Kuwaiti tax law does not define the term permanent establishment. Instead, unless a tax treaty provides otherwise, a taxable presence is deemed to arise in Kuwait wherever a non-resident carries out a business activity in Kuwait. The definition of a business activity carried out in Kuwait is very broad and may cause a taxable presence to arise even for activities carried out for a very short period of time.

Virtual Service PE

In 2015, Kuwait's Department of Inspections and Tax Claims (DIT) modified its interpretation of the PE concept with respect to services rendered by non-residents to Kuwaiti residents. Under the modified interpretation, a non-resident would be deemed to have a PE in Kuwait, if the following conditions are met:

Services provided under contract to a Kuwaiti entity in connection with such entity’s activities in Kuwait; and
The duration of the contract exceeds the threshold period for a PE under the applicable tax treaty.

It is pertinent to note that under this concept of virtual service PE, the duration of the contact is a determining factor as against the actual activities of the service provider in Kuwait. The concept of virtual PE may apply even if the services are provided entirely offshore.

Powerful Tax Solutions

Tax Rules Engine

Collaboration Tools

Latest Tax News