RECIPROCAL AVIATION TAX EXEMPTION AGREEMENT

UNCLAS KUWAIT 000245 SENSITIVE SIPDIS STATE FOR NEA/ARP, EEB/TRA/OTP, EEB/IFD/OIA E.O. 12958: N/A TAGS: EAIR ECON EFIN KTIA KU SUBJECT: RECIPROCAL AVIATION TAX EXEMPTION AGREEMENT REF: STATE 13098 ¶1. This is an action request. ¶2. (U) EconCouns and Econoff met with Ministry of Finance Undersecretary Khalifa Hamada and Omar Welayti, Head of the Ministry's tax treaties section to discuss reengaging on a reciprocal aviation tax exemption agreement. They verbally confirmed that Ministerial Decree Number 108 of 1976 and Ministerial Order Number 7/1982 dealing with aviation tax exemptions were still in force "on a reciprocal basis." In response to EconCouns' proposal that the GoK and the USG conclude an agreement to formalize the exemption from income derived from the operation of aircraft, Hamada stated that the Ministry of Finance would consult with Kuwait Airways to determine their preference and requested that EconCouns send a formal request for response via diplomatic note, which post subsequently did. (Note: EconCouns subsequently raised the possibility of a reciprocal aviation income exemption with the President of Kuwait's Civil Aviation Authority, Fawaz Al-Farah. Farah stressed that the GoK lead for tax agreements lay with the Ministry of Finance, but that he generally supported such agreements as a way of improving aviation cooperation. He promised to raise the issue if/when he had the opportunity. End Note.) ¶3. (SBU) Welayti stated his preference for incorporating aviation tax exemptions in a wider double taxation agreement (DTA) and asked whether the USG still had the same concerns about the Kuwait tax system now that the rate had been reduced to 15 percent. EconCouns noted the GoK's continued policy of discriminatory tax treatment (i.e., taxing non-Kuwaitis at a higher rate than Kuwaitis) and noted that concluding this agreement would benefit companies from both countries. Hamada committed to reviewing the proposed draft agreement seriously, but asked that Kuwait's continued interest in a DTA be put on record. Hamada also briefly asked whether the USG would be interested in negotiating a Bilateral Investment Treaty. EconCouns noted that we had informally shared copies of the U.S. Model BIT text with his ministry for review and had not received any comments. ¶4. (SBU) Comment and Action Request: The Ministry of Finance is in the process of considering the reciprocal agreement, but is also interested in pursuing a broader DTA. In order to help move forward on a reciprocal aviation tax exemption agreement, post requests guidance on how to respond to the GoK's interest in a DTA. (Note: post has just received a formal request from the MFA for the latest USG thoughts on a DTA. End Note.) End Comment and Action Request. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* MISENHEIMER