A friendly tax regime has long made Kuwait a base for expats, and a new FDI oversight body should streamline the process of bolstering the nation's private industry.

The GCC as a whole has developed a reputation as a region that is welcoming to foreign investment, but Kuwait's demographics and economic structure make it stand out even within the region. More than 70% of Kuwait's 4 million residents are expats, with Indians, Egyptians, and Filipinos making up the largest communities. These figures reflect the international nature of the Kuwaiti economy, which relies heavily on foreign workers to meet the nation's needs. Long open to the world, controls on foreign investment have been loosening in recent years as Kuwait looks to create a new and more diversified economy. The past few years have seen state oil companies partner with foreign firms to improve refineries, with the allowance of full foreign ownership in some industries, and the creation of new oversight agencies to coordinate with foreign firms and improve the business environment.

Kuwait saw USD2.3 billion in FDI flow into the country in 2013, above GCC neighbors Bahrain, Oman, and Qatar but less than Saudi Arabia and the UAE. The World Bank's 2018 Doing Business report ranked Kuwait as 96th in the world, above the MENA average but behind Qatar, Oman, and Bahrain. The World Bank's report cited access to credit and bureaucratic delays as two of the largest barriers to foreign investment, but noted that Kuwait is in the midst of liberalization policies that have begun to increase international investor confidence. In 2014, Kuwait's government passed a new FDI law as part of its larger efforts to reduce the country's oil dependency by 2035. The new FDI law created the Kuwait Direct Investment Promotion Authority (KDIPA), an oversight agency in charge of coordinating licensing for foreign firms looking to incorporate in Kuwait. Delays of up to six months were common before the establishment of KDIPA, and the government has expressed its desire to cut the time needed for incorporation down to a month.
With KDIPA's arrival came a new set of laws allowing foreign investors to attain full ownership of industries in a set number of sectors. Kuwait bans foreign investment in the petroleum and natural gas extraction, real estate, public defense, and national security sectors, but now allows for 100% foreign ownership in other sectors subject to investors meeting certain job creation criteria. This is all central to the Kuwaiti government's goal of increasing the private sector's share of the economy from its current level of 25 to 40% by 2020. Kuwait is in the midst of an aggressive privatization program designed to transfer ownership and operations of its national airline, stock exchange, and telecommunications sector to private entities, reducing government spending and creating new economic opportunities for investors. While foreign investors are now allowed to bid on these firms, there are still roadblocks to full and open competition. The insular nature of the Kuwaiti economy means that competition for privatized industries is less than fully open, and Kuwait requires foreign companies to partner with Kuwaiti agents to offer bids. While Kuwait is in the process of working with the World Bank to improve its competition protection structures, the process is still ongoing.
Kuwait's tax regime is fairly friendly to investors but noteworthy for considering the source of income when determining liability. Non-GCC corporations are subject to an income tax of 15%. Economic activity considered to be “sourced" in Kuwait is subject to taxation, which has at times opened firms to unusual taxation burdens; any employee presence in Kuwait often makes a firm's economic activity taxable in the country. The FDI law passed in 2014 included exemptions from income taxes for up to 10 years after starting operations and exemptions from customs duties on the importation of machinery and raw materials for production. Additional changes have lowered the maximum corporate tax rate from 55% to 15%, and the expected expansion of the free trade zone (FTZ) regime should bring another source of relief for corporations—activities located in a FTZ are exempt from corporate taxes. Kuwait's individual tax policies are well known for being friendly; there is no national income tax, value-added tax, property tax, or withholding tax.