Kuwait has approved a tax treaty with Iraq to avoid double taxation and curb tax evasion on income and capital taxes, according to a report by Al-Jarida on 21 September, citing the official gazette Al-Kuwait Al-Youm.

The treaty marks a significant step in the warming of economic ties between the two nations, which have been steadily improving in recent years. The agreement aims to reduce financial barriers for individuals and businesses operating across both countries, enhancing transparency in financial transactions.

Kuwait's issuance of Decree No. 100 of 2024 formalises the move as part of broader efforts to promote bilateral cooperation.

The agreement applies to residents of either or both countries, covering a range of taxes, as outlined in its Articles 1 and 2.

It addresses income from dividends, usufruct shares, founders’ shares, and other non-debt-related profits, stipulating that such income will be taxed in the country where the distributing company is based.

To ensure compliance, the treaty includes provisions for the exchange of confidential information between authorities in both nations.

It also introduces exemptions for income earned by entertainers, athletes, and others in similar professions, allowing taxation in the country where the income is generated rather than the individual’s country of residence.

The accord is expected to foster stronger economic collaboration between the two as Iraq returns to a sense of normalcy. 

The report comes as tensions between the two neighbours kicked off earlier this year when Kuwait witnessed a wave of angry reactions on April 25 after Iraq, Qatar, the United Arab Emirates and Turkey signed a quadrilateral memorandum of understanding (MoU) in Baghdad to establish the "Development Road" project, linking Iraq to Turkey and Persian Gulf states.

The agreement, signed during Turkish President Tayyip Erdogan's visit to Iraq, envisions a project launching from Iraq's Faw port, adjacent to Kuwait's Mubarak port, whose delayed completion caused much of the Kuwaiti anger over perceived threats to national, economic and trade interests.

Initially announced in 2023, the 1,200-kilometre double-track railway is a monumental project that would revolutionise transportation in the region. It would move passengers and freight from Al Faw to Ovaköy in Turkey, with approximately 15 stations along the way.

The government of Iraq envisions high-speed trains moving passengers at speeds of up to 300km/h, similar to speeds seen in Spain and Uzbekistan.