Transfer Pricing in Kuwait: New Compliance Requirements for 2026

Businesses operating as part of multinational groups need to pay closer attention to related-party transactions as Kuwait continues to strengthen its international tax framework. Transfer pricing requirements under the Domestic Minimum Top-up Tax (DMTT) regime have introduced formal rules covering the arm’s-length principle, documentation and disclosures. Finsoul Network Kuwait helps businesses review their intercompany arrangements and prepare the records needed for ongoing compliance.

The 2026 compliance environment requires affected businesses to review their group structures, intercompany agreements and financial records. Companies should also monitor developments in international tax transparency and ensure that their accounting and tax information remains consistent.

What Are Kuwait’s New Compliance Requirements?

Kuwait introduced formal rules for related-party transactions through the Executive Regulations of its DMTT framework. These provisions broadly follow internationally recognised principles and apply to qualifying multinational enterprise groups. The main requirements include:

• Applying the arm’s-length principle
• Reviewing related-party transactions
• Maintaining supporting documentation
• Preparing required files
• Making relevant disclosures
• Supporting the basis used for intercompany pricing
• Responding to information requests from the Tax Administration

Although the core provisions were introduced before 2026, businesses need to incorporate them into their current compliance procedures.

Who Is Affected by the New Rules?

The requirements are particularly important for multinational enterprise groups that fall within Kuwait’s DMTT regime. The DMTT generally applies to qualifying multinational groups with consolidated annual revenue of at least EUR 750 million in at least two of the four fiscal years preceding the relevant fiscal year. Businesses should therefore assess the position of the entire group rather than looking only at the turnover of the Kuwait entity. Potentially affected organisations include:

• Kuwait-based multinational groups
• Foreign multinational groups with Kuwait operations
• Kuwait constituent entities
• Relevant permanent establishments
• Other entities falling within the DMTT framework

A group-level review can help determine whether the formal requirements apply.

What Is the Arm’s-Length Principle?

The arm’s-length principle requires transactions between connected companies to reflect conditions that independent businesses would reasonably agree under comparable circumstances. For example, when a Kuwait company pays a related overseas company for management or technical services, the business should be able to demonstrate why the amount charged is commercially reasonable. An appropriate assessment may consider:

• Functions performed
• Assets used
• Risks assumed
• Contractual terms
• Market conditions
• Nature of the transaction
• Economic circumstances
• Comparable independent transactions

Businesses should maintain sufficient evidence to support the commercial basis of their arrangements.

Which Pricing Methods Can Businesses Use?

Kuwait’s regulations recognise five internationally established transfer pricing methods. The appropriate approach depends on the nature of the transaction and the availability of reliable comparable information.

Comparable Uncontrolled Price Method

This approach compares the price charged in a related-party transaction with a comparable transaction between independent parties.

Resale Price Method

This method begins with the price at which goods are resold to an independent customer and deducts an appropriate margin.

Cost Plus Method

The supplier’s relevant costs are identified and an appropriate mark-up is applied to determine the amount that an independent party might charge.

Transactional Net Margin Method

This approach compares an appropriate net profit indicator with results achieved by comparable independent businesses.

Profit Split Method

Combined profits are allocated between related parties according to their respective contributions, functions, assets and risks.

Businesses should document why the selected approach provides the most reliable basis for their particular transaction.

What Documentation Should Businesses Maintain?

Affected multinational groups need appropriate documentation to support their related-party arrangements.

Master File

The master file provides information about the wider multinational group, including its organisational structure, business activities, financing arrangements, intellectual property and overall intercompany policies.

Local File

The local file focuses on the Kuwait entity and its controlled transactions. It can include information about the local business, related entities, transaction values, functional analysis and financial information.

Disclosure Information

Relevant taxpayers must provide information concerning their related-party dealings and the approaches used to determine appropriate pricing.

Businesses should make sure that these documents agree with their accounting records and tax filings.

What Is the Transfer Pricing Disclosure Form?

The disclosure form gives the Kuwait Tax Administration information about relevant transactions between related parties. Depending on the applicable requirements, information may include:

• Related entities involved
• Nature of transactions
• Transaction values
• Pricing approach used
• Supporting information
• Other prescribed details

The information should be reviewed carefully before submission because differences between the disclosure, accounting records and supporting files can create compliance concerns.

What Are the 2026 Country-by-Country Reporting Developments?

Kuwait signed the Country-by-Country Multilateral Competent Authority Agreement in July 2026. This development supports greater international exchange of tax information and forms part of Kuwait’s broader movement towards increased tax transparency.

Country-by-Country information can give tax authorities a high-level view of multinational groups, including revenue, profits, taxes and economic activity across different jurisdictions. Businesses should distinguish between signing an international agreement and the introduction of a specific domestic filing obligation. Further local implementation requirements may depend on subsequent guidance.

How Does DMTT Affect Related-Party Transactions?

Kuwait’s DMTT applies to qualifying multinational groups for fiscal years beginning on or after 1 January 2025. The regime establishes a 15% minimum effective tax rate for groups that fall within its scope. The way related companies charge each other can affect the income and expenses recorded in different jurisdictions. This can consequently affect effective tax rate calculations and potential top-up tax exposure. Businesses should therefore review intercompany pricing as part of their broader DMTT compliance process.

Which Transactions Should Businesses Review?

Companies should identify all significant transactions between connected entities. Common examples include:

• Sale and purchase of goods
• Management fees
• Technical services
• Professional services
• Royalties
• Intellectual property
• Intercompany loans
• Guarantees
• Cash-pooling arrangements
• Cost-sharing arrangements
• Asset transfers
• Shared employee costs

A complete transaction inventory helps businesses identify which arrangements require further analysis or supporting documentation.

How Should Intercompany Financing Be Reviewed?

Funds transfer pricing becomes relevant when related companies provide financing to one another through loans, cash pooling or similar arrangements.

The assessment may consider:

• Loan amount
• Currency
• Duration
• Interest rate
• Repayment conditions
• Security
• Borrower’s credit profile
• Market conditions
• Guarantees

Intercompany financing should have clear contractual terms and sufficient evidence supporting the commercial basis of the arrangement.

Does a Tax Exemption Remove Compliance Requirements?

A tax exemption does not automatically remove a related-party transaction from the applicable rules. Businesses should determine whether the relevant entity and transaction fall within the applicable DMTT and corporate tax framework. They should also check whether a specific exclusion or exemption applies to the particular arrangement. Companies should avoid assuming that an exempt or preferentially treated income stream automatically falls outside documentation or reporting considerations.

What Is the Position on Expatriate Income?

Income tax in Kuwait for expats is separate from the corporate tax and related-party compliance obligations that apply to businesses. Kuwait does not currently impose personal income tax on employees’ salaries and wages in the same manner as many other jurisdictions. The personal tax position of an expatriate employee should therefore not be confused with the obligations of a company conducting transactions with related entities.

What Are the Main Compliance Risks?

Businesses can encounter problems when their actual transactions do not match their documented arrangements. Common issues include:

• Incomplete supporting documentation
• Unsupported transaction values
• Incorrect method selection
• Weak comparable analysis
• Missing disclosures
• Unrecorded intercompany transactions
• Inconsistent financial information
• Poorly documented financing arrangements
• Differences between tax returns and accounting records
• Delayed responses to information requests

A group policy should accurately describe the activities performed by each entity. Generic documentation may not adequately support a Kuwait company’s position if it does not reflect its actual commercial operations.

Can the Tax Administration Review Related-Party Transactions?

The Kuwait Tax Administration can examine relevant transactions and make adjustments where the arm’s-length requirement has not been satisfied.

Businesses should therefore maintain evidence explaining how transaction values were determined. Useful supporting information can include:

• Intercompany agreements
• Financial records
• Comparable data
• Functional analysis
• Pricing calculations
• Internal approvals
• Commercial correspondence

Good documentation can help management respond more effectively if the Tax Administration requests additional information.

How Should Businesses Prepare for 2026?

Businesses can take the following practical steps:

1. Assess the Group Structure

Determine whether the wider multinational group falls within the DMTT threshold.

2. Identify Related Entities

Prepare a complete list of connected companies and relevant permanent establishments.

3. Map Intercompany Transactions

Record all material transactions involving goods, services, financing, intellectual property and other arrangements.

4. Review Intercompany Agreements

Ensure that written agreements accurately describe the transactions taking place in practice.

5. Perform a Functional Review

Assess the functions, assets and risks associated with each party.

6. Review Existing Pricing Policies

Check whether current policies remain appropriate for the company’s actual operations.

7. Update Documentation

Prepare or update the required Master File, Local File and disclosure information.

8. Reconcile Financial Information

Compare the supporting documentation with accounting records and tax filings.

9. Monitor CbC Developments

Review Kuwait’s continuing international tax transparency developments and determine whether they affect the wider group.

10. Establish Ongoing Controls

Review related-party transactions throughout the year instead of waiting until the annual filing period.

Why Is Compliance Important in 2026?

Kuwait’s tax framework has become more structured as the country implements its DMTT regime and strengthens its alignment with international tax practices.

For qualifying multinational groups, related-party pricing now forms part of a wider compliance process involving financial reporting, documentation, tax calculations and international transparency. Early preparation can help businesses identify gaps in their records, review intercompany arrangements and reduce the risk of inconsistencies.

How Can Finsoul Network Kuwait Help?

Finsoul Network Kuwait can support businesses with practical reviews of their related-party arrangements and associated documentation. Services may include:

• Related-party transaction reviews
• Compliance health checks
• Functional analysis
• Comparable analysis
• Intercompany policy reviews
• Master File preparation
• Local File preparation
• Disclosure support
• DMTT assessments
• Intercompany financing reviews
• CbC reporting readiness

The objective is to help businesses maintain documentation that reflects their actual commercial activities and supports their tax position.

Conclusion

Kuwait’s evolving tax framework requires qualifying multinational groups to take a structured approach to related-party transactions, documentation and disclosures. Businesses should review their intercompany arrangements, maintain appropriate supporting evidence and ensure that financial and tax information remains consistent.

The 2026 environment also includes important developments in international tax transparency. Companies should continue monitoring regulatory updates and assess how these changes affect their wider reporting responsibilities.

Finsoul Network Kuwait supports businesses with compliance reviews, documentation and practical tax advisory services. A structured approach can help companies identify gaps early and maintain reliable records as Kuwait’s international tax framework continues to develop.

Frequently Asked Questions

Who needs to comply with Kuwait’s related-party rules?

The formal requirements are particularly relevant to multinational enterprise groups that fall within the DMTT regime and satisfy the applicable consolidated revenue threshold.

Which pricing approaches are recognised in Kuwait?

The recognised approaches include the Comparable Uncontrolled Price, Resale Price, Cost Plus, Transactional Net Margin and Profit Split methods.

Is a Master File required?

Relevant taxpayers within the applicable framework must maintain the required documentation, including information about the multinational group and its Kuwait operations.

Is a Local File required?

Yes. The Local File focuses on the Kuwait entity and provides information supporting its controlled transactions and pricing analysis.

What information is included in the disclosure?

The disclosure generally covers relevant connected-party transactions, transaction values and the approach used to determine the applicable amounts.

How does DMTT affect multinational businesses?

The DMTT establishes a 15% minimum effective tax rate for qualifying groups. The allocation of income and expenses between group entities can affect the calculation.

Does Kuwait apply these rules to domestic transactions?

The applicable framework can cover both domestic and cross-border transactions between connected entities that fall within its scope.

Does Kuwait impose personal income tax on expatriate employees?

Kuwait does not currently impose personal income tax on employees’ salaries and wages. This position is separate from corporate tax and multinational group compliance requirements.