Kuwait Ratifies the BEPS Multilateral Instrument (MLI)
Key takeaway
On 7 June 2026, Kuwait's Official Gazette published Decree-Law No. 62 of 2026, formally approving Kuwait's accession to the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting (the "BEPS MLI"). This legislative action converts Kuwait's long-standing signature – in place since 7 June 2017 – into full domestic ratification, enabling the MLI to enter into force for Kuwait and begin modifying Kuwait's network of bilateral double tax treaties (DTTs). Businesses operating through Kuwait holding structures, treaty-resident entities, or intra-group payment arrangements should review the impact of enhanced anti-avoidance provisions that will now become operative.
1. Background: The BEPS MLI
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the BEPS MLI or MLI) is a landmark instrument adopted by the OECD and G20 countries on 24 November 2016. The MLI was designed to allow jurisdictions to modify their existing bilateral double tax treaties simultaneously and efficiently, without the need to renegotiate each treaty on a bilateral basis.
The MLI implements a series of minimum standards and optional measures arising from the OECD/G20 BEPS Project (Action 15), targeting: (i) prevention of treaty abuse (Action 6); (ii) preventing the artificial avoidance of PE status (Action 7); (iii) improving dispute resolution mechanisms (Action 14); and (iv) hybrid mismatch arrangements (Actions 2 and 6).
The inaugural signing ceremony was held in Paris on 7 June 2017, at which ministers and high-level officials from 68 jurisdictions formally signed the convention. The MLI entered into force globally on 1 July 2018 following the deposit of the fifth instrument of ratification. As of 2025, the MLI has been signed by more than 104 jurisdictions.
2. Kuwait's MLI Journey: From Signature to Ratification
Kuwait was among the original signatories to the MLI at the 7 June 2017 Paris ceremony, demonstrating an early commitment to international tax reform. However, following signature, the formal domestic ratification process – which requires legislative enactment converting treaty obligations into domestic law – had remained pending for nearly nine years.
Signature (7 June 2017): Kuwait signed the MLI as part of the inaugural group of 68 jurisdictions. Kuwait's provisional MLI position submitted upon signature designated a number of bilateral double tax treaties as Covered Tax Agreements (CTAs) and elected to adopt the Principal Purpose Test (PPT) under Article 7 as its treaty anti-abuse mechanism. Kuwait indicated an intention to adopt a detailed Limitation on Benefits (LOB) clause in due course, a position consistent with several other GCC and emerging market signatories.
Absence of Ratification (2017–2026): While many co-signatory jurisdictions deposited their instruments of ratification with the OECD within 2–3 years of signing (e.g., Latvia, Liechtenstein, Luxembourg, Malaysia), Kuwait's ratification was deferred pending domestic legislative action. During this period, the MLI had no legal effect on Kuwait's treaty network, as the convention only enters into force for a jurisdiction upon deposit of its instrument of ratification.
Broader Tax Reform Context (2024–2026): Kuwait's ratification of the MLI follows a period of significant tax law development in the jurisdiction. Decree-Law No. 157 of 2024 introduced Kuwait's Domestic Minimum Top-Up Tax (DMTT) / Qualified Domestic Minimum Top-Up Tax (QDMTT) aligned with the OECD's Pillar Two / GloBE framework, effective for fiscal years commencing on or after 1 January 2025. Kuwait's QDMTT subsequently received OECD qualified status effective 1 January 2025, formally recognized on 1 May 2026. The MLI ratification is consistent with this broader trajectory of Kuwait aligning its tax framework with international standards.
Active Treaty Engagement: Kuwait has also been actively building its bilateral treaty network, including a DTT with the UAE, the signing of a DTT with the Kingdom of Saudi Arabia (4 December 2024), and the entry into force of a Kuwait-Qatar DTT ratified in October 2025. These new and recently activated treaties are likely to form part of Kuwait's updated CTA list at the point of depositing the ratification instrument.
3. Decree-Law No. 62 of 2026: Key Provisions
Published in Kuwait's Official Gazette (Al-Kuwait Al-Yawm), Issue No. 1794, on 7 June 2026 (corresponding to 21 Dhul Hijja 1447 AH), Decree-Law No. 62 of 2026 contains two operative articles:
Article 1: Approves Kuwait's accession to the MLI – the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS–MLI) – signed in Paris on 24 November 2016, and appends the text of the Convention as ratified.
Article 2: Directs the Council of Ministers to implement the provisions of the Decree-Law, with effect from the date of publication in the Official Gazette.
The Explanatory Memorandum accompanying the Decree-Law acknowledges that governments lose substantial revenues due to tax planning by multinational companies involving profit shifting and base erosion. It highlights that such structures exploiting treaty benefits represent an issue not only for industrialized but also developing economies. The memorandum references the OECD/G20 BEPS initiative and the 20-measure package (comprising the 15 BEPS Actions plus the MLI) as the international response framework, and specifically emphasizes the need to ensure swift and consistent implementation of treaty anti-avoidance measures including in particular addressing treaty shopping and profit shifting through anti-abuse and PPT rules.
Quick Reference Summary
Decree Reference |
Decree-Law No. 62 of 2026 |
Gazette Publication |
Kuwait Official Gazette, Issue No. 1794 | 7 June 2026 (21 Dhul Hijja 1447 AH) |
Instrument Signed |
7 June 2017 (Paris – inaugural signing ceremony) |
Ratification Deposited |
Pending deposit with the OECD following publication |
MLI Convention Date |
24 November 2016 (adopted); 7 June 2017 (signed) |
Effective Date |
Entry into force on the first day of the month following three calendar months after deposit of Kuwait's instrument of ratification with the OECD |
Signatory / Authority |
Signed: H.H. Amir Mishal Al-Ahmad Al-Sabah | PM: Ahmad Abdullah Al-Sabah | FM: Jara Al-Ahmad Al-Sabah |
4. Practical Impact for Businesses
Once Kuwait deposits its instrument of ratification with the OECD and the MLI enters into force, the following treaty modifications and practical considerations will be relevant for businesses with Kuwait-connected structures:
Area |
Impact / Consideration |
Treaty Anti-Abuse (PPT) |
The Principal Purpose Test (PPT) under Article 7 of the MLI will apply to Kuwait's CTA. Treaty benefits (e.g., reduced withholding tax rates) may be denied where one of the principal purposes of an arrangement was to obtain that benefit. Structures relying on Kuwait's DTT network should be reviewed for PPT exposure. |
Preamble Amendment |
MLI Article 6 adds revised treaty preambles explicitly referencing the goal of eliminating double taxation "without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance" – reinforcing a purposive interpretive approach by Kuwait's MoF. |
Permanent Establishment (PE) Rules |
Subject to Kuwait's MLI position, Articles 12–15 of the MLI may tighten PE definitions: anti-fragmentation rules (Art. 13), commissionaire arrangements (Art. 12), and specific activity exemptions (Art. 13). This is particularly relevant for multinationals operating in Kuwait through agents or limited-function entities. |
Dispute Resolution / MAP |
Article 16 of the MLI introduces a minimum standard for Mutual Agreement Procedure (MAP) access, requiring treaty partners to commit to resolving MAP cases within three years from the date of the first notification of the measure that resulted in taxation not in accordance with the provisions of the applicable tax treaty. This strengthens Kuwait as a treaty partner for foreign investors. |
Mandatory Binding Arbitration |
Kuwait did not opt into Part VI of the MLI (mandatory binding arbitration) at signature. This position remains subject to revision upon deposit of the instrument of ratification. |
Hybrid Mismatch / Dual-Resident Entities |
Articles 3–5 (hybrid mismatch) and Article 4 (dual-resident entity tiebreaker) will apply to the extent adopted in Kuwait's final MLI position. These provisions affect cross-border structures where mismatches in tax treatment are exploited. |
Interaction with Kuwait DMTT / GloBE |
The ratification of the MLI complements Kuwait's Pillar Two framework (Decree-Law No. 157/2024). Anti-avoidance strengthening at the treaty level supports the broader OECD/G20 alignment already signaled by the QDMTT safe harbour recognition effective 1 May 2026. |
5. Anticipated Next Steps and Timeline
Following publication in the Official Gazette, the following process is anticipated:
- Kuwait's Ministry of Foreign Affairs will formally deposit the instrument of ratification with the OECD Secretariat in Paris.
- Upon deposit, the MLI will enter into force for Kuwait on the first day of the month following the expiry of three calendar months from the date of deposit (per Article 34 of the MLI).
- The MLI provisions will then enter into effect for individual Kuwait CTAs in accordance with Article 35 of the MLI (generally the next calendar year or taxable period after entry into force).
- Kuwait will be required to publish or update its definitive MLI Position (list of CTAs, reservations, and notifications) at the point of deposit, which may differ from the provisional position submitted upon signature in 2017.
- Businesses should monitor the OECD's MLI Signatories and Parties database for confirmation of the deposit date.
6. How Deloitte can support
Our International Tax practice in Kuwait has extensive experience advising multinational enterprises and Gulf conglomerates on treaty-related matters, cross-border structuring, and BEPS compliance. We are positioned to assist you with:
- Impact assessment of the MLI ratification on your Kuwait treaty positions and holding structures
- Review of DTT-based planning arrangements for PPT and LOB compliance
- Interaction analysis with Kuwait DMTT / QDMTT and Pillar Two obligations
- Preparation of substance documentation to support treaty benefit claims
Monitoring Kuwait's definitive MLI Position upon deposit and advising on any changes from the provisional 2017 position
