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Law no. 116 of 2013 for Promoting Foreign Direct Investment in Kuwait

Table of Contents

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Law No. 116 of 2013 for Promoting Foreign Direct Investment in Kuwait

The newly issued Executive Regulations have shed the light and set guidance and definition for the Investor, individual or with the participation of another investor, who employs his/their capital directly through an Investment Entity in the State of Kuwait who may have potential projects that can be licensed in accordance with provisions of the Law and these Regulations.

The executive rules have clarified the duration and means of application, type of available entities allowed as per the law as well as guidance of applying and impact of changes in

different circumstances. (merger & demerger etc.)

This report shall provide you with a synopses of the actual official issued announcement which precedes the Executive Regulations' of its establishing Law No. 116/2013 regarding

the Promotion of Direct Investment in the State of Kuwait in a summarized illustrative manner.

Law No. 116 of 2013 for Promoting Foreign Direct Investment in Kuwait

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OperatingStructures

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The new executive rules have determined the following available structure’s for foreign investors to operate through:

Kuwaiti company established where a Foreign Investor participation in such company may amount to 100% of the capital of the shareholding company;

A branch of a foreign company licensed to operate within the State of Kuwait; and

Representative offices in the State of Kuwait.

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Administrative

unite in charge of finalizing

Investment entity

transactions

As per the issued executive

rules, KDIPA has introduced the “One Stop Shop” unite which will be responsible for the following:

■Guidebook on post investment matters to ease out transactions processes by Investor; and

■Provide guidance for the required steps to be followed by Foreign Investors and will clarify all issues and concerns investors might have throughout the process.

Judicial Officers

• Law officers appointed to monitor the implementation of provisions of laws and regulations and implementation of decisions.

&Investment Entity and Applications to the AuthorityPrinciples and Rules of license shall be set for

each Investment Entity. Application forms (not yet issued) shall be prepared as for the following:

Request for licensing the Investment entity

Grant and request for Incentives and Exemptions

Amending name/address/purpose/capital/head office

Amending participation

percentage in ownership

Only valid documents are accepted stating the timetable of

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commencement, implementation & operation.

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Submissionequiremen

Documents can now be submitted via email or registered mail.

Receipt is pro

vided by KDIPA upon successful submission proving acceptance of application.

Acceptance/Rejection shall be communicated to applicants where the rejection shall be communicated in writing and reasoned.

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Establishing a Kuwaiti company

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Conditions of License Applications

A preliminary study should be attached with Application where it should include the following in particular:

Type of activity or project to be carried out;Legal form of the company to be licensed;Volume of investment;Finance structure and sources;Economic and environmental impact;Expertise and capabilities of the Investor;Needs of Investment Entity of national and foreign manpower, land spaces, raw material, intermediate goods and sources of obtaining the same;Estimation to quantities of water and power needed annually; andData or explanations required by the Authority before or after filing the Application.

• Application for a foreign company branch should include a preliminary study as above in addition to the following:

1. Certified copy of the memorandum;2. Articles of association of the company; and3. Latest audited balance sheet.

• A statement should be attached with the application that includes the following:

1. Purpose of establishing the office;2. Certified copy of the memorandum;3. Articles of association of the foreign company;4. Latest audited balance sheet; and5. Data or explanations required by the Authority before or

after filing the Application.

Establishing aForeignCompanyBranch

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Qualified Investors shall obtain all required approvals within one year as of the date of issuing the license.

Authority Timeline

Inves

tor should be notified of the tax

exemption certificate decision wit

hin 15 days of notifying the Gener

al Director.

Application decision should be made within 30 days from date of fulfilling all requirem

ents & submission.

Incentives &

Exemptions

• Applicatio

n’s submitted should meet all the conditions and rules to obtain the relevant tax incentives and exemptions;

• Multi-activity entities with the privilege of multiple benefits shall be

assessed whereby the entity shall benefit from the approved and licensed activity only;

• Separate accounts should be

maintained for an entity with multiple activities. Exemptions shall be calculated from the date of actual operation of each activity;

Exemption period assessed by

Authority after submission of application; and

Tax exemption not to exceed 10 years can be offered to qualified applicants noting that the exempted investor will be still required to file a tax return setting the basis of exemption with the MOF as per their usual requirements and deadlines.

Custom Exemptions

• Custom exemption applicatio

n’s should be submitted listing materials subject of application;

• Cooperation mechanisms of technical and procedural areas relating to customs shall be set with regards to the approval of the imports; and

• Entities shall be entitled to exemption, taking the following into consideration;

❖ Imports

should be under the name of the Investment Entity or for it; and

❖ Imported materials should be in line with the needs of the Investme

nt Entity in terms of kinds and quantities.

r Exempted Custom Imports

An Investment Entity may be exempted from taxes,

customs duties or any other fees that may be payable on imports required for the purposes of the Investment Entity without prejudice to the Unified Customs

Code for the Gulf Cooperation Council Countries, including the following:

❖ Machinery, tools, equipment, means of transport and other technological devices;

❖ Spare parts and necessary maintenance supplies for what has been described in the previous subsection; and

❖ Intermediate goods, raw materials, partially manufactured goods, wrapping materials and packaging.

Investment Entity with customs exemption should maintain a record for machinery, equipment, devices, means of transportation, spare parts, materials, commodities, and supplies subject to the above mentioned exemption.

Allocation of Lands and Real Estates

Evaluation of the land and real estate allocated by the Board

which in this regard can estimate the space that can be allocated to the applicant where they are able to customize accordingly.

rTransformation of Investment Entity

Upon the merge of two investment entities (already licensed and approved), the new entity shall benefit from the previous rights/obligations granted already for a licensed foreign investor forming part of themerger;

Newly merged entity shall automatically benefit

merge

from the shorter period of the exemption granted to any of the merged entity; and

In case of

demerger, each separate entity shall benefit to the limit of the contents that exist in the divided entity.

Grievances

Board mean to be forming a

formal committee that shall be tasked with receiving complaints from stakeholders regarding the decisions issued by theauthoritv.