A rate of 1% is collected annually from the net profits of Kuwaiti public and closed shareholding companies for the state's public treasury, under Law No. 46 of 2006 on Zakat and the Contribution of Public and Closed Shareholding Companies to the State Budget.
Who Is Subject to This Rate?
This rate applies to Kuwaiti public and closed shareholding companies, and upon submitting their declaration of the amount due together with their annual balance sheets, these companies determine the portion of the collected amount that represents Zakat on their funds, and they may also request that the amount due, or part of it, be directed to one of the public services.
The Ministry of Finance is responsible for collecting this rate in favour of the state's public treasury in accordance with the rules and procedures set out in the law's executive bylaw. This rate is thus imposed primarily as a mandatory contribution to the state budget, while also allowing the company itself to treat part or all of it as Zakat on its funds if it wishes to do so.
Who Is Excluded?
Companies owned by the government for which special laws are issued, and companies to which Kuwait Income Tax Decree No. 3 of 1955 applies, are excluded from this law, meaning entities subject to income tax fall outside the Zakat regime.
Registration, the Tax Card, and the Filing Deadline
Companies subject to the law must apply for a tax card within thirty (30) days of the date of registration with the tax administration, and this card is renewed annually no later than the fifteenth day of the fourth month following the end of the period covered by the law. Companies subject to the law must also submit a financial declaration audited by an accounting and audit office approved by the tax administration within the same period, accompanied by the auditor's report, the balance sheet, and the financial statements.
Penalty for Evading the Contribution
Any person who submits incorrect statements or refrains from submitting them with the intent to evade payment of this rate is punishable by imprisonment for a period not exceeding three years and a fine not exceeding five thousand Kuwaiti Dinars, or by either penalty, together with a judgment for payment of the amount due.
Shariah-Compliant Channels for Spending Zakat
The law requires the Minister of Finance to issue the executive bylaw setting out the rules and procedures for collecting and spending the funds collected, and this bylaw must include the Shariah-compliant channels for Zakat, after obtaining the approval of the Fatwa Authority at the Ministry of Awqaf and Islamic Affairs, ensuring that the portion a company designates as Zakat is directed to approved Shariah channels.
Legal References
- Law No. 46 of 2006 on Zakat and the Contribution of Public and Closed Shareholding Companies to the State Budget – Articles 1, 2, 3, and 4 (exclusions).
- Administrative Resolution No. 876 of 2013 issuing the executive rules and instructions of Zakat Law 46-2006 – Executive Rule No. (3) on obtaining the tax card, and Article (21) of the executive bylaw.
For questions about your specific situation, you can ask the Kuwait Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.