Kuwait tightens corporate oversight, auditors to monitor KFAS dues compliance

Auditors of joint-stock companies in Kuwait have been tasked with an additional responsibility aimed at curbing evasion of dues owed to the Kuwait Foundation for the Advancement of Sciences (KFAS). This move follows the detection of several companies failing to fulfill their obligations, amounting to approximately 1 percent of their net profits.

In response to the covert corporate evasion practices, the Ministry of Trade and Industry has formally instructed all corporate auditors to include a notation in the annual financial reports, explicitly stating any company’s failure to meet its “scientific progress” contribution, reports Al-Jarida daily.

This directive applies to all types and specialties of joint-stock companies, effective from the issuance of the annual reports for the fiscal year 2023, which are currently underway. Most companies are in the process of finalizing their financial statements and are yet to convene their general assemblies.

This initial step is anticipated to be followed by further measures in subsequent stages. Potential actions may include disqualifying non-compliant companies from participating in government tenders and withholding approval by the General Assembly. Additional procedures will be considered and implemented if the initial recording of observations fails to yield the desired outcome.

According to sources, only a small percentage of companies are non-compliant, with the majority fulfilling their obligations annually. The prescribed percentage, amounting to just 1 percent of net profits, is deemed manageable and does not impose a significant burden on companies, particularly when compared to the substantially higher tax rates imposed by other countries for similar purposes, which can be up to 20 times the “scientific progress” share.