Kuwait VAT implementation update

Emir disolves Parliament; may open path to implement VAT

The Kuwaiti National Assembly has been dissolved by the Emir amidst legislative deadlock and disputes between the parliament and government cabinet. This includes tax reform, and the imposition of a Value Added Tax regime, to help reduced the country’s dependency on volatile oil revenues. Kuwait is the only country in the GCC where the International Monetary Fund (IMF) anticipates negative projected real GDP growth of -1.4%.

Parliament has been a long-standing blocker to the imposition of VAT.

Kuwait signed-up in 2017 with five other Gulf states to a VAT and Customs Union, including 5% VAT regime. Along with Qatar, Kuwait is the only state to have not introduced VAT.

Feb 2024: Government rules out VAT in 4-year plan; excise duties favoured until then

Kuwait’s government’s new 4-year plan has ruled out the implementation of VAT. In 2017, Kuwait signed the Gulf Cooperation Agreement pact on a VAT and Customs Union. So far, only Kuwait and Qatar have failed to introduce VAT.

Instead, the government will look at customs duties since the economy and consumer confidence is believed to be still recovering from the global slow down and inflation spike. The government will proceed with the introduction of excise levies on tobacco, watches, jewellery, luxury cars and yachts. It may also be extended to unhealthy foods, including sugary drinks

Kuwait’s parliamentary elections in October 2022 had increased opposition party hold on the legislature meaning a break-through on the introduction of a Value Added Tax regime is unlikely in the next three years.  Opposition parties are against the tax and other economic reforms on the basis that they hit the poorest hardest.

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Kuwait 2023 plans now shelved

175 countries have a VAT or GST regime as at February 2025.

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 2024.

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%.

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