Tax clearance certificate (Kuwait)

The Ministry of Finance's certificate that a company owes no tax, which releases the 5% held back from contract payments.

In Arabic: شهادة براءة الذمة الضريبية (الكويت)

Meaning

Under Kuwait's income tax rules, government bodies and the other payers the law names hold back 5% of each payment under a contract until the contractor produces a tax clearance certificate (شهادة براءة الذمة الضريبية) from the Ministry of Finance. The retention applies to Kuwaiti contractors as well as foreign ones.

A Kuwaiti company that owes no tax asks the Ministry for the certificate through Kuwait Government Online and, on producing it, recovers the 5%. Until then the retention is money the company is owed, and is kept as a receivable in its books rather than written off as a cost.

Also called: clearance certificate Kuwait · 5% retention Kuwait · tax retention Kuwait

Example

A ministry pays Al Safat Trading W.L.L. KWD 20,000.000 under a supply contract and holds back 5%, KWD 1,000.000. The company books the KWD 1,000.000 as a receivable, obtains its clearance certificate online and collects it.

Where it is used

In Aqid ERP: Accounting & reportsSource: Kuwait Government Online: Clearance certificate for Kuwaiti companies

Related terms

Ministry of Finance (Kuwait tax administration)Income tax (Kuwait)Zakat (Kuwait)All terms

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