KUWAIT 4. Tax and grants
4.1 Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country? If the vehicle chosen for FDI is a local company, the same will not be subject to income tax; however, any foreign corporate shareholders will have to pay tax on their portion of profit or income generated by the company’s operations in Kuwait. This is subject to any tax incentives that may be granted under the FDI Law.
4.2 What are the applicable corporate tax rates? Income tax in Kuwait is regulated by Decree 3 of 1955 as amended (the Tax Law). The existing tax rate is a flat 15% levied on the profits of any corporate body trading or doing business in Kuwait. Income tax is in practice, however, only applied to foreign or non-GCC corporate entities.
4.3 Does the government have any FDI tax incentive schemes in place? One of the incentives provided under the FDI Law is a tax exemption for a given period of time. It is yet to be seen what criteria has to be met to benefit from such incentive.
4.4 Other than through the tax system, does the government provide any other financial support to FDI investors? No.
5.5 Does the country prohibit domestic companies from doing business in any foreign jurisdictions? There are no restrictions on the operation of Kuwaiti companies abroad (except with respect to Israel).
6. Legal and regulatory framework
6.1 Are there any other FDI-specific laws that foreign investors must be aware of? See answer to 1.3 above
6.2 What challenges if any do investors find in getting certainty around local law and regulation? Kuwait’s laws are relatively accessible. All laws can be accessed from the Official Gazette archives. There are also a number of online resources that are frequently updated with the latest laws and amendments. However, there are ministerial resolutions that are frequently issued by ministries that may not be as readily available. These would typically require attendance at the particular government department to access them.
7. Dispute resolution 5. Operating locally
5.1 What is the most common governing law of contracts and local business language? Kuwaiti law permits parties to an agreement to select foreign law as governing law, and Kuwaiti courts should interpret such agreement in accordance with the foreign law chosen. A choice of foreign law would, however, not be upheld in Kuwait to the extent it is deemed to violate Kuwaiti public policy. Where the agreement involves a foreign entity, it is common for the parties to choose the law of a neutral country, and this is typically English law.
While Arabic is the official language of the State, the local business language is a combination of Arabic and English. Official documentation is, however, generally in Arabic.
5.2 Explain any local content or local participation requirements relevant to foreign investors. See answer to 2.2, above. Companies established in Kuwait generally require 51% Kuwaiti participation.
5.3 How difficult is it for foreign investors to secure expatriate visas for shareholder representatives and workers? All foreigners (except for GCC nationals) working in Kuwait require residence and work permits which must be sponsored by a Kuwaiti entity. The duration for processing the same is dependant on a number of factors including: the nationality and qualifications of the individual and whether the sponsoring entity has the adequate quota space on its labour file to employ an expatriate.
5.4 What foreign currency or exchange restrictions should foreign investors be aware of? There are no foreign currency restrictions in Kuwait, and investors are free to repatriate their profits aboard without restriction.
7.1 How efficient are local courts’ enforcement and dispute resolution proceedings, and are there any procedural idiosyncrasies foreign investors must be aware of? The Kuwaiti courts need to streamline their operations and procedures and improve the training of judges and staff to become more efficient. Litigation matters are typically lengthy, as matters are generally referred to the Experts Division before they are considered by a judge.
7.2 Do the courts of the FDI jurisdiction respect foreign judgments and are arbitration awards enforceable in the jurisdiction? Parties to a contract may grant jurisdiction to foreign courts over disputes that arise from their agreements. This however, does not prevent Kuwaiti courts assuming jurisdiction in certain circumstances. Additionally, Kuwaiti courts will only enforce foreign judgments if there is reciprocity of enforcement of judgments between the country that issues the judgment and Kuwait.
Kuwaiti law also recognises arbitration as a form of dispute resolution. Kuwait is party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and should therefore recognise and enforce foreign arbitral awards rendered in a country which is also a party to the Convention.
7.3 Are judgments and arbitration awards from the FDI jurisdiction generally enforceable in other jurisdictions? See answer to 7.2 above
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IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014
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