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Kuwait 2017 | EXECUTIVE GUIDE | REVIEW: DOING BUSINESS

The Gulf has a strong attraction for foreign investors wanting a solid base of operations for Middle Eastern endeavours, and Kuwait has worked hard to make itself stand out.

A variety of companies operate in the country, ranging from LLCs to branches to joint stock companies. It is possible for foreign businesspeople to set up their business through a properly licensed Kuwaiti agent. According to PwC, a six-month wait can be expected for businesses after a license is granted until incorporation. While LLCs require at least two Kuwaitis be shareholders, joint stock companies must have no less than five. Unless the business is located in a free trade zone, foreigners are allowed to own no more than 49% of share capital. As of 2015, PwC reported that the government was no longer issuing licenses for the establishment of an entity in Kuwait's FTZ.

Foreign Direct Investment

Toward the end of 2014, a new law on investment was enacted, with further new regulations expected to be introduced in the future, according to PwC. The law created the Kuwait Direct Investment Promotion Authority (KDIPA), which is in charge of administering investments in the country. With the enactment of the new law, foreign investors are allowed full ownership of subsidiaries, branches, or representative offices in the country, and have the potential to receive benefits such as 10-year tax exemption if the company meets certain requirements, and exemptions from customs duties. There are, however, certain requirements to be met in order to receive such advantages. These benefits include the company's contributions to Kuwaiti employment and advancement of national technology, and are limited to certain types of businesses; eligible business must also be able to prove their activity will benefit the economy in several ways.

Taxation

Kuwait will only tax Kuwait-sourced income. Though different from other residence models of taxation, certain activities that may elsewhere not be considered taxable may be liable in Kuwait. There is a flat, 15% income tax, down considerably from 55%, which ended nearly a decade ago. Taxes are normally calculated based on profits noted in audited financial statements. Foreign businesses working in Kuwait are subject to income tax, and there is a rather broad definition of doing business in the country—a foreign company may be subject to tax with as little as an agent working in Kuwait. Capital gains made upon selling an asset are considered a business profit and are thus unconsidered for capital gains taxes; there are also no withholding taxes. All business—both foreign and Kuwaiti—must hold 5% of every payment to a contractor, as well as all final payments until the Ministry of Finance has received a tax clearance certificate.
Business etiquette

While Arabic is the official language, English is widely spoken and near compulsory in business. However, despite most negotiation and in-person interactions being done in English, contracts and official documents are often written in Arabic. As is common in the region, Kuwaitis prefer to do business with people they know, so introductions and general getting to know one another may extend for some time before getting down to business. Being restricted to a six-hour workday, it is wise to plan meetings with government officials in the morning. Keep in mind any meeting may be interrupted by prayer times. Many companies are family owned and thus take a hierarchical decision-making structure, with many decisions being made at the top.