There are two possible rates of withholding tax in Kuwait under the treaty:
- The withholding tax rate will be 5 per cent of the gross amount of the dividends if the United Kingdom parent controls at least 10 per cent of the voting power of the Kuwaiti subsidiary (Article 10(2)(a)).
- In all other cases, the withholding tax rate will be 15 per cent (Article 10(2)(b)).
To obtain benefit of these rates, the dividends must be subject to tax in the UnitedKingdom.
The withholding tax payable in Kuwait as above qualifies for credit as a direct tax (seeINTM164010(c)).
The reductions to the above rates are not given if the dividends are effectively connected(see INTM153120 fifth sub-paragraph) with a business carried on by the United Kingdomresident recipient through a permanent establishment in Kuwait.
Where a Kuwaiti company pays a dividend to a United Kingdom company which controlsdirectly or indirectly not less than 10 per cent of the voting power in the Kuwaiticompany, credit may also be given for the underlying tax (see Article 24(1)(b) andINTM164010(d)).