Kuwaiti Government Agrees with Proposal to Tax Expat Remittances

In a meeting last March 24, the National Assembly’s Economic Affairs and Financial Committee appeared to heavily favour the approval of proposals on imposing taxes on expat remittances despite objections based on financial and constitutional grounds. According to MP Salah Khorshid, Head of the Economic Affairs and Financial Committee, the panel has decided to defer the voting on the matter until the next assembly meeting after the members agree on one of the four propositions that have been raised to the panel.

Khorshid refuted claims that imposing tax on expat remittances would mar Kuwait’s reputation abroad and rouse legal attention for its unfair treatment between nationals and expats. In defence of the possible approval of the new tax law, Khorshid pointed out that some Gulf States already execute similar tax schemes on expats’ money transfers without identifying any Gulf State. However, as of the time being, none of the other five member states of the Gulf Cooperation Council (GCC) impose such tax schemes on their expatriates.

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Kuwait’s National Assembly Heavily Considers the Approval of Transfer Taxes on Expats

Khorshid further details that as per the Central Bank’s data figures, the total amount of remittances generated by expats last year reached KD 4 billion, and as much as KD 19 billion in the last four years. This only shows that the amount of remittances being made has been going down.

Should the tax scheme proposal be approved, Kuwait’s state funds will go up by as much as KD 50 to 60 million. While that may be the case, the Central Bank has expressed strong opposition towards the Gulf State’s plans to tax expats’ remittances, explaining that the move will be counterproductive and will promote more black market transactions. The National Assembly’s legislative and legal committee also opposes the move stating that it is a clear show of discrimination between nationals and expatriates.

According to Khorshid, the new proposed tax scheme only applies to expats and not on Kuwaiti nationals. One of the proposals, as submitted by MP Safa Al-Hashem, and is awaiting for review from the panel states that there will be a five-per cent tax to be imposed on any fund transfer made by expats regardless of the amount.

However, a suggestion from Kuwait’s Chamber of Commerce had been taken into consideration as well, overruling the original 5 per cent tax fee, and offers the following tax scheme: a two per cent charge will be collected for amounts of up to KD 100; a three per cent fee will apply for amounts between KD 100 and 500 whereas a four per cent charge will apply for transfers above KD 500. This has been the latest proposed tax scheme which is still up for further discussion in the committee’s meeting set next week.

Official sources disclosed that representatives from the Chamber of Commerce have expressed fears that the proposed fees might put off potential skilled workers who are interested in working in Kuwait, but this was quickly dismissed by the parliamentary committee justifying that such fees are necessary to eliminate marginal labour that has already been taking a toll on Kuwait’s public services.

This, being laid out on the table for discussion, another important issue to consider now is how to manage possible attempts to elude paying such fees. Imposing transfer taxes on expats only could bring about “agreements” with nationals to send funds on behalf of the expats. With this possible scenario at play, the committee and the Government must come up with a fool-proof plan before the bill is approved and enacted in all levels by October. Otherwise, the transfer tax might also be imposed on Kuwaiti nationals.

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