Ministry of Finance Opens Door to Advance Tax Payments as Bank Takes Initiative to Settle 50 Million Dinars for 2025
- Open discussions with a second bank to pay an estimated KD 60 million for the first year of the law
- Expectation of stable collection of KD 250 million from the 15% tax on last year’s income
- Kuwaiti banks account for 44% of total payments from multinational entities
- The list of early payers includes four foreign companies with amounts ranging between KD 100,000 and KD 600,000
- Early payment is a cornerstone for avoiding consequences and preserving brand reputation
- The pool of companies complying with the law may exceed 300, with some engaging in hedging
- Registered entities will not be required to pay taxes if their revenues fall below the prescribed minimum threshold
In an effort to achieve a dual financial benefit—benefiting both the public treasury and companies included in the tax base—the Ministry of Finance has implemented an innovative mechanism for collecting the tax on multinational entities (MNEs). These entities operate in more than one country or jurisdiction and have annual revenues of at least €750 million, subject to a minimum rate of 15%. The new mechanism introduces what is known as the “advance payment” option. What are the details of this new product, and what might encourage companies to pay their taxes before they are due, disregarding the opportunity cost of this liquidity and the returns it could generate, especially if the entity is a bank?
To simplify, this mechanism requires companies subject to this tax—which began applying from January 1, 2025—to pay the Ministry of Finance their anticipated tax liabilities in advance. For example, if a company expects last year’s revenues to incur an estimated tax liability of KD 10 million, it can proactively pay the Ministry this amount before the due date. This raises the question: What would compel any entity to pay its future tax obligations urgently?
In exchange for “advance payment,” companies receive priority in tax audits. For large conglomerates, this represents a genuine challenge, as it is not merely a routine procedure but a rigorous test of their compliance with financial regulations and laws. Understanding audit instructions and preparing thoroughly are key to avoiding undesirable consequences and ensuring smooth, transparent operations.
It should be noted that all open tax-related discussions with multinational or potential multinational entities currently focus solely on 2025 liabilities. The current year remains excluded pending the completion of fourth-quarter data.
From an accounting perspective, verifying that a company’s documented financial reality matches its books is a core principle for conglomerates and major companies keen on preserving their brand reputation locally and internationally. This procedure demonstrates to stakeholders skilled in reading and analyzing financial statements the company’s success in managing account settlements, tax collection, and preventing tax evasion to ensure revenue integrity.
Furthermore, companies gain accounting benefits from this initiative through priority tax audits, which help identify and correct any accounting discrepancies or misclassifications within the stipulated timeframe. It also ensures the presence of all supporting documents for each financial transaction and measures the extent to which the entity’s accounting systems comply with prescribed requirements. In short, it guarantees the Ministry of Finance’s acceptance of the company’s submitted accounting and tax data.
In this regard, approximately five companies benefited from the “advance payment” option for the 15 percent tax, including a local bank that paid around 50 million dinars, anticipating that its tax liabilities based on its 2025 financial results would be substantial. Other companies, which are foreign entities operating in Kuwait, paid varying amounts ranging between 100,000 and 600,000 dinars. Meanwhile, open discussions are underway with another bank, indicating a likelihood of paying estimated taxes for the previous year amounting to nearly 60 million dinars. These figures, combined with the amounts already paid by one bank, account for 44 percent of the total tax liabilities due from multinational entities in 2025.
Preliminary data still suggest that the Ministry of Finance’s initial projections regarding the commencement of the law’s implementation remain stable, estimating that the ministry will collect tax revenues from multinational companies listed on its rolls amounting to approximately 250 million dinars (around $800 million) for the 2025 fiscal year. Furthermore, the number of entities subject to the multinational corporate tax may exceed previous estimates of 300 groups, comprising 45 Kuwaiti and Gulf groups and 255 foreign groups operating within Kuwait.
The reason for the increased number of registered groups compared to earlier expectations is that several companies registered their data with the Ministry of Finance as a tax precaution, given their potential revenues nearing 750 million euros. This allows them to avoid any violations in this regard, while also ensuring they are not obligated to pay any amounts if their revenues fall below the statutory minimum threshold.
Notably, the multinational corporate tax is among the economic reforms pursued by the government under Vision 2035. These reforms are supported by legislation aimed at diversifying non-oil revenue sources and maximizing the efficiency of government administration in maintaining flexible revenues amid oil price volatility, while encouraging the private sector to play an active role in implementing Kuwait Vision 2035.
