis that they hit the poorest hardest. The deadlock with the cabinet has delayed the approval of a state budget for the fiscal year 2022/2023

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Kuwait 2023 plans now shelved?

171 countries have a VAT or GST regime as at July 2022.

The Gulf state is one of the last two holdouts not yet to introduce a Value Added Tax regime under the 2017 Gulf Cooperation Council agreement to create a VAT union. The other is Qatar which may expect to launch VAT in 2023.

Instead of VAT, Kuwait is now exploring an excise or turnover tax on a limited range of supplies, including tobacco and related products, soft and sweetened drinks, expensive goods such as watches, jewellery and precious stones as well as luxury cars and yachts.

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Two rates are being considered: 10% and 25%.

Kuwait had targeted 2023 VAT launch date

In the Ministry of Finances’ annual results for the state to March 2021, it set 2023 as the date for the implementation of VAT, with customs coming in one year earlier in 2022. This could raise KD 1.7billion (approx €5billion or $5.7billion) by 2025.

Any indirect tax introductions remain subject to parliamentary approval.

Gulf Cooperation Council 2017 VAT agreement

The six Gulf states agreed in 2016 to introduced VAT in their respective states, and to create a VAT and Customs Union – similar to the European Union model. This would seek to harmonise the rules keep rates broadly similar. The all signed the a unified agreement, and it came into force on 1 February 2017.

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