Are you considering starting a business in Kuwait? If yes, well, you have made the right decision. Kuwait is a wealthy nation with an abundance of natural resources. The country is a top ten oil exporter, with 3.3 million expatriates, 6% of the world’s oil reserves, and 1.4 million citizens. Although the economy is mostly dependent on oil, the national development plan, New Kuwait Vision 203 has put a strong emphasis on diversifying its economy. It also made numerous changes that helped the country move up in the World Bank’s Doing Business Report of 2020 from 97 to 83 out of 190 countries in the world.
If you are also looking for a business setup in Kuwait, this guide is for you.
Table of Contents
About Kuwait – A Wonderful Country to DO Business
Kuwait is in the western part of the Asian continent. It is a Middle Eastern nation and mainly is known as the “State of Kuwait”. Saudi Arabia and Iran are Kuwait’s neighbors across the area. Its currency is the Kuwaiti dinar. The currency is regarded as one of the most valuable currencies in the world. Arabic is the major and official language spoken in the country. Kuwait is mainly ruled by immigrants from various countries across the globe.
The Stock Exchange, which holds the second spot in the entire Middle East, is a fine business sector that is expanding successfully in Kuwait. In addition to that, launching a business in the media industry is also a great choice. It does not impose any restrictions on the press’s ability to express itself. Due to this, the GCC nation with the “Freest Press” designation was awarded. Within the Middle East, Kuwait is renowned for its press freedom. This sends a good message to anyone who wants to launch a media company in Kuwait.
Let’s admit, the business setup in Kuwait is not that simple. Still, it is widely regarded as a center of commerce by many for their business due to its financial advantages. The two main industries that contribute to its economic expansion are gas and oil. Other commercial sectors, such as those in real estate, finance, and other related industries, as well as many more, are also important drivers for expanding Kuwait’s economy.
Kuwait has a robust economy, low tax rates for Foreign businesses, and citizens with high earnings, making it a desirable location for foreign businesses. By luring foreign investment into non-oil industries like infrastructure development, the government of this strong economy is always seeking to diversify and expand the economy. There are numerous business opportunities and prospects in the fields of real estate, business consulting, imports, agriculture, healthcare, and many more.
Factors to Consider When Setting Up a Company in Kuwait
Consider these factors when you are planning to set up a company in Kuwait:
Business Factors
Kuwait made it more challenging to open a business in 2014 and 2015 by raising the minimum capital required and the cost of the commercial license. On the other hand, Kuwait lowered the minimum capital requirement in 2016 to help entrepreneurs start a firm. Kuwait is known for having a challenging business environment that calls for persistence, adaptability, and endurance. Lack of reversal of tenders after they have been awarded, openness in decision-making, a court that largely favors the local citizens, and inconsistent, sometimes contradictory laws present difficulties for many investors and exporters in Kuwait.
Tax System
Depending on the industry and type of business, paying taxes in the country is necessary for foreign businesses. Foreign corporate entities are required to pay corporate income tax in Kuwait. But the taxes are low. Also, enterprises registered under a Gulf Cooperation Council (GCC) country or owned by a GCC citizen or by a Kuwaiti citizen are not required to pay any tax.
Tax is calculated annually and must be paid by the end of the tax year (within three and a half months). But a foreign corporation may be given a 60-day extension. In Kuwait, there is a 15% flat company tax that is applied to all financial benefits, including capital gains and earnings.
Religion
The majority of Kuwaitis are followers of Islam, which dominates their legal, personal, economic, and political lives. Kuwait is renowned for its religious tolerance despite having a majority Muslim population of nearly 95%.
Visa System
It can be challenging for an individual with a brand-new business setup to start a business and obtain a visa. Do your research and prepare yourself in advance for the process before submitting your visa application.
Ethnicity
While conducting business, it is important to take into account the various ethnic groups present in Kuwait, including Kuwaitis (45%), other Arabs (35%), Iranians (4%), South Asians (9%), and others (7%).
Importing System
Kuwait imports food from countries like Australia to meet its needs. Raw materials and products from other countries are welcome in Kuwait in the form of imported items. In Kuwait, meat and cheese are in high demand and are imported quickly. Automobiles, food, and raw materials for the refinery, oil, and gas industries are Kuwait’s main imports. As a typical import charge, importers are required to pay 5% of the entire value of the items they bring in as imported goods and products. In Kuwait, importing might bring in a considerable profit for you.
Some local industries are protected by the Kuwaiti government from high import duty rates. In Kuwait, export items are similarly subject to a 5% tax, with the exception of those imported specifically for export to some other country.
Types of Business Structures in Kuwait
Many types of business structures are legal in Kuwait. Each has benefits and drawbacks, and there is no one right solution because it all depends on the particular demands and conditions of your business. The legal types of business structures in Kuwait are as follows:
- Joint Venture
- Limited Liability Company Formation
- Commercial Agencies
- Branch Office
- Representative Trade Offices
- Limited Share Partnership Company
- General Partnership Company
- Public Share Holding Company
- Holding Company
Ahead is the summarized introduction of the main structures:
Foreign Company Branch
According to Kuwaiti laws, a foreign corporation is not allowed to open a branch there or conduct business without a Kuwaiti agent. It is an exceptional case if the foreign company is a GCC corporation or it has KDIPA clearance.
It is fairly challenging to meet the requirements of forming a corporation under KDIPA in order to successfully run a purely Kuwaiti company owned by foreigners. We suggest large “high-value” firms go for this company structure.
A foreign investor is allowed to set up the following business types via the approval of the KDIPA:
- A Licensed Representative Office
- A wholly-owned subsidiary in Kuwait
- A Licensed Branch
Joint Venture Company
Two or more individuals who are severally and jointly liable can form a joint venture. In most cases, the Joint Venture agreement outlines the project’s goals, circumstances, and terms. The joint venture partners are bound by the joint venture agreement but other parties are not bound by it. These business entities are straightforward agreements that don’t call for formal setup processes. However, compared to the creation of a company, joint ventures established through contractual agreements offer the parties seeking to conduct business in Kuwait greater flexibility in their arrangements. Joint venture agreements are more frequently made when applied to a particular project with a short deadline.
Representative Offices
Representative offices are established with the intention of creating market analyses and possibilities for production without engaging in actual commercial agent activities or business operations. Commercial representatives may receive a percentage of sales or a predetermined regular amount, or commission as a payment for their services. The Ministry of Commerce has established minimum share capital requirements for forming a KSC, WLL, and KSC, which vary based on the activities of the firm.
Kuwait does not impose corporate income tax on businesses that are completely owned by nationals of the Gulf Cooperation Council (GCC) countries of Oman, Bahrain, Kuwait, the United Arab Emirates, Qatar, and Saudi Arabia. Companies in the GCC having foreign ownership are taxed to the degree of that foreign ownership.
Limited Liability Company (“WLL”)
This kind of entity may be set up by both foreign corporations and people. At least 51% of the WLL stock must be held by Kuwaitis. It is easy to set up and incorporates in about three months. provides the limited liability shield and is not subject to tax because Kuwait has no personal income tax. Also, its corporate tax only applies to corporate entities that are not Kuwaiti. There is no cap on how much money can be distributed, but at least 10% has to go into a statutory reserve until it represents at minimum 50% of the capital.
Closed Joint Stock Company (“KSC Closed”)
The other type of company that is accessible to non-Kuwaiti companies is a closed Kuwaiti joint stock company (KSC Closed). The basic requirement is that Kuwaiti citizens must be stockholders in joint-stock enterprises. One exception is that, with the agreement of the relevant authorities, foreigners may own 49% of the share capital of a KSC Closed. A KSC Closed’s incorporation could go up to six months, A 1% donation to the Kuwait Foundation for the Advancement of Science is required. The tax imposed on the foreign company’s earnings as a stakeholder in KSC Closed Company.
Partnerships
Two forms of partnerships are permitted in Kuwait under the Commercial Companies Laws of Kuwait:
Limited Partnership
General partners with unlimited liability and limited partners with limited responsibility are the two sorts of partners in a limited partnership. These partnerships assume the shape of a distinct legal body that is permitted to conduct business under its own name.
General Partnership
A general partnership is a grouping of two or more people who are jointly responsible for the debts of the partnership up to the amount of their individual wealth.
Foreign Direct Investment Law No. 116 of 2013
The Kuwait Direct Investment Law states that:
A representation office for conducting research, polls, and studies.
A Kuwaiti firm may have up to 100% of its capital comprised of foreign shares.
A branch of a foreign company.
Required Documents
Generally, in order to register with the tax department to get a tax card, a registration application must be filled out, signed, and submitted together with a number of supporting documents, including:
- Authorization letter duly signed by the company’s authorized signatory
- Articles of Association
- Agency contract
- The company’s addresses both abroad and within the State of Kuwait
- Agency registration certificate
- Exemption certificate
How to Setup a Business in Kuwait?
Without the right advice, starting a business in the State of Kuwait is quite difficult. Research on the country’s regulations, legal and regulatory requirements, trade and investment policies, employment issues, and tax laws must be done in-depth.
In order to reduce the costs associated with business setup, many foreign companies opt to have an Agency Agreement with the local Kuwaiti company. It should be remembered that Kuwaiti corporation tax applies to any income derived from agency operations.
The Commercial Companies Law (CCL) governs the formation of companies in Kuwait. The shareholder’s liability is capped at the amount of capital they have put into these corporations.
One of the main requirements for starting a business in Kuwait is that the business partner must be a Kuwaiti. Without a local business partner, you cannot set up a business as a foreigner. At least 51 percent of the company is owned by the Kuwaiti partner. But fret not, foreign business entities are able to establish in Kuwait without a Kuwaiti partner under the terms of Foreign Direct Investment Law No. 8/2001.
To start a business in Kuwait,
- Choose the structure that will work best for your business operations in Kuwait.
- Obtain pre-approval from the authorities.
- Register a business name for your company.
- Prepare a company formation application following pre-approval.
A Kuwait 51% LLC firm is required by Kuwaiti law to have a legal registered office in Kuwait as of the date of registration, where all official communications from the government may be sent. Each entity is required to register with the Ministry of Labour, the Ministry of Social Affairs and Employment, and the Ministry of Finance in compliance with Kuwaiti law.
In Kuwait, opening a business is not difficult if follow the guidelines correctly. The process requires some fees in dinars of Kuwait and takes around a month. Regardless of the type of firm, the steps involved are essentially the same and include:
- First, submit a registration application to the Department of Companies of the Ministry of Commerce and Industry (MOCI) with details regarding the capital, shareholding, and other information of your firm.
- Next, background checks are conducted by the Ministry of the Interior and the Ministry of Trade via local municipalities.
- Post that, reserve a special company name and request name approval from the Company Registry.
- Get the letter from the Department of Business sent to the bank.
- Deposit the paid-up capital of your business at the bank and obtain its receipt.
- You also need to schedule a local government inspection and get a NOC within two weeks.
- Then, you have to go for a Memorandum of Association (MOA) submission for approval to the Department of Business.
- Next up, notarize the MOA in front of a public notary.
- Once the MOA is signed and notarized, it should be filed with the Department of Companies.
- Get a Certificate of Registration (CR) by registering your company with the commercial registry.
- Obtain a commercial license from the Department of Companies.
- Get your business registered with the Kuwait Chamber of Commerce and Industry.
- Contact the Public Authority for Civil for registering your business with them.
- Contact the Department of Labour and Social Affairs to register your business with them.
Taxing of Businesses in Kuwait
There is no Corporate Income Tax (CIT) on the businesses of Kuwaiti nationals and citizens of the GCC. Companies in the GCC that have foreign ownership are taxed according to the level of foreign ownership. Foreign businesses operating in Kuwait either directly or through an agency are subject to CIT on their income and capital gains. Only income from activities in Kuwait is taken into account for CIT, and it is liable to tax in Kuwait at a flat rate of 15%.
Although there is no withholding tax in the country, all public and commercial entities are required to hold onto 5% of the contract price until a tax clearance certificate is issued by the authorities. All publicly listed and closed Kuwaiti shareholding enterprises are subject to the Zakat tax on 1% of the total profits of the business.
Plus, even though there are tax treaties with many countries to prevent double taxation, the interpretation is frequently disputed because it is not always consistent or in accordance with the rules and guidelines.
Labour Law in Kuwait
The Labor law in Kuwait says that any business registered in Kuwait is required to employ indigenous Kuwaitis according to applicable sector-specific regulations, which can range from a minimum of 3% to a maximum of 60% of the total employees in a business.
The employer is required to make a contribution to the Financial Remuneration Fund of up to 2,750 KD, or 11.5% of the employee’s monthly wage. Plus, all employees are required to make Social Security contributions at a rate of 10.50%.
Business Opportunities in Kuwait
Business setup in Kuwait can be highly advantageous to foreign investors promising innovation and growth due to the following factors:
- The country is strategically present close to Iran, Saudi Arabia, and Iraq, three important Asian markets.
- Land, water, labor, and electricity are all inexpensive, and some are even heavily subsidized by as much as 86%.
- The country has excellent infrastructure.
- Most Kuwaitis are wealthy and knowledgeable in the business sector.
- A strong banking industry and a well-managed financial market.
- The building, construction, and project industries have experienced significant growth.
- High domestic consumption and average income.
- $104 billion National Development Plan for building new airport terminals, hospitals, housing developments, and a campus for Kuwait University.
- Young people are present in the country.
- New power projects, an oil refinery, an oil exploration project, a new rail and metro system, etc.
- Private project development and construction.
- Numerous project possibilities such as a $10 billion electricity-producing project.
- Infrastructure for healthcare is a key priority for the government.
- With recent government measures, the telecommunications, automobile, oil and gas, equipment, computers/ICT, and construction equipment industries appear to be growing in the future.
Who can Start a Business in Kuwait?
According to the Foreign Direct Investment Law of 2013, foreign ownership may be 100 percent foreign but only with KDIPA approval. At least 51% of all company shares must be owned by GCC nationals or Kuwaitis. Total foreign ownership is only taken into account if the business structure is seen as having the potential to diversify Kuwait’s economy and boost jobs in the country.
Additionally, the company must promote exports and profitably make use of Kuwaiti services and natural resources. 37 foreign companies have so far received approval for 100 percent foreign ownership, according to the most recent KDIPA statistics.
Some Practices that the Tax Department of Kuwait Demands
Here are some of the demanded practices of Kuwait’s Tax Department:
Bonus
A three-month salary will be permitted. Bonuses received outside of Kuwait will not be accepted. The payment of bonuses should be specified in employee contracts, and the business should have made profits during the year in which the bonus is given to the employees.
Payroll Expense
End-of-service benefits are only permitted as a deduction based on actual payments up to the number of benefits required by law. Any additional amount, even if specified in a contract, will not be honored.
Paid Compensations for Employees Working from Other Countries
Salaries and other forms of compensation for team members working abroad can only be accepted if it can be shown that the job was not inappropriate or exorbitant and was directly related to Kuwait’s business. Cash salaries are not accepted.
End of Service Payment
On an accrual basis, leave salary deductions are permitted. The total amount of the payment shouldn’t be greater than what is allowed by labor law. Even though the excess payments are stipulated in the contract, they will not be accepted.
Social Security
Social security contributions made outside of Kuwait that exceed 10% of salary will not be accepted. Furthermore, it must be about the labor force employed in the country.
Conclusion
Starting a business in Kuwait requires serious dedication, commitment, and hard work. Go through the details of the process and prepare the documents before taking any step. Also, think about the problems that you might face when forming a company in this Middle East country.
FAQs
What is an LLC in Kuwait?
LLC stands for limited liability company in Kuwait. “With Limited Liability” (WLL) is another name for an LLC Kuwait Company. Two directors and two shareholders make up a Limited Liability Company. This entity also needs a local citizen as a business partner who has a 51% share in the company in order to perform business activities.
Can a foreigner own a business in Kuwait?
Yes, but one of the key requirements for starting a business in Kuwait is that the foreign business partner must be a Kuwaiti. At least 51 percent of the company is owned by the Kuwaiti partner. Previously, without a Kuwaiti partner, foreign companies were able to organize in Kuwait under the terms of Foreign Direct Investment Law No. 8/2001.
Which business is best in Kuwait?
The petroleum business is best in Kuwait. It generates 95% of export earnings, 80% of governmental income, and close to 50% of GDP. With the growth of the non-oil sector, which includes the financial services industry, Kuwait has been successful in diversifying its economy. Officials in Kuwait have also made an effort to draw in international capital.
Can I start my own business in Kuwait?
Yes, you can start your own business in Kuwait.
Please Note: We do not provide any assistance regarding business setup in Kuwait. However, If you are looking to start your business in the UAE, get in touch with RIZ & MONA CONSULTANCY.
The post Starting a Business in Kuwait – Company Formation Guide appeared first on RIZ & MONA.
