I. Kuwait Income Tax Decree No. 3 of 1955.

1 - Corporate that are liable of Taxation Tax range includes any body corporate carrying on trade or business in Kuwait in a direct or indirect way or any body corporate carrying on trade or business in Kuwait as an agent for others. 2 - Tax base: Income tax, shall be imposed for each taxable period on every body corporate carrying on trade or business in Kuwait and obtains an income, the term income means gains and profits of a body corporate derived from carrying on trade or business in Kuwait: * The purchasing and selling in Kuwait of property, goods, or rights thereto and maintaining a permanent office in Kuwait where the contracts of purchases and sale are executed. * Operating any other, industrial, or commercial enterprises in Kuwait. * Leasing any property located in Kuwait. * Rendering services in Kuwait. But do not include the mere purchasing in Kuwait of property, goods, or right thereto. 3 - Tax rate: According to Kuwait income tax Decree No. 3 of 1955 provisions, taxes are calculated on each company income for a taxable year by the percentages indicated in the following chart:

Income Exceeding (K.D.) 0000 5250 18750 37500 56250 75000 112500 150000 225000 300000 375000

Income Not Exceeding (K.D.) 5250 18750 37500 56250 75000 112500 150000 225000 300000 375000 ..

Percentage (%) Nil 5 10 15 20 25 30 35 40 45 55

Tax Exemption Conditions: A body corporate income not exceeding KD 5250/- per annum is exempted from taxes.

II. Kuwait Income Tax Law (in the Designated Area) No. 23 of 1961.
1- Corporate that is liable for Taxation: Kuwait income tax is imposed on every body corporate carrying on trade or business in extraction of a particular materials any natural material from the neutral zone or designated islands according to a permission or a contract or franchise granted by the ruler of the State of Kuwait, as well as, the refinement, manufacturing or treatment of the extracted materials and natural materials by any other way or transporting and storing such materials.

2 - Tax base: Income tax shall be imposed for each taxable period ending after a fiscal year on every body corporate, wheresoever incorporated, carrying on trade or business in the designated area during such taxable period. 3 - Tax rate: Kuwait income tax for Law No. 23 is calculated according to the companies income for each taxable year as the following percentage: Income not exceeding K.D. 500,000 Income exceeding K.D. 500,000 20% 57%

Wherever the percentage is 57% the amount exceeding K.D. 500,000/- of the body corporate income from such trade or business is added to K.D. 1,000,000/- during the taxable period. 4 - Tax Exemption Cases: Law has not expressly stipulated the exemption of the companies operating in the neutral zone from Kuwait income tax.

III. Chain of Procedures Adaptable by Tax Department to Settle Payments with Tax payers
1 - Identifying the number of tax payers: The Tax Department Identifies the number of companies operating in Kuwait for the submission of such companies to Kuwait Income Tax No. 3

of 1955 and Law No. 23 of 1961 that is still regulating work operation in the Designated Area. 2 - Corresponding with Tax payers: A) Letters will be exchanged with the companies once immediately after identification, and then another time after 30 days has passed, and lastly correspondence will be through the tax return application form stating the companys activity in Kuwait. B) The parties contracting with the companies will be corresponded to insure their application of the Ministerial Order No. 44 of 1985, for seizing 5% of the total contracting amount and for providing the Tax Department with copies of the contracts concluded. C ) In case of the companies refusal of providing the financial data after 3 times of correspondence with the Tax Department, the contracting party will be acknowledged to provide the Tax Department with the companies financial data during the taxable period to carry out the assessment randomly. 3. Tax Assessment Rules: Tax assessment is based on the companies profits according to the submitted Tax Declaration on the ready made Forms and according to what is stated in Kuwait Income Tax Decree No. 3 of 1955 and Law No. 23 of 1961 in the following way: A) The company should submit a financial statement for each fiscal year of its income on or before the fifteenth day, of the fourth month to the end of the taxable period. Provided that he will pay the tax amount stated in the tax return in full or in four equal instalments, to be paid in Kuwaiti Dinars to the Tax Department.

B) The company may request an application of extension of Tax Return period as such request will be approved by the Tax Department and then the letter of Tax Return extension will be issued as a result of the approval. C) The Tax Department will inform the Taxpayer of the due amount after inspection and that is by the issuance of the assessment letter. 4. Procedures and Dates Appointed for Contestation against Tax Assessments Decisions: Ministerial Order No. 16 of 1997 regulates the Taxpayers objection proceedings to tax assessment, which provides for as the following: A) A taxpayer is entitled to file an objection to a tax assessment within sixty days as of the date he is notified through the assessment letter. Should the mentioned date elapse without objection, the tax assessment shall be deemed final and the tax shall be due for settlement to the tax department by the Taxpayer within the thirty days following the date at which the tax assessment is deemed final. B) The Tax Department should resolve upon the objection within ninety days following the date of its filing, and should the tax department agree with the Taxpayer on fixing the amount of the income tax due within the period referred to in the first paragraph, the tax assessment should be issued in accordance with this agreement and shall be deemed final and the Taxpayer should make the payment within the thirty days following the date of the agreement. If the Tax Department does not respond to the objection within the period referred to above, this shall lead to a rejection of the objection. C) Should the objection of the tax payer be expressly rejected or by implication, he may appeal against the rejection decision before the Tax Appeal Committee within thirty days as of the date of his being notified of the rejection, or as of the date at which the objection should have been

resolved, elapsed without response. The appeal together with all the supporting documents shall be submitted to the mentioned Committee. D) The taxpayer may select his representative in the Committee and notify the Tax Department of his name upon filing the appeal. The Committees sessions shall be secret sessions and decisions shall be issued by a majority of votes. If the votes were equal, the Chairman shall have a casting vote. E) Any litigation between the Tax Department and taxpayer concerning the compliance to this decree or the amount of the income tax dues, that is entitled accordingly, may be referred to court by any of the two parties to have a verdict unless the two parties agree referring the litigation to arbitration according to Clause 13 of Kuwait Income Tax Decree No. 3 of 1955.

5. Method of Tax Collection A) Tax dues are paid in full or in four equal payments, according to its order and that in the fifteenth day of the fourth, sixth, ninth and twelfth month of the taxable period end date. B) The Tax Department gives the taxpayer a receipt that certifies payment of the income tax dues by the taxpayer for the period or periods the taxes have been paid. 1 - Penalties for Breaching Tax Law A) Administrative Penalties: Ministerial Order No. 15 of 1997 regulates fine for delay of declaration on the following way: * Fine for Delay in Filing Tax Declaration (Tax Return): The delay fine is calculated at 1% as of the date at which the filing of he tax declaration is due (the fifteenth day of the fourth month following the end of

the taxable period) and until the date of its submission (or the date of the assessment letter if no declaration is filed), and on the basis that the tax amount is as per the assessment. The extension granted by the Ministry shall not be effective unless the taxpayer complies with the requirement to file the declaration within the extended period allowed. * Fine for Delay in the Settlement of the Tax Instalments: 1) Should the company file the Tax Declaration and delay in the settlement of the tax instalments as per the declaration, it will be subject to a delay fine of 1% as of the date at which each instalment becomes due and until the actual settlement date on the basis of the instalment amount of the tax as per the declaration. 2) Once the company files the tax declaration and the subsequent assessment letter is issued at an amount greater than the amount of tax as per the declaration, a fine will accrue on the company for delay in the settlement of tax of 1% on the basis of the tax amount as per the assessment, taking into consideration the amounts that have been settled by the taxpayer as per the declaration. 3) In case the company has not filed a Tax Declaration, the fine for nonsettlement of tax instalments will be calculated on the basis of the tax amount as per the assessment. This is to be calculated as of the date at which the instalment becomes due and until the actual settlement date of the tax due. 4) In case the tax declaration tax return submitted by the company proved to be less than the Tax due, if this statement is right, the company will be obliged to pay a delay fine at the rate of 1% of the difference between the tax and the company Tax Declaration.

B) Penalties: A) Tax data is considered confidential, and it is not allowed to be examined by any person other than the governor, or Tax Department director and staff, without the approval of the taxpayer. It is considered against the law to reveal such data, and will be punished by a fine not more than K.D. 113/according to Decree No. 3 of 1955 and a fine not more than K.D. 100/according to Law No. 23 of 1961. B ) Any person intentionally makes false changes in the taxpayer records or gives false declaration that may affect any statement or required certificate for the purpose of this declaration, will be considered as an act against such law and he will be subjected to imprisonment for a period of about two years or pay a fine , or both.