Kuwait to delay VAT implementation until 2021

Kuwait is set to delay its implementation of a regional 5 per cent value added tax until 2021, according to a parliamentary committee statement.

An update on the National Assembly’s website from a budget and final accounts committee meeting on Monday appeared to confirm the timeline.

“The committee noted that the value added tax will be delayed in Kuwait until 2021, and that the Ministry of Finance considered the need to speed up the selective tax procedures on selected commodities such as tobacco, energy drinks and soft drinks,” according to the statement.

Kuwait was expected to implement the VAT, which applies to most goods and services, next year under a Gulf Cooperation Council deal.

Read: Revealed: Goods and services subject to VAT in the UAE

Saudi Arabia and the UAE implemented the tax on January 1 and Bahrain and Oman have indicated they will do so in 2019.

Read: Oman postpones VAT introduction until 2019

An International Monetary Fund official said in February that Bahrain, Kuwait, Oman and Qatar may need until at least mid-2019 to implement the tax, according to reports.

Read: IMF says Bahrain, Kuwait, Oman, Qatar will need more than a year to introduce VAT

In addition, recovering oil prices are likely to reduce the urgency for the tax’s implementation in some countries, particularly where it is politically unpopular.

Kuwait has seen resistance to the tax from lawmakers, who want the government to ensure it does not burden citizens.

Read: Kuwait MPs say they will oppose VAT bill

Committee head Adnan Abdul-Samad said it had inquired about the development of value added tax and was told its application would be postponed “in the state of Kuwait until the year 2021”.

However, he said the finance ministry saw the need to speed up the implementation of a regionally agreed 100 per cent selective tax on tobacco and energy drinks and 50 per cent tax on soft drinks due to the estimated KD200m ($663.1m) in revenues it would generate and the positive impact on public health.

Kuwait’s finance minister said on Monday he expected the excise tax to be approved at the parliament’s next session in October.

Read: UAE to implement tobacco, soft drinks tax in October

“I personally do not think there will be an opportunity to discuss it before the end of the current session but we hope that in the next session it will be on the agenda,” Nayef Falah al-Hajraf told reporters, according to Reuters.

The committee said Kuwait’s state budget for the new fiscal year was estimated at KD15bn ($49.73bn) with KD13bn ($43.1bn) expected in the form of oil revenues.