In a significant policy shift set to reshape the economic landscape of the Gulf region, Kuwait’s cabinet, under the leadership of Prime Minister Sheikh Ahmad Al-Sabah, has approved a draft law to impose a 15% tax on multinational corporations operating across multiple jurisdictions, effective January 1, 2025. This move aligns with global tax standards aimed at curbing tax evasion and ensuring that tax revenues are not siphoned off to other countries, as reported by the state-run Kuwait News Agency.
The impending tax is expected to have a domino effect on commodity prices and living expenses in the region. Tax experts anticipate that the additional financial burden on multinational enterprises could lead to increased prices for goods, including widely consumed commodities like coffee. For instance, past scenarios in Saudi Arabia illustrate the impact of competitive laws allowing importers to purchase large commodity shipments, such as Nescafe, from Kuwait at lower prices. These shipments, when sold in the Saudi markets, put pressure on local agents attempting to maintain competitive pricing, thereby affecting their profit margins. Upon tax adjustments foreseen, direct sales of Nescafe within Kuwait will decrease, while prices in KSA will reflect an increase.
As Kuwait prepares for this tax reform, Deputy Prime Minister Shereeda Al-Mousherji has reiterated the government’s commitment to implementing the law by the start of 2025. However, the specifics of how this will affect different sectors remain under wraps.
Simultaneously, the UAE is also raising its corporate tax rate to 15% for large multinational enterprises starting January 1, up from the current 9%. The Domestic Minimum Top-up Tax (DMTT) will target companies with global revenues exceeding €750 million ($793 million) across two of the four preceding financial years. Similarly, Bahrain has announced its intention to introduce DMTT for large MNEs beginning next year.
Conversely, Oman is holding off on its proposed personal income tax for high earners. Initially proposed in 2022, this tax would have affected foreign nationals earning above $100,000 and Omani citizens with a global income exceeding $1 million from 2026.
According to Dr. Aisha Al-Ansari, an economist specializing in Gulf economic policies, these tax changes could lead to a recalibration of the region’s economic strategies. “The Gulf states are at a pivotal juncture, balancing global tax compliance with local economic resilience,” she noted in a recent interview with Gulf Business Daily.
The ripple effects of these tax policies are likely to extend beyond corporate profits, potentially influencing consumer behavior and living standards. As Gulf states navigate these sweeping reforms, businesses and consumers alike must brace for an evolving economic environment with both challenges and opportunities.
Industry insiders suggest that these tax initiatives, while burdensome in the short term, could foster a more equitable business environment in the long run. A senior financial analyst at Al Jaber Group hinted at potential strategic alliances between local agents and multinationals to mitigate the impact of rising costs, an approach that could redefine market dynamics in the Gulf.
