Kuwait Business Tax News Decree-law No. 78 of 2026 on combating commercial concealment

Kuwait has enacted Decree-law No. 78 of 2026 on combating commercial concealment (the Law), introducing a comprehensive legal framework targeting business arrangements that obscure the true beneficiary of commercial activities or enable unlicensed persons to conduct economic activities. The Law applies to individuals, companies, and commercial licenses registered with the Ministry of Commerce and Industry.

 All license holders, business owners, managers, and corporate officers operating in Kuwait should review their current arrangements for compliance.

What is commercial concealment? 

Commercial concealment, commonly referred to as "commercial cover-up" or "inclusion", occurs when a license holder enables another person or entity to conduct an economic activity in violation of the law. This includes, but is not limited to:

• Allowing another person to use a commercial license, trade name, or commercial register to operate a business
• Renting out a commercial license in exchange for monthly or annual payments
• Using a license to conduct activities outside the scope for which it was issued
• Conducting any economic activity without the required license 

Importantly, the Law is not limited to arrangements between Kuwaiti nationals and expatriates. It can apply between two Kuwaiti nationals, including family members, where a license is registered in one person's name while another person operates the business or receives its profits.

Who is affected?

The Law applies to:

• Kuwaiti license holders who allow third parties to operate under their license or trade name
• Expatriate residents conducting activities for which they are not legally authorized
• Companies whose employees commit violations in the company's name or for its benefit
• Managers and corporate officers who knowingly ignore false information or fail to perform their duties in a way that contributes to a violation 

Regarding foreign participation: an Article 18 resident may participate in a company's ownership structure within legally permitted percentages, not exceeding 49% of capital. This applies to companies only; individual establishments remain reserved for Kuwaiti nationals.

Penalties

Violations carry significant criminal and administrative consequences:

Companies may also bear financial liability for violations committed by employees where the offense is carried out in the company's name or for its benefit.

Enforcement and detection 

The Law strengthens coordination between the Ministry of Commerce and Industry and a broad range of authorities, including: 

• Ministry of Interior
• Public Prosecution
• Financial Intelligence Unit (KwFIU)
• Banks, exchange companies, and electronic payment providers
• Investment companies and insurance companies 

Financial transactions will be a key detection mechanism. For example, discrepancies between stated ownership percentages and actual profit distributions or financial transfers may trigger scrutiny and reporting.

Designated inspectors will hold judicial enforcement powers and may request documents and information from individuals and businesses. Obstruction of inspectors or provision of false or misleading information carries a penalty of up to 6 months imprisonment and/or a fine of up to KD 10,000.

Settlement and reconciliation

Settlement is available before, during, or before the issuance of a final judgment, subject to the following conditions:

• The settlement amount must be at least half of the maximum prescribed fine
• The violation must be remedied and the legal situation corrected
• Upon fulfillment, the criminal case is dismissed

However:

• Settlement does not prevent administrative deportation where authorities consider it necessary in the national interest
• Settlement is not available to repeat offender

Informant rewards

The Law provides for financial rewards for individuals who report violations and provide credible evidence leading to a final conviction. Rewards may reach up to 10% of fines collected, shared equally among qualifying informants.

Grace Period: Key action window

The Law will not be enforced immediately. Enforcement will commence following the issuance of executive regulations, with application expected six months thereafter. This window is intended to allow businesses and license holders to understand the requirements and regularize their legal status.

Recommended actions

All affected entities take thefollowing steps promptly:

1. Conduct an internal compliance review of all commercial license arrangements, trade name usage, and ownership structures
2. Identify any arrangements where a license is being used by a person not registered under it, or where business operations do not align with the licensed activity
3. Review profit distribution and financial flows to ensure alignment with stated ownership structures
4. Assess corporate governance frameworks to ensure managers and officers are fulfilling their oversight duties
5. Regularize any non-compliant arrangements before the enforcement period commences
6. Train key personnel, particularly compliance officers, managers, and finance teams, on the requirements of the Law
7. Seek legal advice on any arrangements that may be at risk.

How Deloitte can assist 

The enactment of the Law may have direct and material implications not only on the commercial and legal standing of affected businesses, but also on their overall tax position. Any change in the commercial structure of a business, whether arising from a voluntary regularization of existing arrangements or as a result of enforcement action, may trigger consequential tax considerations that require careful assessment.

Companies and individuals affected by the Law are strongly encouraged to revert to their tax advisor to:

• Review their current tax situation in light of any anticipated or required changes to their commercial structure or ownership arrangements
• Assess the tax implications of restructuring, unwinding, or regularizing existing arrangements to achieve compliance with the Law
• Identify any changes to their tax position that may arise as a direct consequence of modifications made to commercial licenses, ownership percentages, profit distribution mechanisms, or business operations
• Evaluate transfer pricing and related-party considerations where ownership or operational structures are being revised

Given the grace period currently available, there is an opportunity to address both the commercial and tax dimensions of any required changes in a coordinated and structured manner. Early engagement with your tax advisor can support the timely identification and assessment of potential tax exposures arising from reactive or last-minute structural adjustments.