Check out this blurb from the Kuwait Top-List site. While the information isn't 100% up to date, it is certainly a good start.

KUWAIT BUSINESS LAWS

The rules of commerce are in general similar to Western 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 licenses in their own name nor may they own real estate locally.

To go the the Kuwait Top-List site, please click HERE

Check out the following for some brief information on the business laws of Kuwait from the Kuwait Pocket Guide       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. The fundamentals of doing business in Kuwait are no different from elsewhere. The market is price conscious and there is a greater emphasis on price. However the business climate is different and social and cultural affinities have great influence. Good business depends on good relations any where. Kuwait, it is all the more important to go beyond business relation to personal relations. The hard-sell approach does not appeal. An attractive brochure, product videos, samples, low-key presentations, pleasantries and patience are essential. Hospitality is an integral part of local culture and to refuse a first cup of gahwa or chai, when visiting an office, would be impolite. KUWAITI BUSINESS LAWS 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. Kuwaiti Manpower Law Kuwait Manpower Law No. 19/2000 introduced in May 2001 aims at solving the Kuwaiti unemployment problem by creating job opportunities for Kuwaitis in the private sector. A high-ranking government team entrusted with implementing the law has to endorse the set of additional charges for expatriates on residence transfers, residence renewals and work permits. The team is seeking a legal basis to specify 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. 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. This tax will supplement additional charges to be collected from expatriates in the private sector. According to a recent statistical report the total labour force in Kuwait reached about 1.271 million individuals in the year 2001. The labour force growth rate was 6.3 per cent. The Kuwaiti workforce increased from 233,250 to 249,800. While 228,600 Kuwaitis are in the civil service, 21,200 are employed in private sector. A committee comprising Ministers of Social Affairs and Labour, Commerce and Industry and Interior, which has been entrusted with framing a mechanism for implementation of the Kuwaiti Manpower Law, has proposed increasing the charges for issuing the work permit to KD 100 per year instead of the current KD 10 for private firms not complying with the percentage of Kuwaiti Manpower Law. The government has already allocated a KD 40 million fund in fiscal 2001/2002 to implement the law. To subsidize the salaries of Kuwaitis in the private sector several measures are under consideration. A memorandum by the Ministry of Social Affairs in August 2002 recommends a KD 500 fee to be imposed on companies, not complying with the designated percentage of Kuwaiti manpower, for obtaining a new work permit for each hired expatriate worker. It sets the percentages of Kuwaiti manpower required in the private sector, according to the company's business activity, highest 38 and 39 per cent respectively for establishments engaged in telecommunications and banking. The percentages for Kuwaiti manpower in private sector will apply to all businesses under specified categories employing 100 or more workers. 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. Kuwait Free Trade Zone (KFTZ) Kuwait's privately-managed Free Trade Zone is located in Shuwaikh and 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 In July 2001 KFTZ launched KFTZonline.com to provide efficient means for clients to access KFTZ services such as business visas, work visas, gate passes, contract amendments and termination, building permits etc. The 'Future Zone' or Kuwait's mini ?Silicon Valley? in the Free Trade Zone is expected to start operating by the end of year 2002. It 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. NEW LIBERALISED BUSINESS LAWS Extensive legislation to reform Kuwait's economy, liberalise its business laws and comply with WTO rules was issued by Amiri Decree in June 1999. In May 2000 the National Assembly approved the indirect Foreign Investment Law which allows foreigners to own stocks on the Kuwait Stock Exchange (KSE). Law No. 20/2000 on allowing non-Kuwaitis to posses shares in Kuwaiti shareholding companies was approved. According to the Article (1) of the law, non-Kuwaitis may posses shares in the Kuwaiti shareholding companies already incorporated during the effective date or which may be incorporated after its implementation. Non-Kuwatis may participate in the establishment of these companies in accordance with the provisions of the law. In August 2000 the Kuwaiti Cabinet approved regulations necessary to implement the bill allowing foreigners to own stocks and trade on the bourse. The legislation allows foreign investors and expatriates living in Kuwait to own up to 100 per cent of the stock of Kuwaiti companies listed on the KSE, except in banks where the ownership will be limited to 49 per cent. IMPORTING INTO KUWAIT The right to import goods into Kuwait on a commercial basis is restricted to Kuwaiti individuals and firms who are members of the Kuwait Chamber of Commerce & Industry (KCCI) and who have import licences issued by the Ministry of Commerce & Industry (MCI). Import Licences General import licences, which must be renewed annually, allow any amount of a variety of products from any country to be imported any number of times. But special licences are needed to bring in regulated products such as arms, ammunition and explosives, ethyl alcohol, drugs, pesticides, jewellery and precious stones, weights and weighing machines, vintage cars, etc; these too must be renewed annually. Special licences are also needed to import industrial equipment and spare parts; these are issued to industrial firms upon the recommendation of the Public Authority for Industry and are valid for a single use only. To protect local morals, alcoholic beverages and materials used in making them, pigs, pork, pigskin products (such as handbags, wallets and shoes), narcotics and associated plants and seeds, pornographic and subversive materials, are, among other items, prohibited. To protect local trade and industry, items such as vehicles over 5 years old and goods manufactured locally are prohibited. Items injurious to health, such as air-guns, asbestos and cyclamates, are banned. Imports from Israel and Iraq are banned absolutely. All imports, as well as locally made items, must comply with Kuwaiti standard specifications (KSS). If there is no KSS for a particular product then Gulf standard specifications (GSS), a set of common standards being devised under the GCC's Unified Economic Agreement, apply, and if there is no suitable GSS, the product must adhere to international standards. Import Documentation To clear goods imported into Kuwait, a minimum of four documents are needed: (a) Commercial Invoice, (b) Certificate of Origin, (c) Official Delivery Order, and (d) Packing List. The invoice, certificate of origin, and the delivery order (bill of lading or airway bill) must be in three original copies and must be certified by a chamber of commerce in the country of export, preferably a joint local-Arab chamber, and certified by the Kuwaiti consulate in that country. If there is no Kuwaiti embassy in the exporting country, the consulate of Saudi Arabia (preferably) or any other Arab country (except Iraq) is acceptable. As well as being shown on the packing list, the country of origin must also be marked on each packing unit. To clear customs, many products must be accompanied by additional certificates showing that they comply with health and safety regulations issued by the Ministry of Public Health, the Municipality and the MCI. Goods failing to clear customs must be re-exported within a month. The minutiae of import regulations tend to change frequently and these changes are published in Al-Kuwait Al-Youm, the Official Gazette. Import Duties Kuwaiti customs duties are the lowest in the region, though there are protective tariffs on some goods. However commercial samples worth up to KD5,000 may be brought in temporarily. Duty is levied as a percentage of the CIF value of the goods up, but excluding unloading in, Kuwait. It is calculated and must be paid in Kuwaiti Dinar (KD). Where importers are invoiced in foreign currencies, customs use a list of 'standard' exchange rates to translate the CIF value into KD. These rates change frequently and a list in Arabic is available for 250fils from customs. The standard rate of duty is 4%. But most goods may be imported duty free, including: Food products, medicines, essential consumer goods, live animals, bullion, printed matter, etc, except where these (such as bread) are manufactured locally; Industrial and farm products from other GCC states provided they have at least 40% added value in the GCC exporting country; and Raw materials, semi-processed goods, equipment and spare parts for new industrial establishments provided exemption has been obtained. But imported hydrocarbon products that are also manufactured locally, such as lubricating oils, are subject to duties of 100%. The duty on cigarettes and tobacco is 75%. But some goods of Arab origin are subject to only 50% or 75% of the duty imposed on similar goods of non-Arab origin. Many locally made products are protected by tariffs. To qualify for protection, an industrial firm must show that it meets, or will be able to meet, at least 40% of the demand in the local market for the products concerned. The tariff varies according to the value added by domestic production. AGENCY & SERVICE AGREEMENTS Only Kuwaiti individuals or firms may act as commercial agents in Kuwait, while foreign individuals or firms, except for GCC nationals, are not allowed to carry on commercial activities in the country except through a commercial agent. All arrangements between a foreign entity and its local agent are governed by Articles 260 to 296 of the Commercial Code. Terms of An Agency Agreement An agency agreement must be in writing and must be registered with the MCI. Its terms must cover the activities to be undertaken, the scope of the agent's authority, his remuneration, and the duration of the agency (if limited). Generally speaking, the parties to an agency agreement have full freedom of contract, but a few provisions of the Code override what the parties might wish to agree and any terms which contradict these provisions are void. If an agent is required to erect premises then the contract must be for at least five years. The principal is obliged to provide the agent with all that the agent requires for the promotion of the principal's products and services. The agent must preserve confidentiality even after the agreement is terminated. The agent is entitled to his remuneration (a) on all matters concluded by him, (b) on transactions which would have been concluded but for some act of his principal, and (c) on transactions concluded either directly by the principal or by others acting on behalf of the principal in the area of the agent's operations, unless otherwise agreed in writing. Termination Compensation If a principal terminates an agency when his agent is not at fault, the agent may seek compensation for loss of income. And, if an agent abandons his agency at an unsuitable time and without reasonable cause, his principal may seek compensation for damages. Any clause to the contrary in an agency agreement is void. Even where an agency is for a fixed term, the law expects it to be renewed on expiry. If the principal does not renew it, the agent may seek fair compensation (even if the contrary is stated in their agreement) provided the agent has not been at fault nor negligent in his performance. If a principal replaces his agent and the termination was due to collusion between the principal and the new agent, the new agent will be held jointly responsible with the principal for settling any compensation due to the former agent. There is no set legal formula for calculating compensation on termination. However an action for compensation must be started within 90 days of the end of the agency. Service Agreements To open a branch in Kuwait, a foreign firm must enter an agency agreement with a Kuwaiti sponsor or service agent. Under such an arrangement the agent is merely the foreign entity's legal representative in the country and does little more than take care of licensing formalities, obtain visas for the principal's executives and employees, and represent the principal officially. The agent will expect a fee for his sponsorship and the use of his licences. Registration Procedures 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 application for registration can only be made by the Kuwaiti agent. It must be made on two original copies of the official MCI form and must be accompanied by: An original copy of the agency agreement A translation of the agreement into Arabic A copy of the agent's commercial licence A copy of the agent's nationality document or registration in the commercial registry A certificate of registration from the KCCI.   If the agency agreement was executed overseas, the original must be attested at the principal's location by an official authority and the Kuwaiti consulate. Where it was executed in Kuwait, it must be notarised by a Kuwaiti Notary Public. Upon registration, the MCI gives the agent a signed and stamped copy of the application, and advertises the registration in the official gazette. Amendments to the agreement must also be registered and when an agency terminates it must be removed from the register. The register may be searched by the names of agents, the names of principals and the trade names of goods. INTELLECTUAL PROPERTY RIGHTS (LAW NUMBER 64) Copyright Until 1999 there was no general copyright law under which the rights in intellectual works could be protected effectively. The only protected works were audio and visual recordings of Kuwaiti, Arab, American and British origin. In addition, public institutions were not allowed to buy pirated computer software. Under the Law No. 64 of 1999 protection is to be given to all literary works (written and oral), theatrical shows, musical works (with or without lyrics), choreographic works, motion pictures, audio, video and radio works, artistic works (painting, sculpture, carving, architecture and decoration), photographs, applied art (craft or industrial designs), illustrations, maps, designs and models, computer works (software and databases), and translated works. The scope of protection under this law covers the following works in particular: * Written works. * Works delivered orally, such as lectures, speech, religious sermons and the like. * Theatrical works and musical plays. * Musical works with or without songs. * Works performed by means of movements or steps and mainly prepared for direction. * Movie works, audio, video and radio works. * Painting and works depicted by means of lines, colour, and diagrams as well as works of architecture, arts,  carving and decoration. * Photographic works. * Works of applied art, including craft or industrial designs. * Illustrations, geographic maps, designs, plans and models relating to geography, topography, architecture and science. * Computer works including software, databases and the like. * Derived and translated works. The protection also covers the title of the work if this is created and it is not a common expression that indicates the subject matter of the work. The period of copyright protection will be 50 years from the death of the author. But works published under a pen name or after the author's death, motion pictures, photographs, applied art, computer works, and works owned by corporate bodies will be protected for 50 years from the end of the year in which they are first published. Writers, composers and directors of theatrical, choreographic, and TV and radio works will enjoy 50 years protection from the end of the year in which the works were first performed or recorded. The law specifies the penalties that the court shall order for infringement of the author's rights. Under the new law the penalty for piracy is a maximum of one year imprisonment and a fine of KD500. A shop selling pirated works can be closed down for up to six months. Trademarks The protection of trademarks is governed by articles 61 to 85 of the Commercial Code, as amended by Decreed Law #3 of 1999. A Trademarks Register, open to public inspection, is maintained in the Patent & Trademark Department at the Ministry of Commerce & Industry (MCI). Under the new law, the definition of a trade mark extends to audible and olfactory marks. There is no registry of service marks. The person who registers a trademark is considered the sole owner with the exclusive right to use the mark on the products for which it is registered. Registration initially protects a mark for ten years from the date of application to register. Registration can be renewed indefinitely for further periods of ten years each. The registrar must notify the owner that the period of protection has expired within one month of expiry and if the owner does not apply for renewal within six months of expiry, the mark is automatically deleted from the register. A trademark may be sold but the change in ownership must be entered in the Register and published in the official gazette. A person who infringes a registered trademark is liable to a fine of KD 600 or imprisonment or both, and to pay compensation. Registration To register a trademark, an application must be submitted in Arabic to the Trademark Control Office along with a fee of KD 24. Once the application has been accepted, it must be advertised in three consecutive issues of the official gazette. Objectors have 30 days after the third advertisement to challenge the registration in writing. The registrar must give a copy of the objections to the applicant, who has 30 days to submit a reply. Thus the overall time needed to register a trademark is not less than three months. Patents & Industrial Designs Under Law 4 of 1962, a patent may be issued for any new invention suitable for industrial use which has not been used in Kuwait during the previous 20 years. Kuwaiti nationals, foreign residents, foreign businessmen with a local presence and foreigners in countries that grant reciprocal rights to Kuwaitis, have the right to be granted patents in Kuwait. All documents for filing a patent application, including the specifications of the invention, must be in Arabic. Under Law 4 of 1962 patent holders are protected against unauthorised use of their invention or design for an initial period of 15 years, renewable for a further 5 years. Under the new law the period of protection will be 20 years, though patents registered in other countries will only be granted protection for the remainder of the period of protection where they are registered. The new law also extends the period of protection for drawings, models and integrated circuits from 5 years to 10 years, which may be renewed for a further 5 years. The law will, in addition, allow improved versions of existing patents to be protected for 7 years. Patent holders may license their patents to others. PUBLIC SECTOR CONTRACTING As a general rule, a public authority in Kuwait may only buy equipment and commodities, and commission works, by way of an independently administered tendering process. Public tendering is governed by Law 37 of 1964, Law 18 of 1970 and Law 81 of 1977 as amended. Tendering procedures for most public institutions are administered by the Central Tenders Committee (CTC), though the client body (i.e. the public body requiring the service) draws up the specifications and particular conditions it requires, reviews pre-qualifying companies, and evaluates bids technically. However some public institutions have their own tendering procedures. But no matter who administers a tender, the procedures are in essence the same as CTC procedures, and all activities relating to public tenders, such as tender announcements, invitations to pre-qualify, pre-tender meetings, and amendments to conditions and specifications, are only published in Al-Kuwait Al-Youm, the official gazette. Funding for major projects is normally provided by the government. In recent years other forms of financing, such as credit facilities supported by export credit agencies (ECAs) and build-own-transfer (BOT) type schemes, have been tried. Eligibility & Registration A tenderer for a public contract must be a Kuwaiti merchant who is (a) registered with the KCCI and the MCI, and (b) registered as an approved supplier or contractor. The CTC and client bodies maintain lists of approved suppliers of equipment and materials. To get on the lists, the main requirement for suppliers is that they be Kuwaiti merchants. Application for registration is usually made to the client body. The CTC also maintains lists of approved contractors for works. Before getting on these lists a contractor must be classified according to the size of projects he is deemed capable of undertaking. The size limit for the first three categories represents the cumulative size of all contracts being undertaken at the same time by a contractor, e.g. a category (4) contractor cannot bid for a contract worth more than KD50,000 if, at the time of his bid, he is already undertaking projects with an total value of KD200,000. Foreign companies are not classified as they must prequalify each time they bid for public sector contracts. Pre-Qualification Participation in some public tenders is restricted to firms who have been pre-qualified, i.e. judged capable of undertaking the particular project. To prequalify, a firm submits a standard set of documents outlining its financial and technical capabilities to the CTC. Foreign firms must prequalify each time they bid for a public contract. Their applications may only be submitted by their Kuwaiti agent and must be accompanied by an authenticated copy of the agency agreement. Bidding Procedures Forthcoming tenders are announced in Al-Kuwait Al-Youm as invitations to bid . To collect the documents, a written request in Arabic plus the fee (for which a receipt is given) is needed. A foreign firm must show an authenticated copy of the agreement with its local agent. Firms who have purchased the documents may be invited to pre-tender meetings with the client body. Sometimes these are mandatory and bidders who do not attend find themselves excluded from the tender. The scope of work may be amended after the tender documents have been issued or after a pre-tender meeting. When this happens the administering committee issues a formal addendum which can only be collected on production of the original receipt for the tender documents. Notice of pre-tender meetings and tender amendments are announced in Al-Kuwait Al-Youm and tenderers are seldom advised directly. Bid Preparation A bid may only be submitted on the original official tender documents issued to the company making the bid. All parts must be completed in full and the documents may not be altered in any way. The bid must conform to the tender terms exactly and alternative terms are never acceptable. All prescribed supporting documen-tation must be appended. The tender documents are expected to be submitted without erasures or corrections. Where alternative offers are allowed, a tenderer must buy a separate set of documents for each offer he submits, with each bid clearly marked to show that it is an alternative. Pricing & Pricing Preferences Contracts must usually be priced on a lumpsum fixed-price basis, though unit pricing is normal in maintenance type contracts. Most bids must be priced in Kuwaiti Dinar. Prices must be stated on a cash-basis. Public sector contracts must by law be awarded to the bidder who offers the lowest price provided his bid conforms with technical requirements and he has adequate resources. But where a firm has submitted an artificially low bid and it appears that it will be unable to perform to the required standard, the contract may be awarded to the next lowest bidder. Local manufacturers have a price advantage. Subject to technical acceptance, goods made in Kuwait may be priced up to 10% higher than comparable items made abroad and be deemed the lowest priced. Goods made in other GCC countries have a 5% price preference; but if the goods are not made in Kuwait then GCC goods have a 10% advantage. Local contractors for the performance of works do not enjoy any pricing advantage. Bid Bonds A bidder's offer must be irrevocable until the end of its period of validity which initially cannot be more than 90 days. An unconditional bank guarantee for the entire initial period of validity, issued in Arabic by a Kuwaiti bank, must be submitted with the bid. These bonds vary from 2% to 5% of the value of the bid. If a bidder is successful but refuses to sign the contract, the bond is forfeit. Bidders are often asked, towards the end of the initial period of validity, to extend their offers. If they wish to do so then the bid bond must also be extended.    Submission of Bids Tender documents must be signed by the bidder and stamped with his seal. If a foreign firm submits a bid directly, rather than through its local agent, both its stamp and the agent's stamp must appear on every page. Proof of the signatory's capacity to bind the bidding firm is always required and this usually takes the form of a notarised power of attorney. If the tender documents include a bid envelope, this must be used to submit the bid. The name of the bidder may not appear on the envelope, which must be sealed with wax. Bids must be submitted to the tender committee at the place, date and time stated in the conditions. Where the CTC is administering the tender, bids must be submitted in the CTC's office in Sharq, which is done by placing the envelope in the box designated for that tender by a notice in Arabic (only). The closing time is usually 1:00pm and the box is always sealed the very second time is up. Evaluation & Award Where the CTC is administering the tender, bidders may get a copy in Arabic of the list of bidders and their prices from the CTC's Sharq office, about a week or so after bidding closes, by showing a copy of the original receipt for the docu-ments. But other tender committees do not normally provide such lists. In most tenders a technical study, to ensure that bids comply with the required specifications, is usually carried out by the client body. During these studies, a bidder may be invited to answer queries orally or he may be sent a list of questions requiring a written reply. Once technical studies are completed, a contract is awarded on the basis of price from among the bids that conform with the tender specifications. The administering committee notifies a successful bidder in writing, but the latter does not have any contractual rights until he has signed his contract with the client body. If the winner fails to sign the contract within a specified time of being invited to do so, he is deemed to have withdrawn. Before signing the contract, a successful bidder must replace his initial guarantee with a final guarantee or performance bond from a Kuwaiti bank. This is typically 10% of the contract value and must be valid for the duration of the contract including a maintenance period. A contractor who fails to present this guarantee is deemed to have withdrawn. Performance Public sector contracts always contain penalty clauses, and minor delays and faults in execution usually result in penalties being imposed. Contractors for the performance of works normally receive an advance of 10% to cover costs of mobilisation. Stage payments on account of work-in-progress are also made. Most contracts allow the client body to retain 10% from work-in-progress payments until the end of the contract and to recoup the advance pro-rata from work-in-progress payments, so that during the maintenance period the client body is holding a retention of 10%. Public sector contracts normally include a maintenance period of a year, during which the contractor is liable for any faults in the equipment or works. The period is covered by a retention, in the case of works, and the performance bond. When a project of works is completed, the contractor usually receives a provisional completion certificate which is replaced by a final acceptance certificate at the end of the maintenance period. This final certificate releases him from further liability and enables him to claim his final payment. Before he can receive his final payment, a foreign contractor must obtain a tax clearance certificate. COUNTERTRADE OFFSET PROGRAMME Under Kuwait's counter-trade offset programme, a foreign contractor who signs contracts to supply government institutions with goods or services that are cumulatively worth more than KD1million in any fiscal year (April to March) incurs an offset obligation that requires him to set up a business beneficial to Kuwait. According to a report, the offset programme has achieved 19 projects in different fields since its start in 1992. The Offset Obligation The offset obligation is expressed in the same currency as the supply contracts and is nominally 30% of their value. The contractor earns 'credits' for expenditures relating to his offset business venture (OBV) and when these credits amount to 30% of his supply contracts he has fulfilled his obligation. Actual expenditures will be much less than 30% because most expenditures earn credits at a rate greater than 1:1 and, in practice, offset expenditures amount to about 3% of a contractor's supply contracts. But before a contractor may embark on his OBV, the business must be officially approved. The programme is administered by the Counter-Trade Offset Program Executive Office (PEO) in the Ministry of Finance. The stated objectives of Kuwait's offset programme are: To promote long-term mutually beneficial collaborative business ventures between foreign enterprises and Kuwaiti companies with an emphasis on the private sector; To achieve sustainable economic benefits (such as export sales and import substitution); To enhance the high-tech capabilities of the private sector by creating and expanding education and training opportunities for Kuwaiti nationals locally and abroad; To facilitate the transfer of state-of-the-art technology into the private sector; and To support Kuwait's foreign aid programmes.   These objectives provide the criteria by which proposed OBVs are evaluated. A contractor's obligation begins when he signs the supply contract that creates it. The total time allowed to fulfil the obligation is 10 years, i.e. 24 months for approval of the OBV and eight years thereafter to generate the credits needed to extinguish the obligation, with 50% being settled within four years. A contractor's OBV must include Kuwaiti businesses or entrepreneurs as equity partners, and it must exist and operate under Kuwait's Commercial Companies Law. A contractor who refuses to participate in the programme or ceases to participate before he accumulates credits equal to 10% of his obligation, incurs a penalty of 6% of the value of his supply contract(s). If he fails to continue after completing 10% or more of his obligation, the penalty is reduced by the percentage of the obligation which has been completed. The Offset Process Once a foreign contractor has signed the supply contracts that trigger his obligation, he must acknowledge this obligation by signing a memorandum of agreement with the Ministry of Finance. He must then submit business ideas to the PEO in order to obtain approval for an OBV. For each idea he must submit in turn a concept paper, a proposal and a business plan, and each of these documents must be approved before the next one is submitted. The concept paper is essentially a brief summary of the proposed business. A proposal is similar to a traditional feasibility study and is the key document upon which approval of the OBV rests. The business plan must be fully detailed and must cover the whole eight years in which the obligation must be fulfilled. The proposed OBV must pass normal evaluation criteria for commercial, technical and financial viability. The business is also evaluated on its ability to further capital accumulation and promote economic development in Kuwait, on the contribution it can make to developing a highly skilled experienced globally-competitive work force and on whether it will transfer inwards technology appropriate to the development of new industries in Kuwait. Calculation of Credits Once his business plan has been approved the foreign contractor establishes and operates the OBV with his Kuwaiti associates. He is awarded offset credits annually on the basis of the expenditures relating to the OBV as shown by its audited financial statements. All the OBV's expenditures, except for costs incurred in administering the programme, are eligible for credits. But instead of being just aggregated to calculate the credits, these expenditures are classified and weighed according to the preferences given to them under the government's economic policy objectives. First the expenditures are classified, according to the internal functions of the OBV, into micro-categories (see box). The actual expenses in each micro-category are then multiplied by the appropriate micro-multiplier. The result is then multiplied by the approved macro-multiplier. The final result is the amount of credits earned in that particular micro-category. The credits earned in each micro-category are then summed to arrive at the total number of credits generated by the OBV for that year. To decide what the OBV's macro-multiplier should be, the OBV is classified according to its activities into one of the economic activity areas (EAA) shown in the box. Each EAA has a macro-multiplier which ranks it by the preferences accorded to that economic activity in the government's policy objectives. Once an OBV is established, the PEO must be provided with six monthly progress reports, i.e. performance updates. The OBV is required to maintain accounting records according to International Accounting Standards and to file annual audited financial statements with the PEO. All supporting records must be kept for four years and PEO has the right to audit these records annually. Future Credits After a contractor's current obligation has been fulfilled, additional credits generated by his OBV may be carried forward and set against offset obligations arising from any future supply contracts he signs. These future credits may not be transferred to other contractors. Third Party Fulfilment Subject to PEO approval, a foreign contractor may designate a third party to fulfil his offset obligation, though the contractor remains responsible for the outcome. Contractors unable to find suitable OBVs may be allowed to fulfil their obligations by investing in approved investment funds which provide finance for ventures acceptable under the offset programme. Several local funds have been approved for this purpose by the Ministry of Finance. CORPORATE INCOME TAX In Kuwait there are no personal income taxes, property, gift or inheritance taxes. Nor are there any sales or value added taxes. The only tax paid by Kuwaiti shareholding companies is a 2.5% levy for the Kuwait Foundation for the Advancement of Sciences (KFAS). Kuwaiti Manpower Law which was introduced in May 2001 applies a 2.5% tax on the net profits of Kuwaiti companies listed on the Kuwait Stock Exchange (KSE). This tax may be imposed on all local companies in the near future. But corporate income tax is levied on the net income of foreign firms. The Liability to Corporate Income Tax Corporate income tax is governed by Law #3 of 1955, as supplemented by directives issued by the Director of Income Taxes, i.e. the Minister of Finance, from time to time. The filing of tax declarations and accounts, the assessment of liabilities and the payment of taxes are administered by the Tax Department in the Ministry of Finance. All tax declarations, supporting schedules, financial statements, and correspondence must be in Arabic. All foreign corporate bodies carrying on a trade or business in Kuwait are liable to income tax, with the exception of companies incorporated in the GCC that are wholly owned by GCC citizens. A foreign corporate body means any business entity, formed under the laws of any state, which has a legal existence separate from that of its owners. The term includes foreign partnerships. Where a foreign firm operates through a local service agent, it is taxed on its income arising in Kuwait. Where it is a shareholder in a local company, it is taxed on its share of the company's profit. Taxable income includes net profits, whether distributed or not, and amounts receivable on account of interest, royalties, technical services and management fees, etc, whether actually paid or not. Where the foreign firm is a shareholder in a local company, the foreign entity bears the tax and the Kuwaiti company has no liability. There is no withholding tax on dividends, interest payments and royalties. Net taxable income is computed on the basis of the net profits disclosed in audited financial statements as adjusted for tax purposes. Where the taxpayer is a shareholder in a local company, the foreign element in total adjusted profits is isolated. Tax Reduction Plan According a draft law approved by the Cabinet the taxes on foreign companies may be reduced to 25 per cent from the current 55 per cent. The tax margin on foreign companies will be in the range from 5 to 25 per cent, depending on their income. The minimum taxable income will be KD 30,000 on a sliding scale of 5 per cent for every incremental KD 30,000, up to a maximum of 25 per cent. Thus a company posting an annual income of less than KD 30,000 will not be liable to taxation but one earning KD 30,000 will have to pay 5 per cent (KD 1,500) as tax. A company earning KD 60,000 will have to pay 10 per cent (KD 6,000) and a company earning KD 90,000 will have to pay 15 per cent (KD 13,500) and so on. The maximum tax however will be 25 per cent. The objective is to attract more foreign investors. Gross Revenues Gross income is all income from business and trade, including amounts receivable as rents, royalties, premiums, dividends and interest, as well as capital gains on the sale of assets and on the sale of shares by a foreign shareholder, where the source is in Kuwait. The source of income is Kuwait if the place where the services are performed is in Kuwait. Work done outside Kuwait is deemed to be performed in Kuwait where it is part of a contract that includes activities within Kuwait; e.g., in a supply and installation contract, the full value of the contract including the foreign-supply element is assessable. Gross billings, excluding advance payments, less the costs of work incurred in an accounting period are used to assess income from contract work and percentage accounting or completed contract accounting methods are usually not acceptable. Where a foreign firm has more than one activity in Kuwait, its income from all activities must be aggregated for tax purposes, even if its different activities are organised through separate local companies. Allowable Expenses All normal business expenses are allowable on an accruals basis provided they are incurred in the generation of income in Kuwait. But the following may be noted: Accounting provisions, whether specific or general, are not allowable. Bad debts are only allowed once they have proved irrecoverable. Other provisions, such as labour indemnities, are only allowed when they are actually paid. Depreciation of fixed assets is allowable but only at particular rates for different classes of assets on a straight-line basis. Losses on the disposal of fixed assets below their tax written-down value are allowable. Interest charges are allowable provided they are payable to a Kuwaiti bank and are reasonable in relation to the business activities carried out in Kuwait. Commissions paid to the taxpayer's local agent are limited to 3% of revenue. Losses brought forward are allowable. Losses may be carried forward indefinitely and deducted from income in later periods, provided there has been no intervening cessation of activities. But losses in a later period cannot be carried back to an earlier period. Management fees receivable by a foreign corporate shareholder in a local company and expensed in the latter's books are not allowable. But direct expenses incurred by the foreign taxpayer are allowable provided they are supported by adequate documentation. As a contribution to a foreign corporate body's head office expenses, deductions may be claimed as follows: By foreign consultants or contractors operating through a local agent: 3.5% of revenues (net of amounts payable to subcontractors and reimbursable costs) By foreign shareholders in a WLL or KSC: 2% of revenues (net of amounts payable to subcontractors and reimbursable costs) By foreign insurance companies: 3.5% of net premiums. Inventory is usually valued at weighted average cost, though FIFO (first-in, first-out) is becoming more popular, but any valuation method in general use is acceptable.   Calculation of Tax Due The tax due on net taxable income is reckoned according to the rates shown below. These are not progressive, i.e. tax is charged on all profits at the rate of the level into which total profits reach. For example, if taxable profits are KD50,000, tax of 15% is levied on the whole KD50,000 and the tax payable is KD7,500. Some relief is available where taxable profits reach marginally into a higher level. This is obtained by calculating the total tax payable at the top of the band just below the highest band into which taxable income falls and to the tax thus calculated the whole of the income in excess of this band is added. Where the resulting amount is less than the tax payable as calculated normally, the lower amount becomes the tax payable.   TAX RATES Total Taxable Profits Tax  Rate  KD %  Tax Cumulative Payable KD Upto 18,750 5 937/  500 Upto 37,500 10 3,750/ - Upto 56,250 15 8,437/ 500 Upto 75,000 20 15,000/ - Upto 112,500 25 28,125/ - Upto 150,000 30 45,000/ - Upto 225,000 35 78,750/ - Upto 300,000 40 120,000/ - Upto 375,000 45 168,750/ - Over    375,000 55 n.a. Source: Tax Department, Ministry of Finance  Administration The Gregorian solar calendar is used for tax accounting. Tax periods are normally 12 months long, though a period of up to 18 months may be allowed on commencement. The usual year-end for tax accounting is 31st December, but a taxpayer may request another year-end. Taxpayers are legally obliged to submit their tax declarations to the Tax Department without being requested. The deadline for filing tax declarations is the 15th day of the 4th month following the end of the tax accounting period; e.g., where the usual end-of-December period end is used, tax declarations must be submitted by 15th April. An extension of 75 days may be allowed if audited accounts are filed. Tax declarations and supporting documentation must be in Arabic and must be certified by a practising accountant who is registered with the MCI. The law is unclear on a number of issues and final assessments are usually agreed by negotiation. There is no special appeals process. Payments Tax must be paid in Kuwaiti Dinar by certified cheque, in four equal instalments on the 15th day of the 4th, 6th, 9th and 12th months following the end of the tax period. No payment is required until accounts have been filed. The tax is payable in a single lump sum where payments are delayed and also where an extension of 75 days has been allowed for the filing of audited accounts. The penalty for tardiness in filing declarations or paying by the due date is a fine of 1% of the tax payable for every 30 days (or fraction thereof) of delay. Tax Clearance Certificates The final payment due to a foreign contractor, which must not be less than 5% of the total contract value, must be retained by all ministries, public authorities and private companies (including foreign firms) operating locally until the contractor has produced a tax clearance certificate from the Ministry of Finance confirming that all tax liabilities have been settled. All ministries, public authorities and private companies operating in Kuwait must submit the names and addresses of all companies with which they are doing business as contractors, subcontractors or in any other form, together with a copy of the contracts, to the Tax Department. When assessing liability to tax, the Director of Taxes may disallow payments to subcontractors which have not been reported. Tax Planning The Director of Taxes tends to look at the substance rather than the form of transactions and does not usually give binding rulings in advance on how tax will be determined in unclear cases and so the scope for tax planning is rather limited. As final assessments are a matter of negotiation, advice from a local practitioner who has a good working relationship with the Tax Department can be helpful. Kuwait is a signatory to the GCC Joint Agreement and to the Arab Tax Treaty. Kuwait also has double taxation treaties with Belgium, China, Cyprus, France, Germany, Hungary, Italy, Romania, South Africa and Thailand, and is negotiating treaties with Australia, Austria, Canada, Finland, India, Japan, Malaysia, Singapore, Switzerland, Turkey and the USA. SOURCES OF INFORMATION Researching business opportunities from outside Kuwait is easy. Data on exports to Kuwait by OECD countries can be used to analyse the market. Foreign government trade promotion agencies have information on market prospects and updates on new projects. These agencies also organise trade missions to Kuwait, a cost-effective way of making local contacts. There are several sources of market-related information within Kuwait. Al-Kuwait Al-Youm, the official gazette, is the official source of government announcements but is published in Arabic only. English translation of all tender-related and regulatory matters is offered by a few translation offices on yearly subscription base. The Ministry of Planning is the main source of government statistics. The Central Bank issues an Annual Economic Report. Research units in the IBK, commercial banks and Institute of Banking Studies are worth contacting. Foreign embassies have data on opportunities. Local foreign business associations provide good networking facilities. (Kuwait Pocket Guide)