A foreign company that wants to trade in Kuwait has three lawful routes: an entity licensed by the Kuwait Direct Investment Promotion Authority (KDIPA) under Law No. 116 of 2013, a Kuwaiti company with a Kuwaiti partner holding at least 51 percent as Article 23 of the Commercial Code (Decree-Law No. 68 of 1980) requires, or a registered commercial agent under Law No. 13 of 2016. The first route is the only one that allows full foreign ownership without a local sponsor, but it is a license, not a registration: KDIPA scores the project, applies a negative list and ties incentives to commitments. This article walks through the statute, the executive regulations and the decisions that govern a KDIPA file, and explains what we check before an investor commits capital in Kuwait.
The three entry routes and the legal baseline
The default rule sits in Article 23 of the Commercial Code, which bars a non-Kuwaiti from carrying on trade unless a company is formed with a Kuwaiti partner holding not less than 51 percent of the capital. Article 24, as replaced by Law No. 1 of 2024 and published on 21 January 2024, lets a foreign company open a branch and start business without a local agent. Practitioner notes published in mid-2026 report that the implementing rules were still being drafted and that the route was not yet working in practice, so we do not build entry plans on it.
The KDIPA route is the exception that matters. Article 14 of Law No. 116 of 2013 provides that a KDIPA license is not subject, as regards foreigners, to paragraph 1 of Article 23 or to Article 24 of the Commercial Code. In plain terms, a licensed investor does not need the Kuwaiti partner or the agent, and our standing advice is to test license eligibility first.
Why the 51 percent rule is not a Companies Law rule
Investors often say that the Companies Law (Law No. 1 of 2016) requires Kuwaiti majority ownership. It does not carry that requirement; the figure comes from Article 23 of the Commercial Code. The distinction matters because a KDIPA license works by lifting the Commercial Code restriction, and Article 12 of Law No. 116 of 2013 then lets the licensed company take any form listed in the Companies Law with foreign participation of up to 100 percent of the capital.
A separate exemption exists for the Gulf. Under Ministerial Resolutions No. 141 of 2002 and No. 237 of 2011, GCC nationals and companies wholly owned by GCC nationals may hold more than 51 percent of a Kuwaiti company or open a branch. For a branch the published conditions include that the GCC entity has existed for at least three years and that its Kuwaiti activities fall within its licensed activities.
Entity forms a KDIPA license can attach to
Article 12 of Law No. 116 of 2013 and Article 8 of the Executive Regulations (Ministerial Decision No. 502 of 2014) list three licensable forms. The first is a Kuwaiti company in any form under the Companies Law, with the regulations expressly allowing a foreign investor to hold 100 percent of a shareholding company, a limited liability company or a single-person company. The second is the branch of a foreign company, whose licensing rules are set by Ministerial Decision No. 394 of 2019. The third is a representative office.
A representative office is narrow by design. Article 12(3) of the law and Article 16 of the regulations confine it to preparing market and production studies, with no commercial activity and no commercial agency work, and Ministerial Decision No. 393 of 2019 sets its licensing controls. For most operating businesses, a limited liability company or a single-person company is the practical vehicle, because it separates liability and can be licensed by KDIPA on its first day.
The negative list of excluded investments
Article 11 of Law No. 116 of 2013 requires the Council of Ministers to maintain a list of direct investments excluded from the law. Council of Ministers Decision No. 75 of 2015, built on the ISIC revision 4 classification, excludes ten groups: extraction of crude petroleum, extraction of natural gas, manufacture of coke oven products, manufacture of fertilizers and nitrogen compounds, manufacture of gas and distribution of gaseous fuels through mains, real estate other than privately operated building development projects, security and investigation activities, public administration, defense and compulsory social security, activities of membership organizations, and the hiring of labor including domestic labor.
The list is the first test of any file. An activity that falls inside one of these headings cannot be licensed by KDIPA, whatever the quality of the business plan, and the investor is back to the Commercial Code rules. Article 2 of the decision lets KDIPA update the titles and propose amendments, so the list is checked again at filing.
The license application: documents, timing and appeal
Article 14 of the Executive Regulations requires an initial study with every application for a Kuwaiti company. The study covers the activity, legal form, investment size, financing, impact, investor experience and resource needs. A branch needs the same study plus the certified constitutional documents, the latest audited balance sheet and a certificate of existence under Article 15. Article 13 requires a timetable for the start of execution and the start of operations.
Article 15 of the law and Article 17 of the regulations give KDIPA thirty days to decide once the file is complete. Article 16 requires a reasoned written rejection and allows an appeal, and silence for thirty days after the appeal is treated as a refusal. Articles 35 and 36 of the regulations route grievances to a committee within thirty days of notice. The One-Stop Shop under Article 17 of the law brings the government employees needed to complete incorporation into KDIPA, and investors may use a consultancy approved by KDIPA to file on their behalf under Article 5 of the regulations.
How KDIPA scores a project (Article 29 and Decision No. 329 of 2019)
Article 29 of Law No. 116 of 2013 links the value, type and duration of incentives to criteria such as technology transfer, the quality of products and services, the need of the local and Gulf market, exports, jobs and training for nationals, regional development, environmental effect, community services, and use of national products and professional services. Decision No. 329 of 2019 turns these into a scoring mechanism with five categories and fifteen sub-criteria: technology transfer, human capital, market development, economic diversification and sustainable development.
The outcome bands are set by the decision. A score below 30 percent, which is four points, is rejected. A score from 30 to 55 percent, five to eight points, earns the license alone. A score from 60 to 80 percent, nine to twelve points, earns the license and one incentive chosen by the investor. A score from 85 to 100 percent, thirteen to fifteen points, earns the license and every incentive in the law. We therefore draft the business plan against the fifteen sub-criteria from the start, because every commitment written into it becomes an obligation that KDIPA monitors later.
Tax, customs, land and labor incentives (Article 27)
Article 27 of the law lists what a licensed investor may receive, in whole or in part: an income tax exemption of up to ten years from the actual start of operations, a matching exemption for expansions, full or partial relief from customs duties on machinery, spare parts, raw materials and packaging subject to the GCC Customs Code (Law No. 10 of 2003), use of land managed by KDIPA, and employment of foreign labor under the Council of Ministers rules on the minimum share of national employment. Imported goods exempted from duty may not be sold or used for another purpose for five years without paying the duty.
The regulations add the working detail. Article 20 limits incentives to the activity KDIPA approved, and Article 21 counts the exemption period per activity with separate accounts. Under Article 24 KDIPA issues the tax exemption certificate within fifteen days of notice of actual operations, and the certificate binds the tax authorities. Decision No. 388 of 2024 adds that an operating entity may apply for incentives after at least one year, that the exemption runs from the date of that application, and that it does not reach contracts or bids that predate the application.
Tax outside the incentive package
Kuwait has no personal income tax in practice, but corporate bodies are taxed. Decree No. 3 of 1955 imposes a flat 15 percent on the net profit that a corporate body earns in Kuwait, and the tax department also looks through to foreign corporate shareholders of Kuwaiti companies. Decree-Law No. 157 of 2024 introduces a 15 percent tax on multinational groups with annual revenue of EUR 750 million or more, and an entity that falls under it is outside the 1955 decree. Shareholding companies carry further levies such as Zakat that do not apply to a limited liability company.
Public bodies and private entities must notify the income tax department of contracts and hold back 5 percent of payments until the counterparty produces a tax clearance, which is a retention mechanism rather than a withholding tax. Kuwait has also not yet introduced VAT, although it has signed the GCC framework agreement.
Incorporating the company: limited liability and single-person forms
Most foreign investors use a limited liability company or a single-person company under Law No. 1 of 2016. The limited liability company needs between two and fifty partners and the single-person company has one owner, who becomes liable for the company's debts only if the company is wound up in bad faith or its finances are mixed with the owner's own. Article 97, as replaced, requires cash capital to be fully subscribed before incorporation, and Article 105 makes managers jointly liable to the company, the partners and third parties for breach of law or the articles.
The practical steps run through the Ministry of Commerce and Industry. The beneficial owner is identified under Resolution No. 4 of 2023, which applies a 25 percent ownership or control test, then the name is approved, the Ministry of Interior clears partners and manager, the memorandum is signed before the notary, the commercial register entry is issued and the trading license follows once premises are leased.
Duties after the license is issued
Article 34 of the law obliges the licensed investor to notify KDIPA in writing within thirty days of starting the set-up steps, of completing them and of starting actual operations, to keep audited accounts under Article 18, to file tax returns, and to give KDIPA the information and site access it requests. Article 18 of the regulations requires the approvals needed to start execution within one year of the license, extendable by the Director General for up to one more year. Under Article 32 a license lapses by operation of law if the entity stops activity for more than a year, or starts more than a year late, without acceptable justification.
The same statute also protects the investor. Article 19 bars expropriation except in the public interest and against compensation equal to the real economic value, Article 22 guarantees transfer of profits, capital and sale proceeds abroad, Article 20 permits transfer of the entity to a foreign or Kuwaiti investor with the buyer stepping into the rights and obligations, and Article 26 gives Kuwaiti courts exclusive jurisdiction while allowing arbitration by agreement.
Route three: a commercial agent under Law No. 13 of 2016
A foreign company that does not want an entity can appoint a registered agent. Article 1 of Law No. 13 of 2016 defines the agency, Article 3 sets the mandatory content of the agreement, and Ministerial Decision No. 565 of 2017 contains the executive regulations. The agent must be a Kuwaiti national or a company with at least 51 percent Kuwaiti ownership under Article 23 of the Commercial Code, the agreement must be in writing under Article 274, and it must be registered with the Ministry of Commerce and Industry, with Article 14 requiring any change or amendment to the agency's data to be annotated in the register within three months.
The agency agreement is the decisive document. Under Articles 5 and 10 of the agency law the agent's after-sales duties continue until the earlier of six months from termination or the appointment of a new agent. Article 275 of the Commercial Code requires a term of at least five years where the agent must build showrooms, warehouses or service facilities, and a principal that terminates or declines to renew without fault by the agent owes compensation under the contract agency provisions of Articles 260 to 296. A distributor is treated as a contract agent under Article 286.
What we review before a Kuwait entry file is filed
When we review a Kuwait entry file, we test the activity against the ten negative-list groups and its class code, map the full ownership chain including any GCC element and the beneficial owner, and decide between a limited liability company, a single-person company, a branch and an agency. We then draft the business plan against the fifteen scoring sub-criteria, reconcile the incentive request with Decision No. 388 of 2024 and any existing contracts, check premises, labor and tax filings, and prepare the shareholder and agency documents so that the license, the company and the commercial contracts tell the same story.
See also: commercial arbitration in Kuwait and M&A legal due diligence in Kuwait, plus our guides on debt recovery for Kuwait businesses and our Gulf company formation comparison.
Frequently asked questions
Can a foreign investor own 100 percent of a company in Kuwait?
Yes, with a KDIPA license. Article 12 of Law No. 116 of 2013 and Article 8 of Ministerial Decision No. 502 of 2014 allow 100 percent foreign ownership of a shareholding, limited liability or single-person company, provided the activity is not on the negative list in Decision No. 75 of 2015.
Is a KDIPA license mandatory for foreign investors?
No. It is an alternative to the Commercial Code route. Without it, Article 23 of the Commercial Code requires a Kuwaiti partner with at least 51 percent, or an agent under Law No. 13 of 2016, and a GCC investor may use the exemption in Ministerial Resolutions No. 141 of 2002 and No. 237 of 2011.
Which activities are excluded from a KDIPA license?
The ten groups in Council of Ministers Decision No. 75 of 2015 include crude petroleum and natural gas extraction, fertilizers, real estate other than private building development, security and investigation, public administration and defense, membership organizations and labor hiring. Class codes decide borderline cases.
How long does KDIPA take to decide?
Article 15 of Law No. 116 of 2013 and Article 17 of the regulations give thirty days from a complete file. The clock starts only when every required document is in, so incomplete or unattested constitutional documents are the usual cause of delay.
Are the incentives automatic once the license is granted?
No. Under Decision No. 329 of 2019 the score decides whether the investor gets the license alone, the license with one incentive, or the license with all incentives. Article 27 of the law caps the income tax exemption at ten years from actual operations.
Can a foreign company open a branch without a Kuwaiti agent?
Law No. 1 of 2024 amended Article 24 of the Commercial Code to allow it, but practitioner notes in mid-2026 report that implementing rules had not been issued. A branch licensed by KDIPA under Ministerial Decision No. 394 of 2019 remains the reliable branch route.
What tax will the Kuwaiti company pay?
Decree No. 3 of 1955 imposes 15 percent on net profit of corporate bodies, subject to any KDIPA exemption, and Decree-Law No. 157 of 2024 imposes 15 percent on very large multinational groups instead. Kuwait had no VAT as of mid-2026.
Can you handle the whole Kuwait entry file?
Yes. Our Kuwait office assesses the route, prepares the business plan and the KDIPA application, incorporates the company and drafts the shareholder and agency documents. Contact us through the contact page and we will assess your activity against the negative list first.