The Double Taxation Relief (Taxes on Income) (Kuwait) Order 1999

Explanatory Note

(This note is not part of the Order)

The Agreement with the State of Kuwait is set out in Part I of the Schedule to this Order.

The Agreement provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

International transport profits are generally to be taxed only in the country of residence of the operator (Article 8).

The Agreement includes rules for determining taxable profits when a company in one country is related to a company in the other country (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country who is subject to tax on them there shall not, in general, exceed 5 per cent. of the gross amount if the beneficial owner is a company controlling at least 10 per cent. of the voting power in the company paying the dividends; and 15 per cent. of the gross amount of the dividends in all other cases (Article 10).

In general, interest is to be taxed only in the country in which the beneficial owner is resident (Article 11).

Royalties may be taxed in the country of source at a rate not exceeding 10 per cent. if the beneficial owner is a resident of the other country.

Gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of movable property forming assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, only to be taxed in the country of the taxpayer’s residence (Articles 14 and 15).

Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16).

Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are performed (Article 17).

Occupational pensions (other than those paid in respect of Government service) and annuities are to be taxed only in the recipient’s country of residence, provided that the recipient is subject to tax in that country on the income concerned (Article 18).

Government service remuneration and pensions are normally taxable only by the paying Government (Article 19).

Certain payments made to students and business trainees (Article 20) and the remuneration of visiting teachers and researchers (Article 21) are, subject to certain conditions, to be exempt from tax in the country visited.

Other income not specified in the Agreement is taxable only in the recipient’s country of residence (Article 22).

The Capital Article (Article 23) provides that capital represented by immovable property may be taxed in the country in which the property is situated. Capital represented by movable property is normally to be taxed only in the taxpayer’s country of residence.

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in Kuwait where the shareholder is a United Kingdom company which controls at least 10 per cent. of the voting power in the company paying the dividends (Article 24).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 26) and for consultation (Article 27) and exchanges of information (Article 28) between the taxation authorities of the two countries.

The Protocol set out in Part II of the Schedule contains provisions as to the interpretation and application in the United Kingdom and Kuwait of Articles 4, 7, 10, 11, 12, 22 and 26 of the Agreement.

The Agreement will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Agreement is to take effect in the United Kingdom for any financial year beginning on or after 1st April in respect of corporation tax, and for any year of assessment beginning on or after 6th April for income tax and capital gains tax, in the calendar year following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.