KUWAIT CITY, Aug 12: The Ministry of Commerce and Industry is preparing significant procedural changes to the regulations governing the issuance of commercial licenses and the establishment of branches for Gulf and foreign companies. This regulatory update aims to enhance Kuwait’s business environment and end the existing partnership with the Direct Investment Promotion Authority regarding licensing for entities not listed as foreign investors benefiting from direct investment advantages.

The Ministry is working on a new regulatory decision that will permit foreign and Gulf companies to open branches in Kuwait, provided they adhere to local laws and the principle of reciprocity. This principle will be applied when evaluating requests to open foreign branches in the country.

To open a branch in Kuwait, the parent company must meet several requirements. It must have generated revenues of at least 3 million dinars over the past three years and provide guarantees for any future obligations or negative developments that could impact the branch’s financial stability or reputation. Additionally, the company must present a work plan for the new branch and ensure that the percentage of national employees meets established thresholds.

A committee is expected to be formed by the Minister of Commerce to oversee the adjudication of branch-opening requests. This committee will be chaired by the Assistant Undersecretary for Corporate Affairs and will include representatives from various government agencies, including the Ministry of Commerce, Kuwait Municipality, Ministry of Interior, and the Investment Promotion Authority. The committee will be responsible for studying applications, verifying compliance with local regulations, and ensuring that established branches adhere to local rules on a periodic basis. It will also be the sole body in Kuwait authorized to receive applications for opening foreign company branches.

The new regulations will introduce several additional controls to the existing rules for foreign company branches. These include the requirement for companies to submit their last three annual budgets and for branches to provide an annual budget audited by a Ministry-approved accounting firm. Foreign company branches will also be required to open a bank account in a Kuwaiti bank for non-banking activities, though exemptions may apply to branches of foreign banks, insurance companies, and those established under Law No. 116 of 2013. Additionally, foreign companies must provide a bank guarantee of 500,000 dinars (value under review) for each branch, which will be automatically renewed. Financial credits must be obtained from Kuwaiti banks or approved by them.

Failure to renew branch registration for two consecutive years will result in the administrative cancellation of the registration, with the Ministry collecting fees and fines from the guarantee and confiscating any remaining amount. Foreign companies will also be limited to opening only one branch, and the branch manager must be Kuwaiti.

The parent company must meet specific conditions, including being established for at least five years and maintaining minimum capital requirements based on their intended qualification and public tender category. These requirements range from 10 million dinars for first-class public tenders to 100,000 dinars for fourth-class tenders.

Certain activities will be prohibited for foreign companies, including establishing printing presses, publishing houses, newspapers, and magazines, as well as providing public and private transportation services, restaurants, cafes, catering services, and Hajj and Umrah services. Other prohibited activities include labor supply services, commercial agencies, care and rehabilitation centers for the disabled, elderly care facilities, community service centers, social services, real estate activities (except construction development projects for private use), security and investigative services, and public administration, defense, and compulsory social security systems.