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Payroll & Tax in Kuwait

Kuwait payroll & taxation

Shield GEO is not operating in Kuwait at this time. However, feel free to contact us and we’ll do our best to assist you with your employment needs or connect you with a trusted partner.

 

Kuwait applies a ‘source’ method to taxation, which means that, whilst tax is imposed only on the Kuwaiti-source income, a taxation liability can arise from activities not considered taxable in many jurisdictions.

The source of income is considered to be in Kuwait if the place of performance of services is within Kuwait. This includes, work carried out outside the country under a contract that also involves activity in Kuwait. Any significant presence of employees or short-term visits to Kuwait by representatives of a company may render the entire revenue from the transactions as taxable in Kuwait.

Your Payroll Options in Kuwait

Remote Payroll

A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Kuwait. Under Kuwait Law, companies registered in other countries are allowed to obtain a license to do business and have employees in the country.

Local Payroll Administration

In some cases, a company will register their business in Kuwait under one of the forms available: Limited liability company, Shareholding companies and Partnerships; but prefer to have another company administering its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Kuwait may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Kuwait payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Kuwait employment laws.

Fully Outsourced Payroll & Employment

Shield GEO does not operate in Kuwait. 

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Setting up payroll in Kuwait

Information Explanation
Currency ? KWD (Approx. 3.3 USD)
Employee Information Required ?

a) Copy of nationality certificate.

b) Copy of birth certificate or age assessment certificate.

c) Copy of the appointment decision, for governmental authorities.

d) Copy of Civil Identity Card.

Social Security Registration ?

The Social Security System requires the employer to provide the registration forms of the Kuwaiti employees who are working for him within ten days as from the date of joining the work, duly accompanied with the following documents:

a) Copy of nationality certificate;

b) Copy of birth certificate or age assessment certificate;

c) Copy of the appointment decision, for governmental authorities;

d) Copy of Civil Identity Card.

Documentation Required for New Employees ?

The Worker shall be employed by virtue of a Contract, verbal or in writing, comprising in particular the start date of appointment, wage agreed upon, term of the contract, if it is a fixed-term contract, and the nature of work. In case the Contract is concluded in a verbal form, the Employer and/or the Worker may by whatever means admissible prove the rights thereof.

Corporate Income Tax Rate

15% on taxable profits

Sales Tax

Currently not implemented.

Withholding Tax

The rate of withholding tax on dividends is 15%.

Tax Figures

Information Explanation
Corporate Income Tax ?

15% on taxable profits

Income Tax Rate ?
Grossed income Tax Rate (%)

Liability for income tax

Kuwait does not impose income taxes on income earned by individuals.

Tax trigger points

There is no personal tax in the state of Kuwait. However, there is corporate tax applicable to foreign corporations in Kuwait. The Kuwaiti tax law does not define the concept of resident/nonresident and permanent establishment. As a result, there may be corporate tax implications where representatives/employees of the supplying/invoicing foreign entities are present in the country.

In practice, the Kuwait Tax Authority (KTA) considers even a single day’s visit in Kuwait to create a taxable presence in the absence of a double tax treaty between the corporation’s country of tax residence and Kuwait.

Types of taxable income

Sales Tax ?

Currently not implemented

Withholding Tax ?

The rate of withholding tax on dividends is 15%.

Income Tax (Personal Allowance) ?

There is no personal income tax (employment tax) in Kuwait.

Employee Social Security (EE SS)

8% calculated on gross salary

Employer Social Security (ER SS)

11.5% calculated on gross salary

Payments

Information Explanation
Payment Mode ?

The payment of contributions and other due funds for the Public Institution for Social Security shall be made as follows:-

By virtue of a checks in the name of the Public Institution for Social Security;

Payment in cash to the Public Institution for Social Security treasury; or

Under a deposit advice for the Public Institution for Social Security`s account

Frequency of Salary Payment ?

Wages may be determined per hour, per day, per week, per month, or per piece. Wages shall be paid in one of official work days and at the workplace of the workers in the currency legally in circulation, subject to the following provisions:

  • a worker appointed on a monthly pay shall be paid the wage thereof at least once per month;
  • a worker paid per hour, day laborer, worker with a weekly wage, or worker paid on the piece-rate basis shall be paid the wage thereof at least once every two weeks;
  • The Employer shall be prohibited to transfer a monthly paid worker to the category of day laborers or to category of workers appointed with a weekly wage or on a piece-rate basis except with the approval of the worker on transferring thereof.
Minimum Wage ?

In Kuwait, minimum wages vary depending on the job role and the job designation as on visa. On average, the monthly salary compensation is 100 KWD (Approx. USD 332).

Employee Entitlements

Information Explanation
Working on Sundays ?

Whenever a Worker is made to work in an official public holiday due to work conditions, such Worker shall be entitled to a double wage for that day.

Employee Protection and Anti-discrimination Rights ?

The Constitution prohibits discrimination based on race, national origin, language, and religion; however, in practice, the Government did not uniformly or consistently enforce laws against discrimination.

Time Off Work ?

The Worker shall be entitled to a weekly period of rest not less than one day without pay, and in case the Worker is made to work in the weekly rest, he/she shall be entitled to a wage in return for that day equaling the original wage per day plus 50% at least.

Medical Leave ?

The Worker whose sickness is recorded in a medical certificate issued by a physician appointed by the Employer or by the attending physician of any government health unit shall be entitled to sick leaves during the year. The sick leaves shall be computed as follows:

  • Six days with full pay;
  • Then six days with three quarters of the pay;
  • Then six days with half of the pay;
  • Then six days with quarter of the pay;
  • Then six days without pay.

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

The party terminating the contract may pay to the other party compensation in return for the notification equaling the wage due to the Worker for the period determined for the notification.

If the labor contract concluded with a definite period and is terminated by one party and the contract fails to mention anything dealing with such case, the party terminating the contract shall compensate the other party for damages. If such termination is initiated by the Employer and for reasons other than those prescribed, the Employer shall be obliged to compensate the Worker for any damage in accordance with the customary practices and work nature, the period of the contract, and in general the conditions where the damage is made certain and the scope of such damage, provided that the amount of compensation shall not by any means exceed the value of the remainder of the wage due to the Worker for the remaining period of the contract. If the termination is initiated by the Worker, the Worker shall be obliged to compensate the Employer for the loss that the Employer incurred as a result of the termination of the contract.

Termination of Employment ?

If the labor contract is for an indefinite period, each of the two parties may terminate it on condition of notifying the other party in writing of such termination.

The notification shall be provided as follows:

  • in the case of workers appointed on monthly wage basis, the notification shall be delivered at least fifteen days before the contract is terminated;
  • In the case of other workers, the notification shall be delivered at least seven days before the contract is terminated.

Kuwait

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