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Kuwait may abandon 2023 VAT implementation

Inflation worries and $100 barrel oil price recovery could mean switch to limited excise tax

Kuwait may alter plans to introduce VAT as inflation hit 10-year highs of nearly 5%, with fear that an increase in prices from the introduction of the consumption tax would undermine public support for wider tax reforms. In addition, the spiralling oil price, now at around $100 per barrel, has taken the pressure of the state to broaden its tax base. Oil’s surge on the back of Russia’s invasion of Ukraine has pushed crude above the break-even level for almost all the Middle East’s producers.

172 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.

Preparing VAT returns For any of the Arab Gulf states can be challenging.  VAT Calc’s single platform VAT Filer can accurately complete any country filings with verified transactional data from our VAT Calculatoror VAT Auditor integrated tools.


Arab Gulf GCC VAT implementations

2023 Kuwait decides between VAT or excise taxes
2023 Qatar delays VAT on inflation worries
Jan 2022 Bahrain doubles VAT to 10%
16 Apr 2021 Oman introduces 5% VAT
1 Jul 2020 Saudi Arabia trebles VAT to 15%
1 Jan 2019 Bahrain launches 5% VAT regime
1 Jan 2018 Saudi Arabia and UAE introduce 5% VAT regime
2016 VAT and Customs Union agreement: Bahrain; Kuwait; Oman; Qatar; Saudi Arabia; UAE United Arab Emirates

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