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Situated at the top of the Persian Gulf and known for being one of the most advanced societies in the Middle East, Kuwait is also one of the oldest cultures in the world. A cross between the modern influences of today and relics of antiquity, this small country an excellent place to discover the hidden wonders of the Middle East. Kuwait has a GDP in excess of $120 billion and a population of 4.2 million, which make it the fourth richest country in the world per capita. Although Kuwait’s main industry is oil, it also has a strong financial services sector.

Historically, Kuwait has not been an overly welcoming country to foreign companies due to their prosperous and narrow economy, but the tides are beginning to turn. With an extremely relaxed tax system and a surplus of friendly people, there are plenty of opportunities for businesses who are willing to work with the Kuwait people to expand their company. However, the ongoing paperwork and payroll regulations can be difficult to learn for those who live outside the country.

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Getting Started

Owners are required to select a physical commercial location before obtaining the proper permits. Once paperwork is submitted to the  Ministry of Commerce , authorities including Health, Fire, and other services will come to approve of the safety of the facility. Kuwait officials may impose rules for what types of businesses can be opened in which locations. Previous laws stated that a Kuwaiti citizen would need to hold at least 51% of the shares of a company, though reform laws have made it possible for select businesses to avoid this rule.

Companies will also need a local bank account to conduct business. Paperwork and documentation can take time to process in Kuwait, meaning anything from obtaining a license to opening a business account may take longer than expected. Those who are familiar with the ins and outs of the culture may be able to secure a bank account within four weeks. If you're hoping to use online banking, you'll need an additional three weeks.

Employment Law & Employee Rights

People in Kuwait typically work from Sunday to Thursday for 40 hours a week. Overtime may be requested and is typically paid at 125% of the regular wage on regular work days, 150% on days off, and 200% on public holidays. Probation periods are allowed but may not last for more than 100 days. Written contracts for employees are required in Kuwait but may prove difficult to draft if you're not from the country. Boilerplate clauses are common in contracts and are not allowed to be negotiated, but there are other clauses that must be agreed upon and made clear by both employee and employer. Collective bargaining is technically allowed in Kuwait but almost never invoked in the private sector.

Compensation & Severance

The Kuwaiti dinar is the highest valued currency in the world, and minimum wage in Kuwait is 60 dinar a month, approximately $198 or €170. Despite the minimum wage, however, the average earnings of Kuwaiti workers is about $40,000–$50,000 a year. The bonus structure in Kuwait is typically based on performance, with most private companies required to give their employees some type of compensation for a satisfactory work history. However, this requirement is not always enforced. Employers are required to give severance pay or end-of-service benefits to their workers, and these are strictly enforced for employees who have been with a company for more than a year. The total amount given is based on the length of service provided, typically with at least 21 days paid at the employee's final salary.

Tax Requirements & Withholding

The corporate tax rate in Kuwait is 15% for foreign corporations, with no personal income tax or VAT tax for those working in the company. Kuwait finances their public services from the revenue made on oil reserves. While the country may have a relaxed tax system, there are several rules for foreign companies that must be followed. For example, they may need to withhold 5% of contractor payments in order to account for any financial liability at the end of the year. Working with a global payroll solution  can make it easier to reserve funds so all obligations can be met.

Time Off & Unpaid Leave

There are 14 official holidays in Kuwait, with workers allowed to take up to 30 additional days of paid leave. In practice, this works out closer to six weeks of time off, as employers are no longer allowed to count Saturdays as an official workday. Sick time in Kuwait is calculated per illness rather than days off. Workers are allowed to take up to six days at full pay, with the next six days at 3/4 pay, and so on. Female workers in certain sectors are typically not allowed to work between the hours of 7 p.m. and 6 a.m. Expecting mothers are entitled to 30 days off before delivery and 45 days after. New mothers may elect to take an additional 100 days of leave without pay.

A New Frontier

Kuwait's economy is starting to open up more to outside interests, but business owners need to be careful about how they interact with the people and legal entities of the country. An international payroll solution can make it easier to ensure payroll, tax, and statutory filing obligations are met without issue and ensure that businesses can operate without outside interference.