Article 5 - Excluded Entities from Tax (Top-up Tax)

The following Entities, whether Kuwaiti or non-Kuwaiti, shall be considered excluded from taxation:

1. Government Entities.

2. Non-Profit Organizations.

3. International Organizations.

4. Pension Funds.

5. Investment Fund that is an UPE.

6. Real Estate Investment Vehicle that is an UPE.

The following Entities are also considered excluded Entities, provided they meet the following conditions:

1. Any Entity, where at least 95% of the value of the Entity is owned (directly or through a chain of Excluded Entities) by one or more Excluded Entities referred to in the first paragraph of this Article (other than a Pension Services Entity) and where that Entity meets one of the following two conditions:

   1. Operates exclusively or almost exclusively to hold assets or invest funds for the benefit of the Excluded Entity or Entities.

   2. Only carries out activities that are ancillary to those carried out by the Excluded Entity or Entities. Ancillary activities refer to activities that are preparatory or auxiliary in nature to the main activities conducted by the Excluded Entities, and these activities are considered ancillary if they are necessary to support or enhance the performance of the core operations of those Entities.

2. Any Entity, where at least 85% of the value of the Entity is owned (directly or through a chain of Excluded Entities), by one or more Excluded Entities referred to in the first paragraph of this Article (other than a Pension Services Entity) provided that substantially all of the Entity’s income is Excluded Dividends or Excluded Equity Gain or Loss that is excluded from the computation of GloBE Income or Loss in accordance with Article 10 of these ERs.

A DCE may elect to treat any of the Excluded Entities as a taxable Entity, and this election will be effective for five consecutive Tax Periods.

A Governmental Entity means an Entity that meets all the following criteria: