Georgia – Kuwait DTT

Georgia/May 2014

On October 13, 2009, the government of Georgia and the government of the State of Kuwait have signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital. The treaty entered into force on April 14, 2013, and is applicable as of from January 1, 2014. The scope of the treaty Agreement on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital isare to motivate economic cooperation between the two countries and encourage foreign investments.

The above mentioned agreement applies to taxes on income and on capital imposed on behalf of a Contracting State or of its administrative-territorial subdivisions (states and autonomous republics) or local authorities, irrespective of the manner in which they are levied. The taxes covered by the agreement are as follows: in the case of Georgia: 1) income tax; 2) tax on profit; 3) tax on property. In the case of Kuwait: 1) corporate income tax; 2) the contribution from the net profits of the Kuwaiti shareholding companies payable to the Kuwait Foundation for Advancement of Science (KFAS); 3) the Zakat; 4) the tax subjected according to the supporting of national employee law.

According to the DTT a 0% withholding tax is imposed on dividends payments in the case where the beneficial owner is a company which has invested more than 3 million USD in the capital of the dividend paying company and a 5% withholding tax is imposed on the gross amount of the dividends in all other cases. It should be noted that a nil withholding tax is imposed in the case where the beneficial owner of the dividends is the Government of the other Contracting State, the Central or the National Bank of the State or any other government agency or financial institution as may be specified and agreed to by the two Contracting States. In addition the treaty stipulates that no withholding tax is imposed on interest payments, whereas a 10% withholding tax is imposed on royalty payments to the other Contracting State.

Furthermore, Article 24 of the aforementioned DTT provides for the avoidance of double taxation, whereby a resident of one Contracting State deriving income from the other Contracting State will be credited against tax suffered in the source state, up to the extent of the tax suffered in the latter. The treaty also regulates issues regarding the prevention of fiscal evasion by means of implementing internationally recognized standards of information exchange for tax purposes.

Georgia has initiated and signed DTAs with its major trade partners.

The two countries are very close in terms of historical importance in trade and current political views, though economic parameters like GDP per capital significantly. Over the last few years the Georgian economy has grown significantly. Economic reforms were were addressed towards the to liberalization of the economy, the achievement of sustainable economic growth, based on the private sector development and minimizing the level of bureaucracy. Establishment of an attractive business environment led to huge inflow of foreign in the country, facilitating high economic growth  and the creation of an attractive business environment that would facilitate the inflow of foreign investments in the country.

Kuwait on the other hand is a small country with massive oil reserves, whose economy has been traditionally dominated by the state and its oil industry. Kuwait is the eighth richest country in the world by GDP per capita and is classified as a high income economy by the World Bank.

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