Kuwait - Dividend

Article 10. Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a)zero per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10% (ten per cent) of the capital of the company paying the dividends;

b)10% (ten per cent) of the gross amount of the dividends in all other cases.

3. The provisions of paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

4. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Protocol:

5. Ad Article 10

It is understood, that, with respect to dividends as meant in subparagraph a of paragraph 2 of Article 10 which are paid by a company which is a resident of the Netherlands, if according to the law in force in Kuwait taxation of such dividends in Kuwait will result in a tax burden of less than 10% of the gross amount of the dividends, the Netherlands may levy a tax not exceeding 10% of the gross amount of the dividends.

However, it is further understood that the provisions under paragraph 1 above do not apply if the dividends are paid by a company which is a resident of the Netherlands and the beneficial owner of the dividends is the Government of Kuwait or any political subdivision or local authority thereof or a governmental institution or inter-governmental entity as defined in paragraph 2 of Article 4 and established in Kuwait, or a company resident in Kuwait and either:

a)the capital of the company receiving the dividends is exclusively beneficially owned by the Government of Kuwait or any political subdivision or local authority thereof or governmental institutions or inter-governmental entity (in so far as the Kuwaiti participation in such entity is concerned) as defined in paragraph 2 of Article 4; or

b)shares in such company are regularly traded on the Stock Exchange of Kuwait; or

c)the company receiving the dividends is engaged in an active trade or business in Kuwait.

In the case a company does not fulfill one of the conditions laid down in paragraph 2 above, the provisions under paragraph 1 above shall also not apply with respect to such company if it is established in mutual agreement by the competent authorities of the Contracting States, in conformity with Article 26 of the Agreement, that such company is not established or maintained in Kuwait mainly for the purpose of ensuring the benefits of subparagraph a) of paragraph 2 of Article 10 of the Agreement and provided that the company receiving the dividends is a resident of Kuwait and the beneficial owner of the dividends.

Notwithstanding the provisions of subparagraph b) of paragraph 2 of Article 10, the Contracting State of which the company paying the dividends is a resident, may tax the dividends at the rate under its domestic legislation in case the beneficial owner of the dividends is an individual and a resident of the other Contracting State as well as a resident of a third State. However, if the Contracting State of which the company paying the dividends is a resident, has concluded an Agreement for the avoidance of double taxation with the third state meant in the preceding sentence, the tax charged on these dividend payments shall not exceed the rate provided for dividends paid to individuals under that Agreement.

6. Ad Articles 10 and 11

It is understood that the term dividend includes income from profit sharing bonds.

7. Ad Articles 10 and 12

Where withholding tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.