Kuwait Taxes for US Expats: A Comprehensive Guide
- Living as an Expat in Kuwait
- Kuwait at a Glance
- US Expat Taxes in Kuwait
- Who Has to File Taxes in Kuwait?
- Who Qualifies as a Tax Resident in Kuwait?
- What Types of Taxation Does Kuwait Have?
- Does the US Have a Tax Treaty with Kuwait?
- Does Kuwait Have a Totalization Agreement with the US?
- What Tax Forms Do Americans Living in Kuwait Have to File?
- Navigating Tax Compliance for US Expats in Kuwait
Living as an Expat in Kuwait
Most US citizens in Kuwait have relocated there to join the bustling oil industry. Kuwait also has opportunities for marketers, business development professionals, and financial experts. The nation presents plenty of possibilities for talented professionals interested in building their careers outside the US.
If you are interested in relocating to Kuwait for the long term, you will have to obtain an iqama (residency visa). To qualify for an iqama, you must show proof of a valid employment offer from the Kuwaiti government or a private company doing business in the nation.
Kuwait at a Glance
- Primary Tax Form for Residents: N/A
- Tax Year: N/A
- Date Primary Tax Form Is Received: N/A
- Tax Deadline: Not applicable
- Currency: Kuwaiti dinar
- Population: 4.329 million
- Number of US Expats in Kuwait: Several hundred
- Capital City: Kuwait City
- Primary Language: Arabic
- Tax Treaty: No
- Totalization Agreement: No
US Expat Taxes in Kuwait
There are no Kuwait taxes for US expats — or Kuwaiti citizens. The primary tax in Kuwait is a corporate income tax. Corporations operating within Kuwait are taxed at a flat rate of 15%. No income earned by individuals is taxed.
The Kuwaiti government does have a social security program. Under this program, employers must contribute 11.5% of employees’ gross wages. Employees must contribute 10.5% of their wages to the program, up to a maximum monthly amount of 2,750 Kuwaiti dinars.
As a US expat working in Kuwait, you will not have to pay into the social security program; only Kuwaiti nationals have to contribute.
However, you will still have to pay taxes to the US government. The US engages in something known as citizen-based taxation. Under this system, the United States taxes all citizens, regardless of whether they are living in the country or abroad.
The alternative to citizen-based taxation is residency-based taxation. Under a residency-based taxation system, a nation would only charge you income taxes if you lived and worked there. Since Kuwait charges neither income nor social security taxes to expats working there, you will not have tax obligations to the Kuwaiti government.
Make sure to file your US taxes by the annual deadline, which falls on April 18, 2023.
Who Has to File Taxes in Kuwait?
As an expat working in Kuwait, you will not have to file any income taxes to the country. Suppose you are acting as a representative of an outside corporation (e.g., a US-based business) and engaged in a contract or other business in Kuwait on behalf of said corporation. In that case, that organization will have to pay the corporate income tax in Kuwait.
Who Qualifies as a Tax Resident in Kuwait?
Only Kuwaiti nationals qualify as tax residents in Kuwait. Kuwaiti citizens do not pay income taxes, but they do pay a 10.5% tax to support the Kuwaiti social security program. However, expats do not pay this tax.
What Types of Taxation Does Kuwait Have?
The income tax rate Kuwait charges residents is zero. They do not charge social security taxes to Americans working in Kuwait, nor do they charge capital gains taxes. You will not owe any taxes to the Kuwaiti government while working there.
What Is the Tax Rate for Foreigners in Kuwait?
The tax rate for foreigners in Kuwait is zero. The tax rate for foreign corporations is 15%, plus the 11.5% social security contribution rate. The 11.5% rate is only required if the corporation employs qualifying Kuwaiti citizens.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
Does the US Have a Tax Treaty with Kuwait?
There is no Kuwait-US tax treaty. Under ordinary circumstances, this could put you in danger of being double-taxed. Fortunately, since Kuwait does not charge income or social security taxes for foreigners in Kuwait, you will only pay taxes to the US government.
Tax treaties are designed to provide expats with more favorable taxation terms when they are living and working abroad. These treaties may offer a decreased tax rate in a host nation or allow expats to deduct foreign taxes from their US returns to lower their overall tax liability.
Does Kuwait Have a Totalization Agreement with the US?
There is no Kuwait-US totalization agreement. A totalization agreement prevents you from having to pay into both the US Social Security program and similar programs run by your host nation.
While the Kuwaiti government does have a social insurance system, it does not offer benefits to expats, nor does it require them to pay into the program. Thus, Americans living abroad in Kuwait must only pay US Social Security.
Totalization agreements are designed to protect expats who plan to retire abroad. Since Kuwait is often a temporary work destination than a retirement hot spot, the lack of a totalization agreement is not a significant concern in most cases.
When setting aside money to pay your US taxes, make sure to save enough for both income and Social Security taxes, as you are obligated to pay both.
What Tax Forms Do Americans Living in Kuwait Have to File?
You will not need to file any tax forms with the Kuwaiti government. However, Americans living in Kuwait will typically need these forms:
- Form 1040: The basic reporting form
- Form 5471: Used to report ties to certain foreign corporations
- Form 2555: Foreign Earned Income Exclusion
- Form 8938: Used to report specified foreign assets
The specific forms that you need will vary based on your unique financial situation. You may not need all of these forms. Conversely, you might need to fill out every one of them and some additional documents.
Navigating Tax Compliance for US Expats in Kuwait
Navigating Kuwait’s taxes as a US expat can be challenging. It’s important to take advantage of any US tax relief programs you’re eligible for and avoid overpaying income or Social Security taxes. However, it’s crucial to apply for these programs in accordance with relevant tax laws to avoid fines and other penalties.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.