Doing business in Kuwait
- How quickly can I set up a business?
- What is the minimum investment needed?
- How can I raise finance?
- What are the legal requirements for setting up my business?
- What structure should I consider?
- What advice can you give me in regards to payroll and taxation requirements?
- Is there anything else that I should know?
How quickly can I set up a business?
What is the minimum investment needed?
It all depends on the scale of project but you can start a craft business at a minimum of 1,000 K.D. and start a company at a minimum of 7,500 K.D.*
*(Exchange rate between 1 K.D. and USD: each Dinar is worth roughly 3.4 USD).
How can I raise finance?
Investor must contribute the entire capital. After the investor is awarded a project either by the government or the private sector, he/she can raise finance from local or foreign banks and financial institutions.
What are the legal requirements for setting up my business?
The following means show how a foreign individual or entity may carry out business activities in Kuwait:
- Establishing a company
- Carry out a joint venture agreement
- Assign a Kuwaiti commercial agent, or
- Assign a commercial representative.
A Single Person Company is the simplest form of business entity. With a sole proprietorship, one person is responsible for all a company’s profits and debts.
Both foreign individuals and corporate bodies may establish a Limited Liability Company WLL. And a Kuwaiti must own at least 51% of the WLL’s shareholdings.
A Closed Kuwaiti Joint Stock Company (KSC Closed) is the type of company open to non-Kuwaiti entities, with a Kuwaiti partner owning 51% of the shares.
What structure should I consider?
Types of Entities
The new companies Law of 2016 defines the following types of entities:
1. Limited Liability Company (W.L.L)
- Both foreign individuals and/or corporate bodies may establish this type of entity.
- A Kuwaiti individual and/or corporate bodies must own at least 51% of the W.L.L. company.
- It is simple to form and takes approximately 30 days to incorporate.
- Provides shield to individual partner from Kuwait corporate tax.
- Corporate tax applies only to non-Kuwaiti corporate or its branch bodies.
- No restriction on distribution of profits, statutory reserve cuts 10% of the profit till it reaches 50% of the capital.
2. Establishment (a branch of the corporate for overseas business)
- Needs the sponsorship of a registered Kuwaiti agent.
- Not a separate legal entity but an extension of the overseas parent company.
- Permanent establishment (6 months carrying business in Kuwait) will pay Kuwait corporate tax on the profit.
3. A Joint Venture
- Joint venture is simple contract that require no formal establishment processors.
- Provide the parties more flexibility in their arrangements than the establishment of a company.
- More common in relation to a specific project that has a limited term.
4. Closed Joint Stock Company (KSC)
- Open to non-Kuwaiti entities.
- Foreign individuals and/or corporate bodies may own 49% of the share capital of a KSCC after obtaining the approval of the concerned authorities
- The incorporation may take between 30 to 60 days.
5. Foreign Direct Investment Law No. 116 of 2013.
- A Kuwaiti company incorporated with foreign shareholding may be as high as 100% of the capital.
- A branch of a foreign company.
- A representation office to carry out studies and surveys.
What advice can you give me in regards to payroll and taxation requirements?
The best special places is Kuwait City.
The Ministry of Social Affairs and Labour administers Law No. 6 of 2010, which sets out detailed legislation on terms of employment, including hours of work, leave, termination of employment and workplace safety for the private sector.
Payroll in Kuwait
Personal Income Tax
Employees are not subjected to income tax in Kuwait. There is a Social Security system for Kuwait citizens, for which employees must pay 10.5% of their monthly salary and employers must pay 11.5%. The purpose of the system is to provide pensions and allowances for disability, sickness, death, and retirement.
HR in Kuwait
The working week in Kuwait is a maximum of 48 hours, and 8 hours per day over a 6-day week. Office hours are generally between 8 am and 5 pm.
After nine months of service, employees are entitled to 30 days of annual leave. In the event of a contract termination, employees are entitled to be paid for untaken accrued leave. There are also 13 national holidays in Kuwait, on which employees are not expected to work.
Upon presenting a medical certificate, pregnant employees can take 30 days of paid maternity leave before their expected due date, and 40 days after the birth.
Employees in Kuwait are entitled to sick leave as long as a medical report is supplied. This is for up to 75 days; the first 15 of these are fully paid, then 10 days at 75% pay, 10 days at 50% pay, 10 days at 25% pay, and the final 30 with no pay.
A probation period can be for no longer than 100 days, during which either party can terminate the contract without notice. Should either party wish to terminate the contract after the probation period, they must give at least three months of notice and pay termination compensation/indemnity to the other party. The amount will depend on the employee’s length of service, and whether they are on a salary or hourly rate.
Tax/regulatory and reporting
Corporate Income Tax (CIT)
Kuwait-owned businesses, and those owned by other Gulf Cooperation Council (GCC) countries are exempt from tax in Kuwait. Foreign-owned companies are subjected to CIT on all profits and capital gains obtained from within Kuwait. CIT is a flat rate of 15%.
Capital gains are not separately taxed. These are included as part of the business income. Capital gains shall be estimated for fixed assets only in the case of submission of insufficient documents.
Losses can be carried forward for a maximum of three years. The tax declaration of each taxable period is required to be submitted within three and a half months of the end of the taxable period. It is possible to seek an extension for up to 60 days in the filing of the tax declaration. It is at the discretion of the Director of Income Tax to grant an extension.
Taxes have to be paid in four equal instalments. In case an extension is granted, tax has to be paid fully at the time of filing the tax declaration. It is possible to file a revised tax declaration to correct an error; provided the original tax declaration was filed before the due date and a tax assessment is not issued for that year. However, there will be delay fines due to the revised filing.
Under certain circumstances the tax department has the right to assess the tax on a deemed profit basis.
The final payment to the contractor or subcontractor is required to be withheld until the contractor or subcontractor settles their tax liabilities and obtains a certificate in this regard from the tax department. The final payment withheld should not be less than 5% of the total contract. In practice, contractors withhold 5% of all payments made. The payments to subcontractors will be disallowed as a cost in case 5% retentions are not withheld.
Profits from the neutral zone are taxed at different rates than operations conducted within the State of Kuwait.
In general, registration with the tax department requires that, a registration application must be completed, signed, and submitted along with the several documents such as:
- The Articles of Association and any amendments thereto.
- The agency contract
- The agency registration certificate
- The company’s addresses both within the State of Kuwait and abroad
- The exemption certificate
- An authorization letter duly signed by an authorized signatory of the company.
* In addition the company can obtain a taxation card by filing a taxation card registration application and submit the following documents:
- The Articles of Association and any amendments thereto.
- The agency contract
Is there anything else that I should know?
The Kuwait has a vibrant free economy, a significant proportion of its revenues arising from exports of oil and gas.
Since the mid-to-late 2010s, Kuwait has initiated a national development plan to diversify the economy. The plan aims to transform Kuwait into a leading financial hub and also aims to position Kuwait as a global hub for the petrochemical industry. As a result, Kuwait’s infrastructure market entered a new phase of growth. Kuwait was the region’s biggest spender of oil and gas megaprojects for two years. Kuwait is currently one of the largest infrastructure markets in the region. Kuwait is the third biggest market in the region in terms of size of project pipeline.
Kuwait has a large wealth-management industry that stands out in the region. Kuwaiti investment companies administer more assets than those of any other GCC country, save the much larger Saudi Arabia. The Kuwait Financial Centre, in a rough calculation, estimated that Kuwaiti firms accounted for over one-third of the total assets under management in the GCC.
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