Kuwait Scraps Expat 5% Remittance Bill

With oil prices in the region taking a hit in previous years, investors and stockholders have been on the lookout for other prospects of keeping the industry as well as the Kuwaiti economy afloat.

ALSO READ: Gov’t Targets to Roll Out VAT at Start of Fiscal ’21-’22

Other than infrastructure projects such as the ambitious Silk City and the recently opened Al Jaber Causeway, the government has been exploring additional ways to raise profit for the people, which also brings back the need for the national tax system (VAT), and then the proposed bill to impose 5% tax on expat remittances.

Kuwait Scraps Expat 5% Remittance Bill
Credits: Wikimedia Commons

Bill Proposed to Tax Expats 5% on Remittances Scrapped

The government is set to scrap a draft law to impose 5% tax on expats on their remittances sent to their home country after the Chamber of Commerce and Industry raised concerns about the negative impact the proposed bill would have, as shared in a report by International Investment.

And while the GCC is known for its heavy dependence on expatriates across various sectors of its economies, analysts warned that taxing remittances would drive expats to look for other methods of sending funds back home, which may not necessarily be a good thing, according to the Central Bank of Kuwait.

In relation to this, the parliament has come up with the decision to drop the bill on taxing expat remittances from its agenda for the current parliamentary term ending in June.

Furthermore, the government strongly expressed disapproval of the proposal and would most likely reject it and return it to the parliament, where it will have to be passed by a majority of 44 votes to be re-discussed.

According to the report by Marmore MENA Intelligence, the measure could potentially cause an exodus of skilled workers. This would create a disastrous situation for Kuwait, especially at a time when it aims to transform itself as a knowledge-based economy and has a large-scale need for highly skilled professionals.

The report cited the suggestion for the tax rates, which would start at 1% for remittances less than 99 Kuwaiti dinars ($330) and increases to 5% for remittances beyond 500 dinars ($1,660). Remittance outflow from Kuwait in 2016 totalled 4.6bn dinars ($15.3bn).

Almost 27% of that amount was remitted to India, 18% to Egypt, 7% to Bangladesh and 3% to both Pakistan and the Philippines.

The Marmore report was critical of the bill’s lack of clarity, pointing out that it does not clearly specify the categories of people to be paying the taxes.

In its current form, the bill also failed to describe what constitutes as remittance, and if it would include income or even loans availed from banks that are being sent abroad. The lack of clarity and proper definition could hinder the upcoming debate in the parliament, the report mentioned.

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