On 23rd of February, 2017 the Egyptian President Abdel Fatah El Sisi issued the presidential decree no. 155 of 2016 ratifying the Income Tax Treaty concluded between Egypt & Kuwait on 16th of December 2014.
The convention between Egypt and Kuwait serves the purpose of avoidance of double taxation in connection with the applied taxes on income in both countries and to mitigate the risk of tax evasions by both countries’ taxpayers. This convention shall be in force for 5 years and shall continue to be valid for the same term/s unless one of the countries notifies the other with its termination notice 6 months before the termination date. Once effective, it will replace the previous tax treaty signed between the two countries in 2004.
Subject to the convention are all taxes applied to the income including the taxes on profits resulting from transferrable or non-transferrable belongings, real estate and the taxes applied to the salaries and wages paid by the projects. The provisions of the convention are applied also to any similar taxes in its nature, which may be introduced after the date of signing this convention.
The convention states that profits achieved by a project of any of the two countries are subject to taxes in its country of origin only, unless the project is performing activities in the other country through a permanent establishment there; in such a case, the profits achieved by the permanent establishment shall be subject to taxes in that other country. Each country shall then determine its share in the profits.
As for international transport activities, the profits resulting from operating vessels or airplanes are subject to taxes only in the country in which the physical headquarters of the project is located. However, if the physical headquarters of a maritime project is a vessel, it is considered located inside the country of the vessel’s port even if the port is not located in the country in which the vessel’s operator is residing.
In regards to interest, the applied withholding tax shall not exceed 10% of the total interest paid. A lower, 5% withholding tax rate will be applicable if the beneficial owner is a company owning at least 10% of the capital in the dividend-distributing entity. Interest and royalties are also subject to 10% withholding tax rate.
The convention has also spotlighted the treatment of the income received by actors and sports players who are residing in one of the two countries and acting as cinema or theater actors, radio or television presenters, musicians or sports players. The income from these activities can be subject to taxes in the country of residence unless the assignment/visit is totally or partially financed by public funds from his/her country.