The Kuwait Cabinet approved a plan to introduce a 10% income tax for corporates. The cabinet also approved the re-pricing of some commodities and public services, i.e., reforms of existing subsidies, for which we do not have any specific details. The cabinet decision comes as a response of Moody’s decision in early March of placing Kuwait, UAE and Qatar’s sovereign ratings under review for a potential downgrade.   Kuwait companies currently pay c4% on charges, which include zakat, a national labor tax and a contribution to the Kuwait Foundation for Advancement of Sciences. There had been earlier discussions regarding the introduction of a 10% corporate tax in 2017, which would replace the existing c4% which Kuwait corporates pay currently. The announcement by the cabinet on Monday does not specify if the new 10% tax charge will be added to the existing 4% or if it will replace it. The worst-case scenario, i.e. an additional 10% tax charge would have a negative impact on earnings of 10-14%, and a negative impact on fair values of 16%-19%. (Elena Sanchez-Cabezudo, CFA,  Rajae Aadel)