Who Is Liable For Income Taxes in Kuwait
No income taxes are currently imposed on individuals in Kuwait.
B. Other taxes
Net worth, estate and gift taxes are not imposed on individuals in Kuwait.
C. Social security
For Kuwaiti employees, contributions are payable monthly by both the employer and employee under the Social Security Law. The employer’s contribution is 11% and the employee’s is 7.5% of monthly salary, up to a ceiling of KD 2,250 per month. Benefits provided, which are generous, include pensions on retirement and allowances for disability, sickness and death.
A health insurance scheme applies for all expatriate residents of Kuwait. The annual premium is payable at the time of initial application or renewal of the expatriate’s residence permit. The premium is KD 50 for expatriates working in Kuwait and from KD 10 to KD 30 for other resident expatriates. No other social security obligations apply to expatriates.
D. Tax treaties
Kuwait has entered into double tax treaties with more than 40 countries. In addition, double tax treaties have been signed or initialed, but not yet ratified, with several other countries. However, because no tax is currently imposed on individuals in Kuwait, the provisions for relief under these double tax treaties are not relevant to individuals in Kuwait.
To learn more about the history, culture, economy and other information about Kuwait
We have been preparing US income tax returns for US Citizens and permanent residents living in Kuwait for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Kuwait and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Kuwait.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email