Base Erosion and Profit Shifting (BEPS) refers to a set of international tax rules developed by the OECD (Organization for Economic Co-operation and Development) to combat tax evasion strategies that exploit gaps and mismatches in tax rules between different jurisdictions around the world.
When was BEPS Initiated?
The BEPS initiative was launched by the OECD (Organization for Economic Co-operation and Development) and G20 countries in 2013.
Why was BEPS Initiated?
-
Tax Avoidance:
Companies were exploiting gaps and mismatches in tax rules to reduce their tax liabilities.
-
Tax Fairness:
There was increasing concern that these practices were unfair to smaller businesses and economies that couldn’t engage in such strategies.
-
Revenue Loss:
Governments were losing significant tax revenues, which were critical for public services and infrastructure.
What does the BEPS initiative include?
BEPS is often discussed in terms of two main pillars that were developed as part of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.
How is Pillar 2 implemented?
From the Global Perspective:
Over 140 countries (including Kuwait) have committed to the BEPS initiative to address tax challenges by participating in the Two-Pillar Solution.
| What is it? | → | Pillar Two introduces a global minimum corporate tax rate set at 15% of net income. |
| Why does it matter? | → | Large multinational companies will now be subject to a minimum effective tax rate of 15% in the countries in which they operate. Any tax incentives claimed in offshore locations may no longer be effective. |
| Who does it affect? | → | Multinational companies with annual revenues exceeding EUR 750 million. |
| When will it take effect? | → | The corporate tax rate will be imposed in Kuwait on multinational corporations with annual revenues exceeding EUR 750 million effective 1 January 2025. |
From Kuwait Perspective:
With the imminent introduction of Corporate Taxes in Kuwait, and after Kuwait joined the OECD/G20 Inclusive Framework on BEPS in November 2023, local and multinational companies operating in Kuwait must comply with the new laws and regulations.
The Kuwait Ministry of Finance (MoF) will act as the representatives of OECD to combat tax evasion and ensure tax fairness. The proposed corporate tax law will expand its scope to include other legal entities incorporated and operating in Kuwait.
The implementation will occur in two phases:
- Phase 1 (Effective 1 January 2025): Corporate tax law will be imposed on large Multinational Corporations with annual revenues exceeding EUR 750 million.
- Phase 2 (Effective 1 January 2026): Corporate tax law will be extended to other legal entities incorporated and operating in Kuwait, excluding individuals and small-sized enterprises.
What are the Services Offered by Baker Tilly Kuwait?
- Assessment Report on Kuwaiti Corporate Tax and Minimum Global Tax on Kuwaiti Multinational Companies that have annual revenues exceeding EUR 750 million.
- Corporate Tax and Minimum Global Tax process, policies and procedures manual that enables companies to comply with tax regulations.
Why Baker Tilly Kuwait?
- Hiring Baker Tilly offers you access to a team of industry experts with extensive knowledge in tax, audit, and advisory services, ensuring tailored solutions that meet your unique business needs.
- A collaborative approach that fosters strong client relationships, providing dedicated support and innovative strategies to navigate complex challenges effectively.