Doing Business in Kuwait: Overview

Kuwait is one of the richest countries in the world, with its currency (the Kuwaiti Dinar) being one of the highest valued currencies in comparison with other global currencies. Its economy is founded on petroleum-based wealth. As a result of frequent diversification, petroleum now constitutes about 43% of the total GDP, while the remainder is the result of export earnings, with steel being the second largest industry. It has the world's largest LNG gas reserves which are being tapped through the Al Zour refinery, which has been executed through the Kuwait-China co-operation project under China's Belt and Road Initiative (BRI) programme.

The dominant industry is the petroleum-based industry, with steel being the second largest industry (Kuwait is self-sufficient in steel). Kuwait's main exports include petroleum derived products, metals and minerals. As a part of its drive towards environmental sustainability, Kuwait has been involved in various megaprojects which have included biofuel and clean fuel. Kuwait's environmental bodies are involved in the Environmental Remediation Programme, which is considered to constitute one the largest environmental remediation programmes in the world. Additionally, there are various major infrastructural projects underway to be executed under Kuwait's Vision 2035.

Kuwait currently has a population of approximately 4.65 million people, 3.2 million of whom are foreign nationals and 1.45 million of whom are Kuwaitis. The official language of the State of Kuwait is the Arabic language. Its official religion is Islam, with the majority of Kuwaitis being Sunnis and the minority being Shia'a.

Kuwait is an Islamic country which has a unique business culture that reflects its traditional values. Though it is not considered a conservative country, Islam still has a large influence over Kuwaiti society, including the operation and management of businesses. Muslims practice prayers five times a day and there is usually a brief stop to any business activity during this period of prayer time. Business hours amount to 48 hours a week (eight hours a day) during Saturday to Thursday, usually between 8.00 am to 6.00 pm (including a one-hour break), although some businesses also function on a two-shift rota each day. Friday is a rest day in principle, and Ramadan working hours are reduced to six hours per day (in view of the fasting period). A list of public holidays is also made available by the state and these are observed by businesses.

The Kuwaiti economy is supported by the world's sixth largest proven reserves of oil, making Kuwait sixth most prosperous country in the world measured by gross domestic product (GDP). The oil sector accounts for 40% of GDP, 90% of total exports and 80% of state revenues (Kuwait GDP Annual Growth Rate Report 2020). The services sector and manufacturing are also prominent, with real estate and financial and business services, wholesale, retail trade, hotels, restaurants, construction, and electricity, gas and water distribution contributing to a lesser degree.

The Kuwaiti Parliament has approved laws that are related to the current development plan and the new airport project, which was started in May 2017 and is expected to be completed in 2022. Investment in this project is estimated to be KWD600 million (about USD2.1 billion). The new terminal added an extra capacity of 13 million passengers a year and the subsequent phases will enhance the capacity to between 25 million to 50 million passengers a year. Other major projects recently completed or due to be completed are the:

The Kuwaiti Government is aiming to be within the top 35% countries by 2035 (Global Competitiveness Index (GCI)). The Kuwaiti Government has signed several international co-operation agreements to improve the economy, for example, seven agreements with the Chinese Government and memorandums of co-operation following the visit of HH Sheikh Sabah and the President of the People's Republic of China, Xi Jinping. Sectors covered in the agreements include those relating to foreign direct investment and oil and gas.

The Annual Plan 2019/2020 achieved 32 development programmes with a financial allocation of KWD3.3 billion. The plan aimed to improve Kuwait's global standing as a financial and trade hub that is commercially appealing to investors. The annual plan for 2021/2022 has KWD1.8 billion's worth of investment in 132 projects, which include building an international economic zone and implementing privatisation plans further to strengthen the private sector. On health projects, the government has invested in projects worth KWD971.6 million which focus on public hospital infrastructure. In addition, there have been changes to health insurance policy in the private hospitals sector for Kuwaitis which means that they can now benefit from private healthcare insurance policies worth KWD230 million in total.

Kuwait's legal system is a mixed judicial system that is influenced by sharia law, the French-based civil law system for the legislature and the courts and by common law (see Question 3). Under Article 14 of Decree Law No. 23/1990 Concerning Judicial Organisation (dated 10 March 1990) (Judicial Organisation Law), the Arabic language is the official language of the courts.

Legislative reforms. Recent legislative reforms that have been introduced include the following:

Regulatory changes. The National Assembly (the Kuwaiti Parliament) has issued several laws which have been published in the Official Gazette (The Kuwait Al-Yowm) regarding judicial procedures. These include amendments to the Kuwaiti law relating to pleadings by approving e-judicial services that will allow individuals to file lawsuits and appeals through e-mail or through the use of electronic systems, with the aim of providing these judicial procedures remotely.

The National Assembly also amended Article 17 of Decree Law No. 38/1980 by extending the limitation periods of appeals to help with delays caused as a result of the COVID-19 pandemic and the lockdown of the country. The Kuwaiti Parliament has also increased the penalties that apply for violations of the health rules in the light of COVID-19. Additionally, under Ministry Decree No. 26 of 2021, the provision of electronic announcements from the courts allowed the parties involved in litigation to be informed about their cases through electronic announcements provided by the courts. The following three types of electronic judicial notifications are permitted:

Women's rights. Kuwait has seen major a development in women's rights in the judicial system, as since August 2020 women can be employed as judges. There has also been a notable improvement in gender parity for both professional and technical workers, and more specifically in the military, judicial and political arenas.

The Kuwaiti Government introduced several incentives and economic reliefs for the private sector during the COVID-19 pandemic. These began with the announcement of monetary support to the private sector, primarily to ensure job stability. This was implemented through several economic steps:

Following the COVID-19 crisis, Kuwait allowed most businesses to open after following certain health guidelines and protocols. E-commerce became one of the crucial business sectors in Kuwait during the pandemic. The Kuwaiti Government and the Ministry of Commerce and Industry have been simplifying the process for establishing new companies in Kuwait over the last five years, and investors can now start up their businesses online in a simplified, one-step process.

Kuwait has a mixed judicial system that is influenced by sharia law, the French-based civil law system for the legislature and the courts and by common law. Civil laws are passed through the Parliament, and disputes are heard at domestic courts in accordance with codified laws. Kuwait acknowledges Islamic law as one of the primary sources, together with positive law. However, legislators can adopt positive laws that violate sharia law because the constitution allows regulation by other sources (Article 2, Constitution of Kuwait 1962). Islamic law principles are the basis of family law but have also been incorporated in some legislation, including criminal laws, labour laws and companies Zakat (religious, financial obligation or tax). It also influences organisations such as the Capital Markets Authority, which sets rules, regulations and procedures relating to the activities of licensed investors working in accordance with Islamic sharia.

Companies that choose to operate under Islamic law must appoint a legislative control authority to conduct Islamic compliance with its activity under Law No. 1 of 2016 Promulgating the Company Law. Islamic companies have internal panels that consist of independent shariah experts who monitor the legitimacy of the company's operations. They issue Fatwas (legal opinions) regarding the activities. The Islamic banks also have in important economic role, as they are governed by certain regulations and are supervised by the Ministry of Islamic Affairs, which intervenes in the compliance of the bank's activities according to the Islamic law (Articles 86 to 93 of Law No. 32 of 1968 with Regard to the Organisation of the Banking Profession (dated 30 June 1968)).

The impact of Islamic law as one of the primary sources is established in Decree No. 139 of 1991 Regarding the Establishment of the Supreme Consultation Committee to Work on Completing the Application of the Islamic Rules. The judicial body can appoint graduates from Islamic schools along with graduates from other law schools under Article 2 of Law No. 42 of 1964 Regarding the Organisation of the Legal Profession Before the Courts (dated 8 August 1964) and Article 19 of the Judicial Organisation Law. This influences day-to-day legal interactions and impacts the legal and cultural atmosphere in Kuwait.

Foreign companies and individuals who wish to invest or set up businesses in Kuwait can incorporate a company, but this company must form a Kuwaiti partnership prescribed by law with a Kuwaiti company that holds at least 51% stake. Foreign nationals can also invest through a Kuwaiti agent. The agent must be a Kuwaiti national or a company in which a Kuwaiti national owns 51% of (Law No. 13 of 2016 on the Organisation of Commercial Agencies). An exemption to the 51% rule is made when foreign investors wish to have a direct investment in Kuwait (Law No. 116 of 2013 on Promoting Direct Investment in Kuwait and Ministerial Decision No. 502 of 2014 Regarding the Executive Regulations of the Application of the Law Concerning the Promotion of Foreign Direct Investment in Kuwait) (see Question 7).

Foreign companies and individuals cannot own all of the shares, or the majority of the shares, of a company that has been set up in Kuwait (Article 23, Law No. 68 of 1980 regarding Promulgation of the Commercial Law).

No restrictions are triggered by an acquisition of shares over a certain threshold, but limitations do apply on share ownership (see above, Government Authorisations).

Not applicable.

Under the Kuwaiti Unified Law for the Boycott of Israel of 1957, which is still in force, together with Law No. 21 of 1964 on the Boycott of Israeli Commodities (Boycott of Israeli Commodities Law), individuals and companies cannot conclude (personally or through an intermediary) agreements with organisations or persons residing in Israel. They also cannot deal with persons who have an interest in Israel, wherever their residence may be, if the agreement is for commercial transactions or financial processes or any other dealing of any nature. The import, exchange, possession or trading of Israeli commodities, goods and products are banned in Kuwait. This prohibition applies to Israeli securities and other movable things of value.

The law also states that goods manufactured in Israel or with parts, whatever their percentage may be, from Israeli products, will be considered Israeli, whether imported directly or indirectly from Israel. Goods and products that are re-shipped from Israel or manufactured outside Israel for exportation to its account or the account of either persons or organisations, will be considered as Israeli commodities. Violation of the law can be subject to imprisonment with hard labour for a period not less than three years but not exceeding ten years, and may be accompanied by a fine of up to KWD5,000. If the culprit is a legal person, the penalty is executed on the person responsible for committing it from the subordinates of the legal person (Article 6, Boycott of Israeli Commodities Law). In addition to the above, a number of decrees, laws, decisions and announcements have also been published in the Official Gazette concerning the boycott of Israeli films and cinematographic production works. The supervision of the implementation of these laws has been assigned to the Director-General of Customs and certain police units in Kuwait.

In principle, investors have a certain level of protection afforded by the stability of the Kuwaiti currency. They enjoy free convertibility to any foreign currencies as this is granted in the law as one of the primary objectives of the Central Bank of Kuwait (Article 15, Law No. 32 of 1968 on Currency, Central Bank of Kuwait, and The Organisation of The Banking Profession). However, every person who enters or leaves Kuwait, who is in possession of currencies or arranges for its transfer abroad must disclose to the Kuwait General Administration of Customs on request the origin of this currency and must provide the necessary information of the legitimacy of it when requested. This is regulated by Law No. 106 of 2013 Regarding Combating Money Laundering.

The General Administration of Customs can in certain circumstances seize some of, or the entire, currency in the event where either:

Personal luggage and gifts with a value less than KWD250 need not be disclosed (Decree No. 200 of 2003 Regarding the Issuance of the Executive Regulations for Article 19 of Law No. 10 of 2003, Pertinent to the Issuance of the Uniform Customs Code for the Co-operation Council's Countries for the Arab Gulf Countries).

The Ministry of Commerce and Industry has also provided an online anti-money laundering and terrorism portal, which allows all companies to check their transactions online, including requesting an audit and analysis of their financial data and the appointment of a compliance observer.

If an individual investor wishes to invest in Kuwait through a Kuwaiti partner as per the 51% rule (see Question 4), the company will not be subject to any income taxation in Kuwait.

If an investor wishes to invest through Law No. 116 of 2013 on Promoting Direct Investment in Kuwait, that investor will be entitled to some or all of the following incentives:

The Direct Investment Promotion Authority in Kuwait has worked to improve the business environment of Kuwait to increase international investment, and attracted USD3.4 billion to Kuwait during 2019. Leading companies established in Kuwait include IBM, Huawei, LH, TSK, Limak, MMI, Honey Well, Cengiz, Tecnicas Reunidas, DCI, Berkeley Research Group, Grand Cinemas, WTE, EVN Group, Leonardo, IDEMIA, McKinsey and Company, Baker Hughes (GE Company) and The Conference Broad.

The main business vehicles are (Law No. 1 of 2016 Promulgating the Company Law (Companies Law)):

The form of business vehicle most commonly used by foreign companies is the limited liability company as it has a flexible corporate structure and fewer corporate requirements. It also protects the partners from liability as it is a separate legal entity.

To register a limited liability company, the following information is required:

To become incorporated, a limited liability company should distribute all pecuniary shares between the partners and shareholders, and deposit the monies in a local bank.

The company must also meet the following conditions:

During the establishment process, the manager of the company can either be a Kuwaiti national or a Gulf Co-operation Council national. The manager can also be a foreign national, but the manager must hold a valid residence in Kuwait. If a foreign national is appointed as a manager, the company will have a temporary licence until the manager transfers their residence to the new company, which must be achieved within three months. To record the company's memorandum of association a fee of KWD180 must be paid to the Ministry of Commerce and Industry (this cost is subject to change by the Ministry of Commerce and Industry).

An amendment to the Companies Law (under Law No. 15 of 2017) now permits a limited liability company to use its e-mail and postal addresses as its mode of communication platform within the business environment.

An annual meeting must be conducted within three months from the end of the financial year. A report on the activity of the company and its financial position must be presented at the meeting. Certain decisions must be taken on the distribution of profits, the appointment of a manager or that manager's discharge. An auditor must also be selected for the following financial year and the auditor's fees must be agreed.

An amendment to the Companies Law (under Law No. 15 of 2017) eliminates the obligation of payment of the company's capital (see above, Registration and Formation). However, the executive bye-laws determine the minimum capital of the company as per the activities of the company. The partners have the right to determine the nominal value of the shares as per their agreement, but the shares must be of the same value.

Shares can be either in cash or in kind.

Restrictions on rights attached to shares. The company's capital must be divided into equal shares. The share must be indivisible. For the assignment of shares to persons other than the partners, the approval of the remaining partners must be obtained.

Automatic rights attached to shares. Every shareholder is considered a partner in a limited liability company. All partners can view the company's accounts, its deeds and documents at the company's headquarters. All conditions or decisions in contradiction of this are void. Partners also have the right to attend the general assembly meeting either in person or through their agent. All partners have votes equivalent to the number of shares they hold in the company.

The management of a limited liability company must be undertaken by one manager or more from among the company's partners, or from other persons designated in the company's articles of association. If the company's articles do not designate a manager, then the partners must appoint one at the ordinary general assembly meeting.

Managers cannot do any of the following unless they have the express authorisation to do so issued by the general assembly meeting of the partners:

The standard residency laws/immigration laws apply to managers to hold a valid work permit/residence permit (where required) and to be legally residing in the country.

Managers, directors and officers of a company can be discharged by a judicial decision at the request of one or more of the partners who own at least a quarter of the shares in the capital, based on any of the following reasons:

The holding company is jointly responsible for the debts of its affiliated company if:

Law No. 42 of 2014 is the principal law concerned with protecting the environment. It governs all private and public entities in Kuwait and aims to protect environmental resources and maintain the equilibrium of natural resources in Kuwait. The Environment Public Authority is the main environmental public entity that has juristic personality. It has the ultimate authority to decide what constitutes pollution to the environment, and puts in place the rules that businesses must consider if they intend to venture into activities that may involve the use of minerals, paints, chemicals and so on.

All employees are subject to Law No. 6 of 2010 concerning Labour in the Private Sector (together with its amendments), which applies to both foreign national employees and Kuwaiti nationals working in the private sector in Kuwait. The law provides the minimum mandatory rules that must be met regardless of any choice of law in the employment contract. For example, the mandatory provisions include those governing:

Other mandatory employment laws also apply to employees working in specific sectors (for example, oil sector employees, domestic labour employees and employees in the public service).

Kuwaiti employees hired overseas by Kuwaiti governmental entities will usually be subject to Kuwaiti public sector law, though other employers of Kuwaiti employees hired overseas can apply the labour laws of the country within which the employees are working.

See above, Foreign Employees.

Employment contracts must be in writing and must include the date the agreement was concluded, its commencement date, details on the employee's remuneration, the duration of the contract (if it is for a fixed term) and the nature of work. It must be drafted in triplicate. Both the employer and the employee both receive a copy and the third copy must be deposited at the General Authority for Labour Force (Public Authority of Manpower) (PAM), which is a public organisation with juristic personality and an affiliated budget. PAM is supervised by the State Minister for Economic Affairs under Decree No. 1 of 2019. Where an employment agreement is not concluded in writing it can still be deemed to validly exist in law, but in this case the onus of proof is on the employee to establish their rights under the employment agreement by providing evidence of its existence. An employee's wages cannot be reduced during the term of an employment contract as this is considered void for public policy reasons.

PAM provides a mandatory employment template that includes the minimum rights of the employee. The PAM ensures that the minimum rights guaranteed to employees under the law is implied into an employment contract by requiring all companies in Kuwait to use this template, which ensures the basic requirements (such as those governing basic salary, job position, the provision of transport and accommodation in specific employment areas, rest days, overtime (if any), sick leave, annual leave, and end of service benefits) are included within the employment contract. Any other special conditions can also be included in the employment contract.

Not applicable.

Work permits must be obtained to work in the private sector. Employers are considered to be the sponsors of employees and must apply for work permits on the employees' behalf at the relevant authorities. "No Objection" Certificates must also be obtained from the Criminal Investigation Department by employees where these are requested by the employer. Employees must undergo medical tests on arrival in Kuwait, including fingerprinting and security clearance.

For foreign national employees wishing to work in Kuwait for a period of longer than three months, the employer must apply for a residence permit at the Immigration and Passport Department. A maximum period of five years is granted, costing KWD10 per year.

For foreign national employees wishing to work in Kuwait for a period of three months or less, a temporary commercial visit visa must be obtained by the employer which is issued for one month: this can then be extended for a period of up to three months. A temporary commercial visit visa can also be converted into a work permit on an application by the employer that applied for the original temporary commercial visit visa.

Employees are not entitled to management representation or to be consulted on corporate transactions such as redundancies and disposals. If employees think that they deserve bonuses or believe they were wrongly dismissed, they can approach the relevant labour authority and claim for their rights and any compensation that may be due.

The provisions that regulate the termination of an individual's employment depend on whether the employee is on a fixed-term employment contract or an open-ended employment contract, and the ground on which the employment is terminated.

Fixed-term employment contract. If the employment contract is a fixed-term employment contract, it is binding on both parties until the end of the term. If one of the parties ends the contract without a justified reason (see below, Fair Dismissal: Open-ended employment contract), the party ending the contract must indemnify the other party for any harm that was suffered by that party as a result of the termination of the contract. This compensation must not exceed the equivalent of the employee's wages for the remaining period of the contract, which must be taken into consideration while determining the damage, together with current custom, the nature of the work and the period of the contract.

Open-ended employment contract. If the term of the work contract is not specified (that is, it is an open-ended employment contract), both parties can terminate the contract at any time without a reason/ground simply by providing notice to the other party as follows:

If the party terminating the contract does not abide by the period of notice, the party terminating the contract must pay the other party compensation for the notice period equal to the remuneration of the employee for the same period.

If the notice of termination is issued by the employer, the employee can take a day off or eight hours off over the course of a week to allow them to look for other work. The employee is entitled to their remuneration for this day (or these hours) of absence. The employee decides on the day or hours of absence and must notify the employer at least one day prior to taking such absence. Employers can exempt employees from working (that is, provide garden leave) during the period of notice. The employer must pay the employee all relevant employment entitlements and remuneration up to and including the notice period. No further severance pay is due but the employer must pay the employee their end of service benefit (which is calculated in various ways depending on the circumstances surrounding the termination).

The following actions constitute justified grounds for an employer to immediately terminate an open-ended employment contract, without notice (though any employment entitlements (except for the end of service benefit, which is forfeited) such as accrued holiday pay and salary owed must be paid to the employee), where the employee:

In all cases where an employer terminates an open-ended employment contract (for whatever reason), the employer must inform the relevant authority about the termination of that contract along with the reasons for that termination.

Employees can terminate open-ended employment contracts with immediate effect and without notice, and remain entitled to receive their end of service benefit, in any of the following cases:

Grounds for unfair dismissal. Where an employee on an open-ended employment contract considers that they have been unfairly dismissed (because the employer has claimed to have had a justified reason for the dismissal, but no such reason exists and the employee has in fact been arbitrarily dismissed by the employer), the employee can object to the dismissal decision before the competent labour department using the procedure outlined in the law.

Remedies. If it is established by a final verdict that the employer arbitrarily dismissed the employee, the employee will be entitled to receive their end of service benefit together with compensation for material and moral damages.

There are no specific provisions of employment law that protect certain classes or groups of individuals.

Redundancies and mass layoffs are regulated under Law No. 6 of 2010 Concerning Labour in the Private Sector (at Articles 123 to 132).

In the event of collective redundancies/layoffs, the concerned parties (that is, the employer (or the employer's representative) and the employees (or the employees' representative)) must initiate direct negotiations. The competent ministry delegates a representative to attend the negotiation as a controller. If an agreement is reached between them, the agreement must be registered at the competent ministry within 15 days of its conclusion. If direct negotiation fails to arrive at a solution, the Work Disputes Reconciliation Committee (Committee), which consists of the following, will look into the dispute:

The Committee will consider the opinion of any person it deems useful. In all the preceding stages, the competent ministry can request all the information necessary to settle the dispute. The Committee will hear the dispute within one month from the submission of the application. If it can settle the dispute, wholly or partially, it must register the settlement reached by both parties in the minutes of the proceedings in three copies signed by the attendees. The settlement is considered final and binding on both parties. If the Committee cannot settle the dispute within a specific period, it must refer the dispute (or the unsettled part), within a week after its last meeting, to the Arbitration Panel along with all relevant documents. For collective redundancy/layoff disputes, the Arbitration Panel will be formed as follows:

The disputing parties or their legal representatives will appear before the Arbitration Panel, which hears the dispute within 20 days of the date the documents are submitted to the Clerks Department. Both disputing parties must be notified of the date of the session at least one week in advance. The dispute must be settled within three months of the date of the first session. The Arbitration Panel has all the powers of the Court of Appeal in accordance with the provisions of the law regulating the judiciary and the law of civil and commercial procedure. The verdicts rendered by them are final and have the same effect as the verdicts rendered by the Court of Appeal.

Kuwait is an income tax-free jurisdiction. Therefore, income tax is not applicable to income earned from employment in Kuwait. However, the Kuwaiti Government imposes a mandatory social security contribution on all employees who are citizens/Kuwaiti nationals, which must be paid by both employers and employees. The employer must pay social security contributions up to a rate of 12.5% (depending on each employee's monthly salary), while the employee must contribute up to 10.5% (depending on the employee's monthly salary) to the Public Institution of Social Security.

See above, Tax Residence.

Income tax is not applicable to income from employment, as Kuwait is an income tax-free jurisdiction. Tax residency is therefore of no relevance to income taxation in Kuwait. However, if a foreign company is conducting business in Kuwait through an agent, a 15% income tax is applied to its net income. For the applicable social security contributions for both employers and employees, see Question 18, Tax Residence.

See above, Tax Resident Employees.

Employers are no subject to income tax in Kuwait. However, if a foreign company is conducting business in Kuwait through an agent, a 15% income tax is applicable on the net income depicted in the financial report (which includes the balance sheet) presented to the Ministry of Finance. The Ministry of Finance will schedule an appointment with the employer to conduct a check on this financial report. For the applicable social security contributions for both employers and employees, see Question 18, Tax Residence.

If a foreign company operates in Kuwait through a joint venture or consortium partner as a shareholder in a limited liability company or a closed shareholding company, then only the foreign company's share of profits earned is subject to tax. All foreign companies carrying on operations in the neutral zone or free zones are liable to income tax under Law No. 23 of 1961 Regulating the Income of Companies in the Designated Area. Any activity or business wholly or partially executed in Kuwait, whether the contract was concluded within Kuwait or overseas, as well as the income realised from the supply and sale of goods or the provision of services, is not subject to income taxation.

The following forms of business are not subject to income tax:

The tax that is potentially applicable to a business vehicle is only applicable to a foreign company conducting business directly in the State of Kuwait and earning an income. Such income is taxed at the rate of 15% on the net income. To ensure such tax is not evaded, local companies engaged in commercial activity with foreign companies must retain 5% of all payments made to them as withholding tax, which is subject to release when the foreign company files its return (evidenced in the form of a certificate).

Tax returns for each taxable period must be submitted within three and a half months of the end of the taxable period. Taxes must be paid in four equal instalments as follows:

Under Law No. 2 of 2008 on Amending some Provisions of Kuwait Income Tax Decree No. 3 of 1955, a body corporate that is subject to tax in Kuwait must maintain the following books of accounts and records:

In practice, the tax department expects to verify the revenues and costs disclosed in the tax declaration with a detailed general ledger together with original invoices and supporting documents, including cash and bank statements. The tax department accepts computer-based accounts.

Kuwaiti shareholding companies are required to pay Zakat at a rate of 1% of their net profits. They are also required to pay 1% of their net profits to the Kuwait Foundation for the Advancement of Sciences. Moreover, foreign companies doing business in the neutral zone between Kuwait and Saudi Arabia are subject to the same tax on 50% of their profit.

Although Kuwait is a signatory to the Gulf Cooperation Council Value Added Tax Treaty 2016, Kuwait has not yet initiated legislation to implement VAT in the region (as under Article 134 of the Constitution of Kuwait, no taxes can be applied except by law, meaning that the tax cannot be imposed until the necessary legislation has been passed to implement it).

There is no withholding tax levied on dividends distributed by fund managers, investment custodians and corporate bodies.

The following persons/bodies must deduct and deposit 15% to the income tax account from the incorporated body's share in the profits and distributions or as per the provisions of applicable conventions for the avoidance of double taxation:

Foreign management fees are the amounts paid to each incorporated body that exercises management activities in return for fees under contract stipulations. For incorporated bodies participating in a Kuwaiti company, these fees will be accepted as costs for the company and at the same time will be added to the full net profit of the incorporated body. These fees will be treated as full net profit as such fees are considered as revenues without expenses in return.

Income from royalties is taxed and includes amounts earned on selling, leasing or granting of franchise rights for the use of any trade mark, design, patent, copyrights, or other corporate rights, or relating to intellectual property rights in consideration for using any copyright for literary, technical or scientific works of whatsoever form.

The Tax Department can inspect such companies and verify that the inter-company transactions are conducted on sound bases and not purely to obtain illegal tax privileges. In such a case, the inter-company transactions of associated companies will be determined on a comparable arm's length basis, with such associated companies comprising:

Related incorporated bodies cannot integrate activities, as each incorporated body has its own independent legal entity for calculating the tax due.

There are no thin capitalisation rules or restrictions on loans from foreign affiliates. However, companies must take the following into consideration:

Profits of a foreign subsidiary need not be imputed to the parent company as only the income from the Kuwait operations are subject to tax (see Question 20).

The tax authorities consider that there is a taxable profit margin on the following activities:

The six Gulf Cooperation Council (GCC) states comprising of Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the UAE announced the formation of a Customs Union with effect from 1 January 2003. This union eliminated customs duties for trade within GCC states and removed regulations and procedures that restricted trade within the GCC. The Customs Union resulted in unified customs duties.

The GCC states have approved a unified customs tariff of 5% on cost, insurance and freight invoices subject to certain exceptions.

Kuwait has signed and ratified double taxation treaties with more than 70 different countries, including, Hong Kong, India, Austria, Canada, China, Spain, France, Italy, The Netherlands, Germany, Denmark, Greece and Switzerland.

The main advantages of double taxation treaties are:

Law No. 72 of 2020 Regarding the Protection of Competition (Competition Law) governs and regulates competition, particularly practices that are harmful to competition and monopoly violations. It applies to all commercial enterprises operating in Kuwait irrespective of whether they are local of foreign entities. Article 4 of the Competition Law sets out the penalties for violations of the law, which can include fines and/or the cessation of work (for repeat violations), which can be imposed for a maximum period of three years.

The Competition Law) (published in the Official Gazette on 11 January 2021) has recently amended competition in law in Kuwait and has repealed the previous law (Law No. 10 of 2007). The Competition Law further enhances the freedom of competition in Kuwait, and applies to all entities, including foreign persons, doing business in Kuwait. It applies to natural and legal persons, such as merchants, companies and economic entities, societies, unions, organisations and other establishments, and bonds.

The Competition Law aims to ensure the freedom to practice economic activities in a way that does not curb, prevent or harm free competition in any way. The Competition Authority also recently launched an online e-complaints service for companies to take measures to combat anti-competitive practices during COVID-19. The Competition Authority went to great lengths to ensure the stability of the market and prevent harmful practices during the unprecedented circumstances created by the pandemic. The service listed 12 harmful practices to competition that could be reported electronically, such as influencing the prices of products, making fictitious transactions, limiting or blocking sales, and refraining from selling.

Prohibitions. The Competition Law prohibits certain restrictive agreements and practices that harm free competition. Persons who have control of products and abusively use their control can be subject to penalties (see below). The prohibitions apply to restrictive agreements that, among other things (Competition Authority):

Penalties. The Competition Authority can impose criminal penalties on violators of the Competition Law according to the seriousness of the violation. The penalty can be a fine of up to KWD100,000 or the equivalent of the value of the illegal gains that were realised, whichever is greater. In addition, for repeat violations, the fine can be doubled. The Competition Authority can also seek to obtain a court judgment to stop the violator from committing the violating activity for a maximum period of three years.

Under the Competition Law, any contract or agreement that tries to create a monopoly, or curbs or restricts free trade or competition between competitors, in Kuwait is prohibited. Any natural or legal person who has a position of dominance in the market, and therefore has the control to influence the market, is prohibited from abusing their power with regards to such practices. This includes single firms and their actions resulting from such conduct. A list of prohibited practices is set out in Article 4 of the Competition Law. The Competition Authority is the governing body.

Mergers and acquisitions are regulated and supervised under Law No. 7 of 2010 Concerning the Establishment of the Capital Markets Authority (CMA) and Regulating Securities Activities (Securities Law), which was issued on 21 February 2010 and published in the Official Gazette on 28 February 2010. This law was further amended through Law No. 108 of 2014 Concerning Electronic Transactions and through Law No. 22 of 2015 Amending Certain Articles of the Securities Law. In addition, the purchase offers in acquisition and merger operations are regulated in the Executive Byelaws of the CMA (Module 9). Each merging company must also comply with the provisions of Law No. 10 of 2007 on the Protection of Competition and its Executive Byelaws, if the merger would lead to control, or increased existing control, of the relevant market.

The scope of application of the merger provisions applies to companies licensed by the Competition Authority or listed on the stock exchange, but in addition to these, all companies involved in mergers, acquisition offers, offers to acquire or solicitations to procure the acquisition of shares of a listed company or unlisted company in a reverse acquisition must disclose the following stages of the merger:

Companies involved in a merger must submit to the Competition Authority the Draft Merger Contract (DMC) for its approval. The Central Bank's approval is required for the units subject to its supervision. The DMC cannot be published or circulated to shareholders or partners before obtaining these approvals. Each shareholder or partner has the right to receive a copy of the DMC following the Competition Authority's approval, which includes the following:

The following information must also be attached to the DMC:

See above, Transactions Subject to Merger Control.

See above, Transactions Subject to Merger Control.

The Kuwait Anticorruption Authority (Nazaha) is a neutral, independent authority which was set up in response to the requirements of the United Nations Convention Against Corruption, which is responsible for establishing anti-bribery and corruption regulations within Kuwait.

Definition and legal requirements. A patent under Kuwaiti law is the deed that is granted by the Gulf Cooperation Council (GCC) Patent Office to the owner of the invention so that the invention enjoys the legal protection afforded under the rules of Patent Law No. 71 of 2013 Issuance of the GCC Patent Law for the States of the Cooperation Council (Patent Law), and its regulations, and is valid in all the states of the GCC. An invention is an idea reached by the inventor through which a solution to a certain problem results or that adds a new feature in the field of technology. An invention can be registered if:

Registration. An application must be submitted to the GCC regional patent office under the the Patent Law, as Kuwait is a member of the GCC Patent Office. The invention can be protected in all GCC countries through filing a GCC patent application, which must include the following:

The applicant must also provide the GCC regional patent office with any other information required and additional data relating to the application, as applicable.

Enforcement and remedies. The Patent Law applies to all GCC countries and states that the competent bodies in every state of the GCC can review all disputes relating to the violation of patent rights or the possibility of the occurrence of such a violation in the GCC countries. The GCC adjudicates disputes according to the rules of the Patent Law and its codes relating to patents, if found applicable, or according to the general rules.

Penalties for infringement can include imprisonment for a period not exceeding one year, a financial penalty not exceeding KWD5,000, or both, for every person who:

Length of protection. The protection period of the patent is 20 years from the date of submitting the application to obtain the patent. An annual fee is due on the patent, which must be paid at the beginning of each year starting from the year following the date the patent application is submitted. If the patent owner does not pay the annual fee at a date no later than three months from the beginning of the year, the patent owner can pay the fee within three months starting from the expiry of the previous period (together with the payment of an additional fee). In all cases, annual fees cannot be settled in advance for all or some of the patent's period. If the owner of the patent does not settle the annual fee during the previous regulatory period (six months from the date of maturity) the patent lapses.

Definition and legal requirements. Under Law No. 13 of 2015 Concerning Trade Marks for GCC countries (Trade Marks Law), a trade mark is a work that takes a distinctive form that can consist of names, words, pictures, signatures, letters, symbols, numbers, addresses, stamps, drawings, pictures, inscriptions, packaging or holographic elements, shapes, colours, groups, or a combination of these, or any signal or group of signals, if used or intended to be used to distinguish goods or services of an establishment from commodities or services of another establishment, or to indicate the performance of one of the services or the monitoring or examination of commodities or services. Symbols for sound or smell can be considered trade marks.

Protection. The Trademark Office in the Ministry of Commerce and Industry is the official authority responsible for the registration of trade marks. To register a trade mark, an application for registration must be filled, indicating the trade mark owner's name, address and location. The authority accepts handwritten applications and the required documents are:

Trade mark registration fees are as follows:

Enforcement and remedies. In cases of infringement or to prevent a forthcoming infringement on any of the rights, the rights holder can seek an order on a request from the court concerned with the origin of the conflict to take the actions (or appropriate protective measures) that are regulated under Article 40 of the Trade Marks Law.

The rights holder who suffered direct harm arising from the infringement of any of the rights provided under the provisions of the Trade Marks Law can file a lawsuit before the competent court requesting compensation sufficient to rectify the damage (Article 41, Trade Marks Law). Compensation must include the profits gained by the defendant.

Violators who falsify a registered trade mark, or imitate it in such a way as to mislead the public and use it in bad faith, can face imprisonment for not less than one month and not more than three years and a fine (Article 42, Trade Marks Law). The same penalties apply if an infringer places a trade mark owned by a third party on a commodity in bad faith.

Length of protection and renewability. The term of protection is ten years. If the rights holder wishes to continue protection for similar periods, the rights holder must submit a request for renewal during the final year under the conditions outlined in the Trade Marks Law and its executive regulations.

Definition. Registered designs and other related rights are protected under Law No. 22 of 2016 Regarding the Rights of Copyright and Related Rights (Copyright Law). The protection applies to the rights of authors of innovative works, which includes illustrations, geographical maps, designs, drawings, cartoons (sketches) and works related to geography, topography, architecture and science (Article 3, Copyright Law).

Registration. The National Library of Kuwait is the authority that registers registered designs.

Enforcement and remedies. See below, Copyright.

Length of protection and renewability. Protection is for 50 years (see below, Copyright).

Definition and legal requirements. Unregistered designs are not recognised or afforded IP protection in Kuwait.

Enforcement and remedies. Not applicable.

Length of protection. Not applicable.

Definition and legal requirements. Copyrights and other related rights (including registered designs) are protected under the Copyright Law, which protects literary, artistic, dramatic or scientifically innovative original works of any kind, or manner of expression, or purpose. Copyright protects the creative character that confers originality on the work. The law also recognises collective work (where an artistic work is made by more than one person, under the guidance of one natural or legal person, and where that work is then managed and published in just that one natural/legal person's name for all the authors' account), and the work of multiple authors which is integrated into the final work, that does not specify the right of any of the authors in the total artistic work (which includes works such as encyclopaedias and literary anthologies). In addition, artistic work that derives its origin from an earlier artistic work (that is, derived work, such as certain musical works and folklore works) is also recognised. National folklore and expressions of traditional arts, including popular oral or written musical works, are protected as the law considers these works to constitute inherited knowledge.

Protection. Under the Copyright Law, the National Library of Kuwait is the authority that registers copyrights. Protection applies to the rights of authors of innovative works in literature, arts, science or knowledge, in any mode of expression and of individual or multiple authorship, and specifically includes the following:

Protection also applies to group expressions (folklore) heritage and folklore anthologies.

Enforcement and remedies. Owners of copyrights and related rights and their private and public successors can authorise associations or companies among themselves according to the law to manage rights. There are several remedies related to copyright infringement including civil, criminal and administrative protection.

The head of the competent court concerned with the dispute, at the request of the concerned person(s) and on a written order, can order one or more of the following precautionary appropriate measures on the infringement of any of the copyrights:

The head of the court can order the appointment of one or more experts to assist in implementing these measures. The applicant must submit the dispute to the competent court within 15 days from the date of issuance of the order, otherwise it will be considered null and void.

The staffs of the National Library of Kuwait are designated to monitor the implementation of the Copyright Law. They can inspect presses, libraries and publishing houses and general places, and seize items produced in violation of the law. They compile the necessary reports and forward them to the relevant authority to investigate instances of infringement. They can also request the assistance of police officers, if needed. The customs authorities, on their own or at the request of the rights holder, can issue a reasoned decision not to issue import clearance for items representing an infringement of a protected financial right in accordance with the provisions of the Copyright Law.

The General Prosecutor's Office exclusively investigates acts and prosecutes all crimes resulting from the application of the provisions of the Copyright Law. The criminal department of the full bench court hears all criminal proceedings. Their rulings can be appealed before the Court of Appeal, whose judgments can be appealed through the Court of Cassation.

Violations of the Copyright Law can result in penalties being issued, including imprisonment for not less than six months and not exceeding two years, or a fine of not less than KWD500 and not more than KWD50,000, or both. This applies if a person committed any of the following:

Imprisonment for a period of not less than six months and not exceeding two years, or a fine of not less than KWD1,000, or both, can apply if someone commits any of the following:

The court can also order that a summary of the final "guilty" verdict is published in two daily newspapers at the violator's expense.

Length of protection and renewability. Protection of copyright on artistic work lasts over a lifetime and for 50 years after the death of the author or owner. The duration of protection for joint works is calculated from the death of the last surviving author. Other periods of protection are as follows:

The financial rights of works published for the first time after the death of its author expire after 50 years from 1 January of the calendar year following the year in which they are published.

Not applicable.

Commercial agency agreements are regulated under the Commercial Agencies Law No. 13 of 2016 on the Organisation of Commercial Agencies (Agencies Law). The Agencies Law regulates every agreement where a person who has the legal right assigns to a trader or a company in Kuwait the right to sell, promote or distribute commodities or products, or to render services in their capacity as agent or distributor. The Agencies Law also applies to original importers or persons who have a franchise or a licence for the product.

Principals can have more than one agent and/or distributor. However, under the Agencies Law an agent or distributor must be:

The commercial agency contract must contain the following information:

The law does not permit exclusivity in an agency agreement. This means that Kuwaiti law permits third parties to import any commodity or product already in distribution by an agent even though that agent may have an exclusive agreement with the principal supplier and even if the principal provides the right to use that trade mark to a certain agent.

The principal's relationship with agents will be governed by the commercial agency agreement. Principals can re-enter the registration of the agency in the commercial agencies registry under the name of a new agent in the following cases:

However, if a principal terminates an agency agreement when the agent has not breached the contract, the principal must indemnify the agent for the damage the agent has sustained due to the termination. Any agreement contrary to this will be void under the Agencies Law.

See above, Agency.

Franchise agreements are regulated under the Agencies Law and the same laws as for agencies apply (see above, Agency).

E-commerce includes distance selling, electronic transactions and electronic signatures, which are regulated under Law No. 20 of 2014 Concerning Electronic Transactions (Electronic Transactions Law). This law governs electronic letters, transactions, documents, records and signatures of relationships with civil, commercial and administrative transactions and every dispute arising from using e-commerce, unless the parties agree otherwise.

Electronic records, electronic documents, e-mail, electronic transactions and electronic signatures in civil, commercial and administrative transactions produce the same legal effects as deeds, documents and written signatures and are binding on the parties (Electronic Transactions Law).

Generally, there is no specific regulation of websites that are established for general purposes (only websites that are set up specifically for the purposes of online press, journalism and/or broadcasting are specifically regulated by the Ministry of Information). However, the Ministry of Information can intervene where any website includes an advertisement that violates public laws, public order or public manners/morality, or includes any information that is fraudulent or misleading and which has the purpose of deceiving the public (for which criminal sanctions can also be imposed).

Under the Decree Regulating Advertisement in Public Places issued on 15 February 1977, advertising is every means used to announce to the public or a group of people information about a certain commodity, commercial or industrial product or apparatus, machinery, commercial or industrial business, trade or profession, or any public or private service.

Written advertisements and the signs for public shops, in their various types, must be in the Arabic language. A translation in a foreign language can be added to the advertisement provided that the largest part of the advertisement is allocated for writing in Arabic.

Entities must obtain a permit for the advertisement from the Municipality. They must submit the documents confirming the approval of the other competent authorities and pay for insurance to be assessed by the Municipality. The permit indicates its validity period, the beneficiary's name and is not transferable.

Advertising is also regulated under Law No. 2 of 1995 Concerning Sale at Reduced Prices, Advertising and Promotion of Goods and Services, which states that the Ministry of Commerce and Industry is responsible for the regulation, supervision and control of all means of sale at reduced prices. The Ministry regulates offers of free prizes and commercial advertisements concerning the promotion of goods and services. Law No. 39 of 2014 Regarding the Protection of the Consumer also regulates advertising for commodities and services.

Certain restrictions apply when advertising concerns certain professions, such as legal services (concerning lawyers) and medical services. In such cases, advertising agencies must consider certain laws when promoting and advertising, such as:

See above, Digital Advertising.

Sales promotions are regulated by the relevant municipal department of the Ministry of Commerce and Industry where those sales promotions are to take place. All such sales promotions must be prepared for the approval of the relevant municipal department, and must include information concerning the period of the promotion and its nature. On approval, the municipal department issues a licence number which must then be displayed on all advertisements concerning the sales promotion (this licence number also dictates the duration of the sales promotion). In the case of prize draws, a commissioner from the relevant municipal department must be present during the draw for the purposes of inspection and oversight.

Several laws provide data protection provisions, for example, Law No. 63 of 2015 Regarding Anti-Information Technology Crime, which protects data and information and specifies the penalties of imprisonment or fines for violations. Law No. 37 of 2014 Regarding the Establishment of the Regulatory Authority for Telecommunication and Information protects personal data, photos and videos. In addition, Law No. 1 of 1970 on Protection of Public Funds states that all mail enjoys secrecy. There are also other specific laws that provide special protection to maintain the secrecy of banking information, information between clients and their attorneys, and medical information between patients and doctors.

Data protection is provided for:

It is a crime to violate the data protection laws and violators who use, forge or destroy data by any method can face either imprisonment or a fine.

See above, Data Protection Laws.

Law No. 39 of 2014 Regarding the Protection of the Consumer (Consumer Protection Law) regulates product liability and product safety. The National Committee for Consumer Protection in the Ministry of Commerce and Industry deals with consumer protection and safeguarding the interests of consumers (Consumer Protection Law).

Consumers have the following rights:

Consumers can replace or return a commodity and obtain a refund of its value without any extra cost within 14 days from the date of receipt of purchase. Vendors must indemnify consumers against actual damages that occur or are inflicted on the consumer (or inflicted on a consumer's assets or commodities) by defective services or products that do not conform with standard specifications or validity conditions (Consumer Protection Law).

Main activities. The Competition Protection Agency: this is supervised by the Ministry of Commerce and Industry and is the competent authority to implement the Competition Law and its executive regulations to control and supervise the operation of the market in Kuwait. It aims to create a business environment that stimulates competition and commercial activities, encourages investment and operates for the benefit of both businesses and consumers.

W https://cpa.gov.kw/ar/Pages/default.aspx.

Main activities. The Environment Public Authority: this is responsible for considering environmental affairs, and its remit includes drafting bills/bye-laws/regulations on environmental protection, developing and executing environmental surveys and monitoring programmes, creating a general framework for environmental awareness, and assisting with updates to the legislation on environmental matters.

W https://epa.org.kw/en-us/.

Main activities. The Central Bank of Kuwait: this was established to keep pace with local and international economic developments within the framework of the role played by central banks in other jurisdictions, to both formulate and implement monetary policy, and regulate and monitor the banking system (particularly considering the increasingly important role played by monetary policy in achieving social and economic development). It issues national currency for the account of the state, directs credit policy to help economic and social progress and increase national income, and provides financial advice to the Kuwait Government.

W https://www.cbk.gov.kw/en.

There are no other considerations not already included in this article that relate to doing business in Kuwait.