215
The DIT has not enforced the imposition of income tax referred to above (or the retention of payments referred to under
"—
Retention
" below) on non-GCC corporate entity "lenders" in the context of transactions to date which are similar to
the issue of the Notes (such as other international bond issues which are made through offshore special purpose vehicles
and/or loans extended to Kuwaiti borrowers by non-GCC corporate entity bank lenders).
Notwithstanding the foregoing, the application and enforcement of the Kuwaiti income tax regime remains uncertain,
especially as a result of the lack of DIT and/or Kuwaiti court precedent referred to above and as a result of the fact that
the DIT has to date not always adopted consistent rulings on Kuwaiti tax matters more generally. Accordingly,
prospective investors in the Notes are advised that there remains a possibility that any holder of Notes which is a non-
GCC corporate entity may become subject to the Kuwaiti income tax regime in the future (which would include an
obligation to file an income tax return in Kuwait), should the DIT and/or the Kuwaiti courts determine that the income
received by it in respect of any Notes held by it (whether payments are received directly from the Issuer or are received
from the Guarantor under the Note Guarantee, should there be a call on the Note Guarantee) represents the "lending of
funds inside Kuwait" (and hence constitutes the conducting of business in Kuwait for the purposes of the income tax
regime described above), even if the holder of Notes is not incorporated or otherwise located in Kuwait.
Given the lack of precedent of the DIT enforcing the imposition of income tax on non-GCC corporate entity lenders in
the circumstances described above, it is not possible to state definitively how the DIT and/or the Kuwaiti courts may
implement or enforce the Taxation Laws in practice.
Individuals are not subject to any Kuwaiti income tax on their income or capital gains.
Retention
Under the Regulations, a Kuwaiti-based party making a payment (being referred to in this section as the payer) to any
other party (being referred to in this section as the payee), wherever incorporated, is obliged to deduct five per cent. of
the amount of each such payment until such time as the DIT issues a tax clearance certificate approving the release of
such amount. The payer is not required to transfer the deducted amount to the DIT immediately, but instead retains such
amount and releases it either (i) to the payee upon presentation to the payer by such payee of a tax clearance certificate
from the DIT confirming that the payee is not subject to or is exempt from income tax, or has realised a loss, or has paid
or guaranteed the payment of its income tax; or (ii) in the absence of such a tax clearance certificate, to the DIT, on
demand.
According to a literal interpretation of the Regulations, payments which are subject to a deduction as described above
would include principal and interest payments. Accordingly, the Guarantor would be required to deduct 5% from every
payment made by it to the Issuer (under the terms of any loan) and the holders of the Notes (if there is a call on the Note
Guarantee), which amount would be released by the Guarantor upon presentation to it by the Issuer or the relevant holder
of Notes of a tax clearance certificate from the DIT.
However, the Issuer and the holders of Notes will be able to rely on the provisions of the Notes, the Indenture and the
Note Guarantee, which require the Guarantor to gross up each payment by an amount equal to any deduction,
irrespective of whether a tax clearance certificate is presented or not.
Other taxes
Save as described above, all payments in respect of the Notes and the Note Guarantee may be made without withholding,
deduction or retention for, or on account of, present taxes, duties, assessments or governmental charges of whatsoever
nature imposed or levied by or on behalf of Kuwait.
No stamp, registration or similar duties or taxes will be payable in Kuwait by holders of Notes in connection with the
issue or any transfer of the Notes.
Egypt tax considerations
The statements herein regarding taxation are based on the laws in effect in Egypt as at the date of this Offering
Memorandum and are subject to any changes of law occurring after such date, which changes could be made on
retroactive basis. The following is a summary only of the material Egyptian tax consequences of the purchase,
ownership, and disposition of Notes for Egyptian resident beneficial owners as well as of payments by an Egyptian
resident under a guarantee. The following summary does not purport to be a comprehensive description of all the tax
considerations which may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal
with the tax consequences applicable to all categories of investors, some of which may be subject to special rules.
Prospective investors in the Notes are advised to consult their own tax advisors concerning the overall tax consequences
