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Business Environment in Kuwait
 
 
 

Legal System

The legal system of Kuwait reflects the history and social ethos of the country. Islamic (sharia) law is very important and governs all family law matters.

Commercial law has also been influenced by the Latin civil law codes. A particular influence has been Egyptian civil law, which gained a large part of its structure from French Napoleonic codes.

Unlike the British Common Law system, all laws and regulations in Kuwait are codified, and precedent plays a comparatively minor role in the legal process.

There are Courts of First Instance and Appeal, which comprise three judges, and are divided into a number of circuits; each of which covers specific branches of the law, including: civil, commercial, family law, penal and administrative matters.

The Supreme Court (Court of Cassation) presides over the other courts, and also consists of circuits competent to try writs of challenge, pertinent to the above branches of the law.

Customs and Regulatory Environment

The GCC general customs tariff of 5% applies, except for goods produced in Kuwait such as paints, furniture and some construction materials, which attract rates of duty between 15% and 25% – assessed on the CIF value of the goods.

Documentation

Export documentation for Kuwait includes a commercial invoice, certificate of origin, bill of lading and insurance certificate, if appropriate.

AQIS certification is required for plants and live animals.

Tenders

Public authorities in Kuwait are generally required to purchase all equipment and commodities, and to commission work, only through an independently administered tender process.

Tender processes are administered by the Central Tenders Committee (CTC). The client institution (i.e. the public body requiring the goods or services) draws up the specifications and the particular conditions that it wishes to apply, reviews the pre-qualified companies and evaluates the bids on a technical basis.

Some public bodies may have their own tendering procedures, but no matter who administers the tender, the procedures applied must be the same as tenders administered directly by the CTC.

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.

Investment Environment

Foreign investors may own 100% of investments in infrastructure developments in Kuwait; however, access to a number of other sectors (most especially the oil industry) is restricted.

Incentives, such as land grants and tax holidays, are usually tied to the number of Kuwaiti nationals that are to be employed in the project.

The UNCTAD World Investment Report 2008 indicated that Kuwait received $123 million in foreign direct investment (FDI) in 2007, with FDI stocks reported as $940 million.

The World Bank 'Ease of Doing Business' rankings place Kuwait at 52nd place for 2009, down from 49th in 2008.

In an effort to attract more foreign investment, the Kuwait National Assembly amended the provisions of the Kuwait Income Tax Decree on 20 July 2008.

The New Tax Regime, as it is termed, abolishes the tax structure that resulted in the net income of foreign companies being taxed at marginal rates up to 55%, and replaces phased rates with a flat tax rate of 15%. This 'flat rate' applies to income earned by foreign companies in Kuwait. However, further liberalisation will be required for foreign investment flows to increase appreciably.

In a similar fashion to other GCC states, investment law in Kuwait provides that foreign companies must have a Kuwaiti partner whose equity holding is at least 51% of the venture. In 2001, legislation was introduced which allowed 100% foreign equity in a range of scheduled activities – principally, as noted earlier, in infrastructure.

Limited liability companies (WLL) are another form of entity open to foreign investors, as well as a Kuwaiti Shareholding Company (KSC). Approvals for this last class of company, however, are somewhat harder to get.

A detailed summary of these business entities is provided in a business guide produced by a Kuwait legal firm, Abdullah Kh. Al-Ayoub & Associates.

Kuwait has been a long-term offshore investor, establishing the Kuwait Investment Office in London in 1953. Kuwait transfers 10% of its oil revenues into what is termed the Reserve for Future Generations, on an annual basis.

The Kuwait Investment Authority (KIA) is the primary sovereign wealth fund (SWF) investment vehicle of the Government of Kuwait, with assets reported as $264 billion by the SWF Institute.

Some of the KIA's major investments include substantial holdings in Citigroup, Daimler AG and BP.

Distribution

Kuwait offers efficient distribution and logistics services, with an excellent road network, featuring a series of concentric ring roads around the central business district.

Banking and Finance

Kuwait has a well-developed financial sector. The Kuwait Stock Exchange (KSE) was established in 1962, and is the second largest in the Gulf Cooperation Council, with a total market capitalisation valued at $207 billion in 2007. Some 200 companies are listed on the KSE.

There are a range of banks operating in Kuwait. The 2008 credit crisis has had an impact in Kuwait, with the Central Bank stepping in to support Gulf Bank, and also guaranteeing bank deposits.

 
 


 


 
 

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