With 1.4 million citizens, 3.3 million expatriates and 6 per cent of global oil reserves, Kuwait is a rich country with a bounty of natural resources, a global top ten oil exporter. Though the economy is primarily oil-based, the national development plan, New Kuwait Vision 2035 stresses economic diversification and enacted many reforms that help the country improve from 97 to 83 among 190 countries in the World Bank’s 2020 Doing Business Report.
Company formation in Kuwait can be immensely beneficial to foreign investors promising innovation and growth and mainly due to the below-mentioned reasons
- Water, power, land and labour are cheap and some are highly subsidized up to a whopping 86 percent.
- Rich and business savvy Kuwaiti nationals.
- Significant expansion in the building, project and construction industry.
- $104 billion National Development Plan for the construction of major roadways, a new airport terminal, new hospitals, new residential complexes, a new Kuwait University campus.
- New oil refinery, oil exploration, new power projects, and a new railway and metro system.
- Private construction and project development.
- Several project opportunities e.g. a proposed $10 billion electricity generation projects.
- The automotive, oil and gas, computers/ICT, telecommunications equipment, and construction equipment sectors look promising with recent government initiatives.
- Government's high priority for healthcare infrastructure.
- Politically strategic country.
- A young local population.
- High average income and high domestic consumption.
- A well-managed financial market and a strong banking sector.
- Good quality infrastructure.
- Strategically located close to three major markets including Iraq, Saudi Arabia and Iran.
The foreign direct investment law 2013 only allows 100 percent foreign ownership if approved by the Kuwait Direct Investment Promotion Authority (KDIPA). Either Kuwaitis or GCC nationals must own a minimum of 51 per cent of any business share.
Total foreign ownership is only considered if the business set up is perceived as capable of creating employment and diversifying the nation’s economy. Besides, the business establishment must also contribute to export promotion and gainfully utilise Kuwaiti services and natural resources.
As per the latest reports from KDIPA, 37 foreign firms have so far been approved for 100 per cent foreign ownership.
If you are looking for investment opportunities in Kuwait as a foreigner, the country offers you many business vehicles to choose from.
A Limited Liability Company (LLC) structure, known as WLL (With Limited Liability) is most common, easy and fast to incorporate with a minimum share capital of 1000 KD. An LLC however, is not permitted to take part in banking or insurance sectors, with a maximum of 49 per cent stakeholding.
A joint-stock company alias Kuwaiti Shareholding Company (KSC) also permits a maximum of 49 per cent foreign equity participation and can be publicly traded on a local stock exchange whereas a closed KSC doesn’t permit publicly trading of shares.
A limited liability partnership is a partnership structure with two categories of partners, one being general partners liable for the business’s debts and the other one limited liability partners and profits distributed proportionally based on shares held.
A branch doesn’t need any sponsor and is only permitted for GCC nationals. Other foreign business establishments can only set up a branch office if approved by KDIPA.
Agency involves an agreement with a local commercial agent/distributor if you as a foreign investor are not willing to set up a local company in Kuwait. A commercial agent is normally paid a fixed fee or a percentage of profits from your Kuwaiti business with all terms and conditions detailed in the agency agreement.
A joint venture company, a JV is formed by a venture of two or more legal and natural persons with no separate legal entity and without any need of getting registered with the Ministry of Commerce and Industry and usually used in construction projects and conducted under the trade license of the Kuwaiti partner.
Setting up a business in Kuwait is not cumbersome, costs you KD 323 (approx. 1000 USD) and takes around a month. The steps involved are almost similar irrespective of the company types and include
- Submitting an application with details of your company’s capital, shareholding and other information to the department of companies of the Ministry of Commerce and Industry (MOCI) for registration.
- A background check by the ministry of commerce through the local municipality and the ministry of interior.
- Reserving a unique company name and submitting it to the Company Registry for name approval.
- Retrieving the letter addressed to the bank by the department of companies.
- Depositing your company’s paid-up capital at the bank and collect the receipt.
- Scheduling inspection by the local municipality and obtaining NOC within two weeks.
- Submitting Memorandum of Association (MOA) to the department of companies and receiving approval.
- Notarizing the MOA before a public notary.
- Filing signed and notarized copy of MOA with the department of companies.
- Registering with the commercial registry and receiving a Certificate of Registration (CR).
- Obtaining Commercial License from the department of companies.
- Registering with Kuwait Chamber of Commerce and Industry.
- Registering with the Public Authority for Civil Information.
- Registering with the Department of Labour and Social Affairs.
Businesses owned by the Kuwaitis or GCC nationals are free from corporate income tax (CIT). GCC companies with foreign ownership are taxed based on the extent of foreign ownership. CIT is levied on the profits and capital gains of foreign corporations carrying out business or trade-in Kuwait either directly or through an agent.
Income earned from activities in Kuwait is only considered for CIT subject to tax in Kuwait and at a flat rate of 15 per cent.
The religious tax Zakat is imposed on all publicly traded and closed Kuwaiti shareholding companies at a rate of 1 per cent of net company profits.
The country’s tax law does not levy withholding tax but all public and private entities are mandated to retain a 5 per cent sum of contract amount till that time a tax clearance certificate is presented.
Even though tax treaties are with several countries for the avoidance of double taxation, the interpretation is not always consistent or in line with the guidelines giving rise to frequent disputes.
Every business registered in Kuwait must employ local Kuwaitis based on applicable sector-specific requirements that may vary from 3 to 60 per cent of the total headcount.
Social Security contributions are mandatory for all employees at a rate of 10.50 per cent while the employer has to contribute a sum equal to11.5 per cent of the monthly salary of employees, up to a maximum of 2,750 KD towards the Financial Remuneration Fund.
Careful selection of business partners is the single most important step to a foreign investor while doing business in Kuwait. Outsourcing taxation, accounting and legal services can protect your business from future liabilities.