BUSINESS FUNDAMENTALS

The population figures may present Kuwait as a small market but the import figures for various commodities are quite impressive which gives lot of weight to Kuwait market and projects a high purchasing power.

KUWAITI BUSINESS LAWS 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 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 has one or more Kuwaiti partners and the capital owned by the Kuwaiti partner(s) in the joint business is not less than 51% of the total capital (60% in the case of banks, investment 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 Kuwaiti agent. Foreign individuals and firms may not acquire commercial licences in their 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 Licences
To do business, a licence 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 required and these are often issued by the ministry that controls that activity, e.g. publishing licences are granted by the Ministry of Information.

Business licences are only issued to Kuwaiti nationals and Kuwaiti companies and, in some cases, to GCC nationals and companies. Costs are usually KD100 per licence. All licences require periodic renewal, normally every two years.

Based on the GCC Unified Economic Agreement and the Supreme Council resolutions issued some two years back, GCC nationals are allowed to practice all business activities and professions in Kuwait excluding some activities such as: Haj & Omra services, private employment bureaus, labour provision services, finalizing document services, delivery services at airports, real estate services, leasing and sub-leasing of lands and buildings, car renting, advertising and publicity services, transport services and travel agencies.

Social activities excluded are: handicapped care and re-habilitation centers, the elderly peoples houses, community service centers and any center or office providing social services.

Among the cultural activities excluded are: the establishment of publishing houses, presses, newspapers, magazines, photographic studios movie and art production, commercial theatre bands, cinemas, theatres and art exhibition halls.

Three Steps Needed to Establish New Companies

The proposed companies will now require the following three procedures:

  1. Bank Account in which the company's capital is deposited.
  2. Justice Ministry for authenticating the Article of Incorporation and the business record.
  3. Ministry of Commerce and Industry to Obtain a Certificate and official announcement of the business.

Kuwaiti Manpower Law
Kuwait Manpower Law No. 19/2000 introduced in May 2001 is enforced from October 2003. The law aims at increasing the Kuwaiti employment in the private sector, regulate the expatriate labour work visas and transfers, and ensure that the employees are paid regularly in time through the banks. All salaries are supposed to be deposited every month by the employers in the employees bank account. The law specifies Kuwaiti manpower percentages to work in the private sector and the companies which do not comply with these percentages will be charged KD 500 for issuing new work permit for each expat appointed and may have to pay a fine of KD 500 for each extra expatriate in their firms. In addition, the companies not employing the specified Kuwaiti work force, will not be eligible to particapate in tenders offered by the Central Tenders Committee. The law sets the percentages of Kuwaiti manpower required in the private sector, according to the company's business activity, highest is 50 per cent for banks. The percentages for Kuwaiti manpower in private sector will apply to all businesses under specified categories employing 100 or more workers and firms having 50-75 expats must employ one Kuwaiti.

Kuwait has begun applying a 2.5 % tax on the net profit of Kuwaiti companies listed on the Kuwait Stock Exchange (KSE). The tax may be imposed on all local companies in the future.

According to the latest statistics by the Ministry of Planning, total workforce in Kuwait reached 1,869,809 in 2006. This includes 335,238 Kuwaitis (194,716 men and 140,522 women). The Kuwaiti labour force increased by 6.5 per cent in 2006 from 7.5 per cent in 2005, while the expatriate labour force recorded a growth rate of 8.4 per cent in 2006 against 12.1 per cent in 2005.

The number of Kuwaitis working both the public and private sectors had increased by the end of 2006.

To increase Kuwaiti national' employment in the private sector, the government has extended social allowance to Kuwaitis in the private sector and has initiated training sessions to prepare Kuwaitis for work demands of the private sector. The training sessins are financially covered by the 2.5 per cent tax collected from the companies listed on the Kuwait Stock Exchange.

Business Entities
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.

The Kuwait Free Trade Zone
The Kuwait Free Trade Zone, established in 1998 at Shuwaikh harbour, offers state-of-the-art facilities ranging from warehousing, light industries, offices, open land for development, kiosks and traders exchange market and exhibition facilities. These combined products with a continued commitment to providing premium and timely services to clients enables KFTZ investors to focus on growth and business development.

Trade Zone allows 100% foreign ownership of businesses within the zone. There are no import duties and foreign corporate income is tax-free. Commercial, industrial and service licences are available without a local sponsor. KFTZ provides a variety of infrastructural services. Tel: 802808, Fax: 4822067, http: www.kuwaitfreezone.com, e-mail: info@nrec.com.kw

The 'Future Zone' or Kuwait's mini "Silicon Valley" in the Free Trade Zone is located on the water front parallel to Al-Ghazali Street in Shuwaikh outside the customs area of the Free Trade Zone and covers an area of 800,000 square metres.

Foreign Direct Investment (FDI)
In February 2003, the executive memorandum for implementing Law No. 8/2001, which was approved by the Parliament in April 2001, pertinent to foreign direct investment (FDI), was issued.

The law is characterized by many attributes that include income tax exemption in addition to other taxes for ten years including any new addition to investment, benefiting from agreements of exemption from double taxation, total or partial exemption from custom duties on machinery, equipment, parts, and raw materials, semi-processed goods, assigning land and real estate, and the right to bring foreign labour.

According to the executive memorandum, granting these privileges should be linked with the project's capability of introducing new technologies, or developed management and marketing methods, or repatriating private capital, both local and foreign, and to expand the private sector's contribution to specialization and creation of national labour with due observance of the provisions of law no. 19/2000 concerning Recruitment of the National Labour. Granting the optimal privileges and exemptions will depend on the project's fulfillment of the requirements and will be judjed by the Foreign Investment Bureau and its Committee.