Companies in Kuwait
Business Licences
To do business, lisences is necessary. General trading, contracting, importing and industrial licences are issued by the Ministry of Commerce & Industry (MCI). For particular commercial activities, specific licences are requierd and these are often issued by the ministry that controls that activity, eg publishing licences are granted by the Ministry of Information. 
Business licences are only issued to Kuwaiti nationals and Kuwait companies and. In some cases, to GCC nationals and companies. Costs are usually KD100 per licences, All licences require period renewal, normally even two years.

The rules of commerce are in general similar to West European practice.
Any Kuwaiti or GCC national over 21 years of age may carry on commerce in Kuwait provided he or she is not affected by a personal legal restriction. But a foreigner (non-GCC national) may not carry on a trade unless he or she more Kuwaiti partners and the capital owned by the Kuwaiti partners(s) in the joint business is not less than 51 % of the total capital (60 % in the case of banks, investments houses and insurance companies). A foreign firm (including a partnership) may not set up a branch and may not perform any commercial activities in the country except through a Kuwait agent. Foreign individuals and firms may not acquire commercial licences in there own name nor may they own real estate locally.
The main laws regulating business in Kuwait, which have been amended several times since they were issued, are (a) The civil code (Law 67 of 1980), (b) The commercial code (Law 68 of 1980), and (c) The commercial companies law (Law 15 of 1960).
Business Entities TOP
Business enterprises can take several forms, viz. Kuwait shareholding company (KSC), company with limited liability (WLL), and general partnership, The time and cost of establishing and registering these entities ranges from one month and at least KD500 for a general partnership to about three months and KD3.000 for a KSC.
Kuwaitis new privately managed free trade zone is located Shuwaikh and allows 100% foreign ownership of business within the zone. There are no import duties and foreign corporate income is tax-free. Commercial, Industrial and service licenses are a variety of infrastructural services. Tel: 802808, Fax: 4822067 http:,

The right to import goods into Kuwait on a commercial basis is restricted to Kuwait individuals and firms who are member of the Kuwait Chamber of Commerce & Industry (KCCI) and who have import licences issued by the Ministry of Commerce & Industry (MCI).

Import Licences
General import licences, which must be renewed annually, allow any amount of a variety of products from any country to be imported any number of times. But special licences are needed to bring in regulated products such as arms, ammunition and explosive, ethyl alcohol, drugs, pesticides, jewellery and precious stone, weights and weighing machines, vintage cars, etc; these too must be renewed annually. Special licences are also needed to import industrial equipment and spare parts; these are issued to industrial firms upon the recommendation of the public Authority for industry and are valid for a single use only.
To protect local morals, alcoholic beverages and materials used in making them, pigs, pork, pork and pigskin products (such as handbags, wallets and shoes), narcotics and associated plants and seeds, pornographic and subversive materials, are, among other items, prohibited. To protect local industry, items such as vehicles over 5 years old and goods manufactured locally are prohibited. Items injurious to health, such as air-guns, asbestos and cyclamates, are banned import from Israel and Iraq are banned absolutely.
All imports, as well as locally made items, must comply with Kuwaiti standard specifications (GCC), a set of common standards being devised under the GCC’s Unified Economic Agreement, apply, and if there is no suitable GCC, the product must adhere to international standards.
Import Documentation TOP
To clear goods into Kuwait, a minimum of four documents is needed; (a) Commercial invoice (b) certificate of origin (c) official delivery order (d) packing list.
The required content of these documents is shown in the books overleaf. The invoice, certificate of reigin, and the delivery order (bill of lading or airway bill) must be in three original copies and must be certified by a chamber of commerce in the country of export, preferably a joint local-Arabic chamber, and certified by the Kuwait counsulte in the country, the consulate of Saudi Arabia (preferably) or any other Arab country (except Iraq) is acceptable.
As well as being shown on the packing list, the country of origin must also be marked on each packing unit.
To clear customer many products must be accompanied by additional certificate showing that they comply with health and safety regulation issued by the Ministry of Public Health, The Municipality and the MCI. Goods failing to clear customers must be re-export within a month. The minutiae of import regulation tend to change frequently and these changes are published in Al-Kuwait Al Your, The Official Gazette.
Import Duties
Kuwait customer duties are the lowest in the region, though there are protective tariffs on some goods. However commercial samples worth up to KD5.000 may be brought in temporarily.
Duty is levied as a percentage of the CIF value of the goods up, but excluding unloading in Kuwait, its calculated and must be paid in Kuwait Dinar (KD). Where import are invoiced in foreign curries. Customs use a list of standard exchange rates to translate the CIF value into KD. There rates change infrequently and a list in Arabic is available for 250files from customers.
The standards rates of duty is 4%, But most goods may be imported duty free, including:
· Food products, medicines, essential consumer goods, live animals, bulling , printed matters, etc, except where these (such as bread) are manufactured locally;
· Industrial and farm products from other GCC states provided they have at least 4% added value in the GCC exporting country; and
· Raw materials, semi-processed goods, equipment and spare parts for new industrial establishments provided an exemption has been obtained.
But imported hydrocarbon products that are also manufactured locally, such as lubricating oils, are subject to duties for 100%. The duty on cigarettes and tobacco is 75%. But some goods of Arabic origin are subject to only 50% or 75% of the duty imposed on similar goods of non-Arabic origin.
Many locally products are protected by tariffs. To qualify for protection, an industrial firm must show that it meets, or will be able to meet, at least 40% of demand in the local market for products concerned. The varies according to the value added y domestic production.
Agency & Service Agreement
Only Kuwait individuals or firms may act as commercial agents in Kuwait, while foreign individuals or firms, except for GCC nationals, are not allowed to carry on commercial activities in the country except through a commercial agent. All arrangements between a foreign entity and its local agent are governed by Articles 260 to296 of the Commercials Code.
Terms of an Agreement TOP
An agency agreement must be in witting and must be register with the MCI. Its terms must cover the activities to be undertaken, the scope of the agent’s authority, his remuneration, and the duration of the agency (if limited). Generally speaking, the parties to the agency agreement have full freedom of contract, but a few privations of the code override what the parties might wish to agree and any terms, which contradict these privations, are void.
If an agent is required to erect premises then the contract must be for at least five years.
The agent is entitled to his remuneration (a) on all matters concluded by him, (b) on transactions which would have been concluded but for some act of his principal, and (c) on transactions concluded either directly by the principal or by others acting on behalf of the principal in the area of the agent’s operations, unless otherwise agreed in writing.
Compensation on Termination
If a principal terminates an agency when his agent is not at fault, the agent the agent may seek copesation for loss of icome. And, if an agent abandons his agency at an unsuitable time and without reasonable cause, his principal may seek compensation for damages. Any clause to the country in an agency agreement is void.
Even where an agency is for fixed term, the law expects it to be renewed on expirty. If the principal dose not renew it, the agent may seek fair compensation (even if the country is stated in their agreement) provided the agent has not been at fault nor negligent in his performance. If a principal replaces his agent and the termination was due tocollusion between the principal and the new agent, the new agent will be held jointly responsible with the principal for settling any compensation due to the former agent.
There is no set legal formula for calculating compensation. However an action for compensation must be started within  90% days of the end of the agency.
Service Agreement
To open a branch in Kuwait, a foreign firm must enter as agency agreement with a Kuwaiti sponsor or service agent. Under such as arrangement the agent is merely the foreign entity’s legal representative in the country and doses little more than take care of licensing formalities, obtain visas for the principal’s executives and employees, and represent the principal officially. The agent will expect a fee for his sponsorship and the use of his licences.
Registration Procedures TOP
An agency agreement is not enforceable under Kuwaiti law unless it has been registered in the Commercial Agencies Register at the MCI. Application for registration must be made within two months of the agency being created. Before applying to the MCI, the agreement must be registered with the KCCI.
The application for registration can only be made by the Kuwaiti agent. It must be made in two original copies of the official MCI form and must be accompanied by:
· An original copy of the agency agreement
· A translation of the agreement into Arabic
· A copy of the agent’s commercial licences
· A copy of the agent’s nationality document or registration in the commercial registry
· A certificate of registration from the KCCI
If the agency agreement was executed overseas, the original must be attested at the principal’s location by an official authority and the Kuwaiti consulate. Where it was executed in Kuwait, it must be notarised by a Kuwaiti Notary Public.
Upon registration, the MCI gives the agent a signed and stamped copy of the application, and advertises the the registration in the official gazette.
Amendments to the agreement must also be register and when an agency terminates it must be removed from the register. The register may be searched by the names of agent, the names of principals and the trade names of goods.
Intellectual property Right
Expect for trademarks, the protections of intellectual property rights in Kuwait was quite poor unit 1999 when, to satisfy Kuwait’s obligations under WTO agreements, comprehensive legislation’s to protect intellectual property was promulgated by Amiri Decree under article 71 of the constitution. There laws were being reviewed by the National Assembly in November 1999 and revised versions were expected to be promulgated early in 2000.
Trade Marks
The protection of trademarks is governed by articles 61 to 85 of the commercial code, as amended by Decreed Law # 3 of 1999. A Trademark Register, open to public inspection, is maintained in the Patent & Trademark Department at the Ministry of commerce & industry (MCI). Under the new law, the definition of a trademark extends to audible and olfactory marks. There is no registry of service marks.
The person who registers a trademark is considered the sole owner with the exclusive right to use the mark on the products for which it is registered. Registration initially protects a mark for ten years from the date of application to register. Registration can be renewed indefinitely for further periods of ten years each. The registrar must notify the owner that the period of protection has expired within one month of expirty and if the owner dose not apply for renewal within six months of expiry, the mark is automatically deleted from the register.
A trademark may be sold but the change in ownership must be entered in the Register and published in the official gazette. A person who infringes a registered trademark is liable to a fine of KD600 or imprisonment or both, and to pay compensation.
To register a trademark, an application must be submitted in Arabic to the Trademark control Office along with a fee of KD24. Once the application has been accepted, it must be advertised in three consecutive issues of the official gazette. Objectors have 30 days after the third advertisement to challenge the registration in writing. The registrar must give a copy of the objections to the applicant, who has 30 days to submit a replay. Thus the overall time needed to register a trademark is not less than three months.
Patents & Industrial Designs
Under law 4 of 1962, a patent may be issued for any new invention suitable for industrial use, which has not been used in Kuwait during the previous 20 years. Kuwait nationals, foreign residents, foreign businessmen with a local presence and foreigners in Kuwait. All documents for ciprocal rights to Kuwaitis have the right to be granted patents in Kuwait. All documents for filling a patent application, including the specification of the invention, must be in Arabic.
Under law 4 of 1962 patent holders are protected against unauthorised use of their invention or design for an initial period of 15 years, renewable for a further 5 years. Under the new law the period of protections will be 20years, though patents registered in other countries will only be granted protection for the remainder of the period of protection where they are registered. The new law also extends the period of protection for drawings, models and integrated circuils from 5 years to 10 years, which may be renewed for a further 5 years, The law will, in addition, allow improved versions of existing patents to be protected for 7 years patent holders may license their patents to others.
Until 1999 there was no general copyright law under which the rights in intellectual works could be protected effectively.
The only protected works were audio and visual recordings of Kuwaiti, Arab, American and British origin. In addition, public institutions were not allowed to buy pirated computer software.
Under the new law protection is to be given to all literary works (written and oral) theatrical shows, musical works (written or without lyrics), choreographic works, motion pictures, audio, video and radio works, artistic works (painting, sculpture, carving, architecture and decoration), photographs, applied art (craft or industrial designs), illustrations, maps, designs and models, computer works (software and database), and translated works.
The period of copyright protection will be 50 years from the death of the author. But works published under a pen name of after the author’s death, motion pictures, photographs, applied art, computer works, and works owned by corporate bodies will be protected for 50 years from the end of the year in which they are first published. Writers, composers and directors of theatrical, choreographic, and TV and radio works will enjoy 50 years protection from the end of the year in which the works were first performed or recorded.
Under the new law the penalty for piracy is a maximum of one year in goal and a fine of KD500. A shop selling pirated works can be closed down for up to six months.
Public sector Contracting TOP
As a general rule, a public authority in Kuwait may only buy equipment and commodities, and commission works, by way of an independently administered tendering process. Public tending is governed by law 37 of 1964, Law 18 of 1970 and Law 81 of 1977 as amended.
Committee (CTC), though the client body (ie the public body requiring the service) draws up the specification and particular conditions it requires, reviews pre-qualifying companies, and evaluates bids technically. However some public institutions have their own tendering procedures. But no matter who administers a tender, the procedures are in essence the same as CTC procedure, and all activities relating to public tenders, such as tender announcements, invitations to pre-quality, pre-tender meetings, and amendments to conditions and specification, are only published in Al-Kuwait Al-Youm, the gazette.
Funding for major projects is normally provided by the government. In recent years other forms of financing, such as credit facilities supported by export credit agencies (ECAs) and build-own-transter (BOT)types schemes, have been tried.
Eligibility & Registration TOP
A tenderer for a public contract must be a Kuwaiti merchant who is (a) registered with the KCCI and the MCI, and (b
) registered as an approved supplier or contractor.
The CTC and client bodies maintain lists of approved suppliers of equipment and materials. To get on the lists, the main requirement for suppliers is that they be Kuwaiti merchants.
Applications for registration are usually made to the client body.
The CTC also maintains lists of approved contractors for works, before getting one these lists a contractor must be classified according to the size of project he is deemed capable of undertaking. The size limited for the first three categories represents the cumulative size of all contracts being undertaken at the same time by a contractor, eg a category (4) contractor cannot bid for a contract worth more than KD50.000if, at the time of his bid, he is already undertaking projects with as total value of KD200.000. Foreign companies are not classified, as they must prequalify each time they bid for public sector contracts.
Participation in some public tenders is restricted to firms who have been pre-qualified, ie judged capable of undertaking the particular project. To pre-qualify, a firm submits a standard set of documents outlining its financial and technical capabilities to the CTC. Foreign firms must prequality each time they bid for a public contract. Their Kuwaiti agent and must be accompanied by an authenticated copy of the agency agreement.
Bidding Procedures
Forthcoming tenders are announced as invitations to bid Al-Kuwait Al-Youm. To collect the documents, a written requested in Arabic plus the fee (for which a receipt is given) is needed. A foreign firm must show an authenticated copy of the agreement with its local agent.
Firms who have purchased the documents may be invited to pre-tender meeting with the client body. Sometimes these are mandatory and bidders who do not attend find themselves excluded from the tender. The scope of work may be amended after the tender documents have been issued or after a pre-tender meeting. When this happens the administering committees issues a formal addendum, which can only be collected on production of the original receipt for the tender documents. Notices of pre-tender meeting and tender amendment are announced in AlKuwait Al-Youm and tenders are seldom advised directly.
Bid Preparation
A bid only is submitted on the original official tender documents issued to the company making the bid. All pats must be completed in full and the documents may not be altered in any way. The bid must conform to the tender terms exactly and alternative terms are never acceptable. All prescribed supporting documentation must be appended.
The tender documents are expected to be submitted without erasures or corrections.
Where alternative offers are allowed, a tenderer must buy a separate set of documents for each offer he submits, with each bid clearly marked to show that it id an alternative.
Pricing & Pricing Preferences TOPContractors must usually be priced on a lump-sum fixed-price basis, though unit pricing is normal in maintenance type contracts. Most bids must be priced in Kuwaiti Dinar, Prices must be stated on a cash-basis.
Public sector contracts must by law be awarded to the bidder who offers the lowest price provided his bid conforms with technical requirements and he has adequate resources. But where a firm has submitted an artificially low bid and it appears that it will be unable to perform to the required standard, the contract may be awarded to the next lowest bidder.
Local manufactures have a price advantage. Subject to technical acceptance, goods made in Kuwait may be priced up to 10% higher than comparable items made abroad and be deemed the lowest priced. Goods made in other GCC countries have a 5% price preference; but if the goods are not made in Kuwait then GCC goods have a 10% advantage. Local contractors for the performance of works do not enjoy any pricing advantage.
Bid Bonds
A bidder’s offer must be irrevocable unite the end of its period of validity which initially contact be more than 90 days. An unconditional bank guarantee for the entire initial period of validity, issued in Arabic by a Kuwaiti bank, must be submitted with the bid. These bonds vary from 2% to 5% of the bid. If a bidder is successful but refuses to sign the contract, the bond is forfeit.
Bidder is often asked, towards the end of the initial period of validity, to extend their offers. If they wish to do so then the bid bond must also be extended.
Submission of Bids
Tender documents must be signed by the bidder and stamped with his seal. If a foreign firm submits a bid directly, rather than through its local agent, both its stamp and the agent’s stamp must appear on every page. Proof of the signatory’s capacity to bind the bidding firm is always required and this usually takes the form of a notarised power of attormey.
If the tender documents include a bid envelope, this must be used to submit the bid. The name of the bidder may not appear on the envelope, which must be sealed with wax.
Bids must be submitted to the tender committee at the place, date and time stated in the conditions. Where the CTC is administering the tender, bids must be submitted in the CTC’s office in Sharq, which is done by placing the envelop in the box designated for that tender by a notice in Arabic (only). The closing time is usually 1:00pm and the box is always sealed the very second time is up.
Evaluation & Award
Where the CTC administering the tender, bidder may get a copy in Arabic of the list of bidder and their prices from the CTC’s Sharq office, about a week or so after bidding close, by showing a copy of the original receipt for the documents. But other tender committees do not normally provide such lists.
In most tenders a technical study, to ensure that bids comply with the required specification, is usually carried out by the client body. During these studies, a bidder may be invited to answer queries orally or he may be sent a list of questions requiring a written reply.
Ones technical studies are completed, a contract it’s awarded on the basis of the price from among the bids that comfort with the tender specification. The administering committee notifies a successful bidder in writing, but the latter dose not have any contractual rights until he has signed his contract with the client body. If the winner fails to sign the contract within a specified time of being invited to do so, he is deemed to have withdrawn.
Before signing the contract, a successful bidder must replace his initial guarantee with a final guarantee or performance bond from a Kuwait bank. This is typically 10% of the contract value and must be valid for the duration of the contract including a maintenance period. A contract that fails to present this guarantee is deemed to have withdrawn.
Performance TOP
Public sector contractors always contain penalty clauses, and minor delays and faults in execution usually result in penalties being imposed.
Contractors for the performance of works normally receive as advance of 10% to cover costs of mobilisation. Stag payments on account of work-in-progress are also made. Most contractors allow the client body to retail 10% from work-in-progress payments until the end of the contract and to recoup the advance pro-rata from work-in-progress payments, so that during the maintenance period the client body is holding a retention of 10%.
Public sector contracts normally include a maintenance period of a year, during which the contractor is liable for any faults in the equipment or work. The period is covered by retention, in the case of works, and the performance bond.
When a project of works is completed, the contractors usually receive a provisional completion certificate, which is replaced by a final certificate release, him from further liability and enables him to claim his final payment. Before he can receive his final payment, a foreign contract must obtain a tax clearance certificate.
Contertrade Offset Programme
Under Kuwait’s counter-trade offset programme, a foreign contractor who signs contracts to supply government institution with goods or services that are cumulatively worth more than KD1milion in any fiscal year (July to June) incure an offest obligation that required him to set up a budiness benefical to Kuwait.
The Office Obligation
The office obligation is expressed in the same currency as the supply contractors and is nominally 30% of their value. The contractor earns ‘credits’ for expenditures relating to his offset business venture (OBV) and when these credits amount to 30% of his supply contracts he has fulfilled his obligation. Actual expenditures will be much less than 30% because most expenditure earn credits at a rate greater than 1:1 and, in practice, offset expenditures amount to about 30% of a contractor’s supply contracts. But before a contractor may embark on his OBV, the business must be official approved. The programme is administered by the objective of Kuwait’s offset programme are:
· To promote long-term mutually beneficial collaborative business venture between foreign enterprises and Kuwaiti companies with an emphasis on the private sector;
· To achieve sustainable economic benefits (such as export sales and import substitution
· To enhance the high-tech capabilities of the private sector by creating and expanding education and training opportunities of the private sector by creating and expanding education and training opportunities for Kuwaiti nationals locally and abroad;
· To facilitate the transfer of state-of-the-art technology into the private sector; and
· To support Kuwait’s foreign aid programs.
These objectives provide the criteria by which prop0osed OBVs are evaluated.
A contractor obligation is being when he signs the supply contract that creates it. The total time allowed to fulfill the obligation is 10 years, ie 24 months for approved of the OBV and eight years thereafter to generate the credits needed to extinguish the obligation, with 50% being settled within four years. A contractors OBV must include Kuwait businesses or entrepreneurs as equity partners, and it must exist and operate under Kuwait’s Commercial Companies Law.
A contractor who refuse to participate in the programme or ceases to participate before he accumulates credits equal to 10% of his obligation, incurs a penalty of 6% of the value of his supply contracts. If he fails to continue after completing 10% or more of his obligation, the penalty is reduced by the percentage of the obligation which has been completed.
The Offset Process TOP
Once the foreign contractor has signed the supply contract that triggers his obligation, he must acknowledge this obligation by signing a memorandum of agreement with the Ministry of finance. He must then submit business ideas to the PEO in order to obtain approved for an OBV. For each idea he must submit in turn a concept paper, a proposal and a business plan, and each of these documents must be approved before the next one is submitted.
The concept paper is essentially a brief summary of the proposed business. A proposal is similar to a traditional feasibility study and is the key document upon which approval of the OBV rests. The business plan must be fulfilled.
The proposed OBV must pass normal evaluation criteria for commercial, technical and financial viability. The business is also evaluation on its ability to futher capital accumulation and promote economic development in Kuwait, on the contribution it can make to developing a highly-skilled experienced globally-competitive work force and on whether it will transfer inwards technology appropriate to the development of new industries in Kuwait.
Calculation of Credits
Once his business plan has been approved the foreign contractor establishes and operates the OBV with his Kuwaiti associates. He is awarded offset credits annually on the basis of the expenditure relating to the OBV as shown by its audited financial statements.
All the OBV’s expenditures, except for costs incurred in administering the programme, are eligible for credits, But instead of being just aggregated to calculate the credits, these expenditure are classified and weighed according to the preference given to them under the government’s economic policy objectives. First the expenditures are classified, according to the internal functions of the OBV, into micro-categories. The actual expenses in each micro-category are then multiplied by the appropriate micro-multiplier. The result is then multiplied by the approved macro-multiplier. The final result is the amount of credits earned in that particular micro-category. The credits earned in each micro-category are then summed to arrive at then summed to arrive at the total number of credits generated by the OBV for that year.
Future Credits TOP
After a contractors current obligation has been fulfilled, additional credits generated by his OBV may be carried forward and set against offset obligations arising from any future supply contracts he signs. These future credits may not be transffered to other contractors.
Third Party Fulfilment
Subject to PEO approval, a foreign contractor may designate a theird party to fulfil his offset obligations, though the contractors remain responsible for the outcome. Contractors unable to find suitable OBVs may be allowed to fulfil their obligations by investing in approved investment funds, which proved, finance for ventures acceptable under the offset programme.
Several local funds, which provide finance for this purpose by the Ministry of Finance.
Corporate Income Tax TOP
In Kuwait there are personal income taxes, property, gift or inheritance taxes. The only tax paid by Kuwaiti shareholding companies is a 20% levy for the Kuwait Fund for the Advancement of Science. But corporate income tax is levied on the net income of foreign firms.
The Liability to Corporate Income Tax
Corporate income tax is governed by Law # 3 of 1955, as supplemented by directives issued by the Director of Income Taxes, ie the Minister of Finance, from time to time. The filling of tax declaration and accounts, the assessment of libilities and the payment of taxes are administered by the Tax Department in the Ministry of Finance. All tax declaration, supporting, schedules, financial statements, and correspondence must be in Arabic.
All foreign corporate bodies carrying on a trade or business in Kuwait are liable to income tax, with the exception of companies incorporated in the GCC that are wholly owned by the GCC citizens, A foreign corporate body means any business entity, formed under the laws of any state, which has a legal existence separate from that of its owners. The term includes foreign partnerships. Where a foreign firm operates through a local service agent, it is taxed on its share of the company’s profit.
Taxable income includes net profits, whether distributed or not, and amounts receivable on account of interest, royalties, technical services and management fees, etc, whether actually paid or not. Where the foreign firm is a shareholder in a local company, the foreign entity bears the tax and the Kuwait Company has no liability. There is no withholding tax on dividends, interest payment and royalties.
Net taxable income is computed on the basis of the net profits disclosed in audited financial statements as adjusted for tax purposes. Where the taxpayer is a shareholder in a local company, the foreign element in total adjusted profits is isolated.
Gross Revenues
Gross income is all income from business and trade, including amounts receivable as rents, royalties, premiums, devindeds and interest, as well as capital gains on the sale of assets and on the sale of shares by a foreign shareholder, where the source is in Kuwait. The source of income is Kuwait if the place where services are performed is in Kuwait. Work done outside Kuwait is deemed to be performend in Kuwait where it is part of a contract that includes activities within Kuwait, eg, in a supply and installation contract, the full value of the contract including the foreign supply element is assessable.
Gross billings, excluding advance payments, less the costs of work incurred in an accounting period are used to assess income from contract work and percentage accounting or completed contract accounting methods are usually not acceptable.
Where a foreign firm has more than one activity in Kuwait, its income from a;; activities must be aggregated for tax purposes, even if its different activities are organised through separate local companies.
Allowable Expenses TOP
All normal business expenses are allowable on an accrual basis provided they are incurred in the generation of income in Kuwait. But the following may be noted:
· Accounting provisions, whether specific or general, are not allowable. Bad debts are only allowed once they have proved irrecoverable. Other provision, such as labour indemnities, is only allowed when they are actually paid.
· Depreciation of fixed assets is allowed but only at particular rates for different classes of assets on a straight-line basis. Losses on the disposal of fixed assets below their tax written-down value are allowable.
· Interest charges are allowable provided they are payable to a Kuwaiti bank and are reasonable in relation to the business activities carried out in Kuwait.
· Commission paid to the taxpayer’s local agent are limited to 3% of revenue.
· Losses brought forward are allowable. Losses may be carried forward indefinitely and deducted from income in later periods, provided there has been no intervening cessation of activities, But losses in later period cannot be carried back to an earlier peried.
· Management fees receivable by a foreign corporate shareholder in a local company and expensed in the latter’s books are not allowable. But direct expenses incurred by the foreign taxpayer are allowable provided they are supported by adequate documentation.
· As a contribution to a foreign corporate body’s head office expenses, deductions may be claimed as followed:
· By foreign consultants or contractors operating through a local agent: 3.5% of revenues ( net of amounts payable to subcontractors and reimbursable costs).
· By foreign shareholders in a WLL or KSC: 2% of revenues (net of amounts payable to subcontractors and reimbursable costs).
· By foreign insurance companies: 3.5% of net premiums.
Inventory is usually valued at weight average cost, though FIFO ( first in first out ) is becoming more popular, but any valuation method in general use is acceptable.
Calculation of tax Due TOP
The tax due on net taxable income is reckoned, These are not progressive, ie tax is charged on all profits at the rate of the level into which total profits reach. For example, if taxable profits are KD50.000 tax of 15% is levied on the whole KD50.000 and the tax payable is KD7.500.
Some relief is available where taxable profits reach marginally into a higher level. This is obtained by calculating the total tax thus payable at the top of the band just below the highest band into which taxable income falls and to the tax thus calculated the whole of the income in excess of this band is added. Where the resulting amount is less than the tax payable as calculated normally, the lower amount become the tax payable.
The Gregorian solar calendar is used for tax accounting. Tax periods are normally 12 months long, though a period of up to 18 months may be allowed on commencement. The usual year-end for tax accounting is 31st December, but a taxpayer may request another year-old. Taxpayers are legally obliged to submit their tax declarations to the Tax Department without being requested. The deadline for filing tax declarations is the 15th day of the 4th month following the end of the tax accounting period; eg where the usual end-of-December period end is used, tax declarations must be submitted by 15th April. An extension of 75 days may be allowed if audited accounts are filed.
Tax declarations and supporting documention must be in Arabic and certified by a practising accuntant who is registered with the MCI. The law is unclear on a number of issues and final assessments are usually agreed by negotiation. There is no special appeals process.
Payments TOP
Tax must be paid in Kuwait Dinar by certified cheque, in four equal installments on the 15th day of the 4th, 6th, 9th and 12th, months following the end of the tax period. No payment is required until accounts have been field.
The tax is payable in a single lump sum where payments are delayed and also where an extension of 75 days has been allowed for the filling of audited accounts. The penalty for tardiness in filling declarations or paying by the due date is a fine of 1% of the tax payable for every 30 days (or fraction thereof) of delay.
Tax Clearance Certificates
The final payment due to a foreign contractor, which must not be less than 5% of the total contract value, must be retained by all ministries, public authorities and private companies (including foreign firms) operating locally until the contractors has produced a tax clearance certificate from the Ministry of Finance confirming that all tax liabilities have been settled.
All ministries, public authorities and private companies with which they are doing business as contractors, subcontractors or in any other form, together with a copy of the contracts, to the Tax Department. When assessing liability to tax, the Director of Taxes may disallow payments to subcontractors, which have not been reported.
Tax Planning TOP
The Director of Taxes tends to look at the substance rather than the form of transactions and dose not usually give binding ruling in advance on how tax will be determined in unclear cases and so the scope for tax planing is rather limited. As final assessments are a matter of negotiation, advice from a local practitioner who has a good working relationship with the Tax Department can be helpful.
Kuwait is a signatory to the GCC joint Agreement and to the Arab Tax Treaty. Kuwait has also double taxation treaties with Belgium, China, Cyprus, France, Germany, Hungary, Italy, Romania, South Africa and Thailand, and is negotiating treaties with Australia, Austria, Canada, Finland, India, Japan, Malaysia, Singapore, Switzerland, Turkey and the USA.
Sources of Information
Researching business opportunities from outside Kuwait is easy. Data on exports to Kuwait by OECD countries can be used to analyes the market. Foreign government trade promotion agencies have information on market prospects and updates on new projects. These agencies also orgnise trade mission to Kuwait, a cost-effective way of marking local contracts.
There are several sources of market-related information within Kuwait, Al-Kuwait Al-Youm, and the official gazette, is the official source of government announcement but is published in Arabic only. An English translation of all tender-related and regulatory matters, with a local news update and business diary, is issued by Kuwait publishing House at the same time as the official version.
The Ministry of planing is the main source of government statistics. The Central Bank issues an Annual Economic Report. Research units in the IBK, commercial banks and Institute of banking Studies are worth contacting.
Foreign embassies have data on opportunities. Local foreign business associations provide good networking facilities:
· The British Business forum (BBF) is an association of British business people which aims to foster British business interests and win business for the UK. The BBF works closely with the British Embassy where business-relate meetings and seminars are organised regularly. A meeting, open to all, is usually held at 7.30 pm on the second Monday of each month. Membership is not restricted to British nationals.
· The American Business Council – Kuwait  (ABC-K) serves as the local chapter of the US Chamber of Commerce. Its objectives are the development of commerce and investment between the USA and Kuwait, bringing a better awareness of the Kuwait market to the USA, and providing a forum to pursue business interests and enhance the business climate in Kuwait. Membership & meeting information: Brenda Stoetzer,
· The India business Advisory Council (IBAC) promotes economic and commercial relation between India and Kuwait. Most prominent Indian businessmen in Kuwait are members, The IBAC meets periodically to discuss business matters, Prominent Kuwaiti businessmen, as well as well-known visiting Indian entrepreneurs, are invited to meetings to exchange views on economic and commercial matters.

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