Kuwait’s new rules to revolutionize licensing for Gulf and foreign firms

• A work plan for the new branch must be submitted, ensuring it meets the minimum national employment percentage and reciprocity requirements with the foreign investor’s country.

• The company must provide a guarantee for any future obligations arising from the branch, as well as a pledge addressing any developments that could negatively impact the financial stability or reputation of the company.

The Ministry of Commerce and Industry is set to implement significant procedural changes to the regulations governing the issuance of commercial licenses and the opening of the commercial register for branches of Gulf and foreign companies.

This regulatory effort aims to enhance the local business environment and end the current partnership with the Direct Investment Promotion Authority concerning licensing. These changes specifically target entities not included in the list of foreign investors eligible for direct investment benefits, according to Al Rai newspaper.

In this regard, informed sources revealed to Al-Rai newspaper that the Ministry of Commerce is working on issuing a regulatory decision allowing foreign and Gulf companies to open branches in Kuwait, in accordance with relevant laws and regulations, provided that the principle of reciprocity is applied when reviewing any request to open a foreign branch in Kuwait.

It is planned that, to open a branch of a foreign or Gulf company in Kuwait (the controls under study may be approved, amended, or canceled), the parent company’s revenues for the last three years must not be less than three million dinars.

Additionally, the company must provide a guarantee for any future obligations arising from the branch, as well as a pledge addressing any developments that could negatively impact the financial stability or reputation of the company.

A work plan for the new branch must also be submitted, and the percentage of national workers employed must meet the established minimum requirements.

New committee to oversee foreign and Gulf company branch openings in Kuwait

A committee is expected to be formed by a decision of the Minister of Commerce to initiate the procedures for evaluating requests to open branches of foreign and Gulf companies. This committee will be chaired by the Assistant Undersecretary for Corporate Affairs and will include members from various government agencies, all of whom will hold positions of at least department director. The committee will include representatives from the Ministry of Commerce, the Kuwait Municipality, the Ministry of Interior, and the Investment Promotion Authority.

The committee will be responsible for:

1. Reviewing applications to open branches of foreign and Gulf companies, ensuring they meet the conditions, controls, and standards stipulated in Law No. 116 of 2013, its executive regulations, and relevant decisions.
2. Ensuring that the established branches comply with local regulations and rules both at the start of their operation and on a periodic basis.
3. The committee is the sole authority in Kuwait responsible for receiving applications to open branches of foreign companies.

The sources noted that seven additional controls have been added to the rules and regulations followed by the “Investment Encouragement” regarding the opening of a foreign company branch, as stipulated in Minister of Commerce and Industry Decision No. 394 of 2019. These can be summarized as follows:

• The company must submit its last three annual budgets.
• After receiving approval and beginning operations in Kuwait, the branch of the foreign company is required to submit the parent company’s annual budget, as well as an annual budget audited by a Ministry of Finance-approved accounting firm.
• For non-banking activities, the branch must open a bank account in a Kuwaiti bank. Discussions include exempting branches of foreign banks, insurance companies, and branches established under Law No. 116 of 2013. Foreign companies must provide a bank guarantee for each branch, in the amount of KD 500,000 ‘subject to review’, issued by a licensed bank in favor of the Ministry, and automatically renewed.
• Financial credits must originate from, or be approved by, a Kuwaiti bank.
• If a foreign company fails to renew the registration of its branches for two consecutive years, the registration will be administratively canceled. The Ministry will collect any fees and fines from the guarantee, with any remaining amount being confiscated.
• Only one branch is permitted to be opened.
• The branch manager must be a Kuwaiti national.

Conditions that must be met by the parent company:

1. The company must have been established at its main center for at least five full years.
2. The company’s capital must not be less than the following amounts:

• Ten million dinars for firms seeking qualification and participation in first-class public tenders.
• Five million dinars for companies seeking qualification and participation in second-class public tenders.
• One million dinars for companies seeking qualification and participation in third-class public tenders.
• 100,000 dinars for firms seeking qualification and participation in fourth-class public tenders.

Activities prohibited for foreign companies:

• Establishing printing presses, publishing houses, newspapers, and magazines.
• Public and private transportation services for individuals, including taxis and airport taxis.
• Trade and related activities, particularly the buying and selling of products or goods.
• Operating restaurants, cafes, and catering services.
• Providing Hajj and Umrah services.
• Supplying labor.
• Operating commercial agencies.
• Managing care and rehabilitation centers for the disabled.
• Operating care homes and clubs for the elderly.
• Running community service centers.
• Managing centers focused on social services.
• Engaging in real estate activities, except for construction development projects for private operation.
• Conducting security and investigation services.
• Involvement in public administration, defense, and compulsory social security systems.