Doing Business 2020 Kuwait Economy Profile Kuwait Page 1 Doing Business 2020 Kuwait Economy Profile of Kuwait Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Kuwait About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Kuwait Ease of Doing Business in Region Middle East & North Africa DB RANK DB SCORE Kuwait Income Category High income 83 Population 4,137,309 67.4 City Covered Kuwait City Rankings on Doing Business topics - Kuwait 6 45 51 68 66 74 82 119 115 162 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 88.4 71.9 81.9 75.1 45.0 66.0 92.5 52.6 61.4 39.2 Starting a Business (rank) 82 Getting Credit (rank) 119 Trading across Borders (rank) 162 Score of starting a business (0-100) 88.4 Score of getting credit (0-100) 45.0 Score of trading across borders (0-100) 52.6 Procedures (number) 5.5 Strength of legal rights index (0-12) 1 Time to export Time (days) 19.5 Depth of credit information index (0-8) 8 Documentary compliance (hours) 72 Cost (number) 1.7 Credit registry coverage (% of adults) 16.8 Border compliance (hours) 84 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 31.6 Cost to export Documentary compliance (USD) 227 Dealing with Construction Permits (rank) 68 Protecting Minority Investors (rank) 51 Border compliance (USD) 665 Score of dealing with construction permits (0-100) 71.9 Score of protecting minority investors (0-100) 66.0 Time to export Procedures (number) 19 Extent of disclosure index (0-10) 5.0 Documentary compliance (hours) 96 Time (days) 103 Extent of director liability index (0-10) 9.0 Border compliance (hours) 72 Cost (% of warehouse value) 5.5 Ease of shareholder suits index (0-10) 4.0 Cost to export Building quality control index (0-15) 14.0 Extent of shareholder rights index (0-6) 2.0 Documentary compliance (USD) 332 Extent of ownership and control index (0-7) 6.0 Border compliance (USD) 634 Getting Electricity (rank) 66 Extent of corporate transparency index (0-7) 7.0 Score of getting electricity (0-100) 81.9 Enforcing Contracts (rank) 74 Procedures (number) 5 Paying Taxes (rank) 6 Score of enforcing contracts (0-100) 61.4 Time (days) 49 Score of paying taxes (0-100) 92.5 Time (days) 566 Cost (% of income per capita) 55.7 Payments (number per year) 12 Cost (% of claim value) 18.6 Reliability of supply and transparency of tariff index (0-8) 6 Time (hours per year) 98 Quality of judicial processes index (0-18) 7.5 Total tax and contribution rate (% of profit) 13.0 Registering Property (rank) 45 Postfiling index (0-100) Resolving Insolvency (rank) 115 Score of registering property (0-100) 75.1 Score of resolving insolvency (0-100) 39.2 Procedures (number) 7 Recovery rate (cents on the dollar) 32.2 Time (days) 17 Time (years) 4.2 Cost (% of property value) 0.5 Cost (% of estate) 10.0 Quality of the land administration index (0-30) 18.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 7.0 Page 4 Doing Business 2020 Kuwait Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Kuwait Starting a Business - Kuwait Standardized Company Legal form Limited Liability company (WLL) Paid-in minimum capital requirement No minimum City Covered Kuwait City Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Procedure – Men (number) 5 6.5 4.9 1 (2 Economies) Time – Men (days) 19 19.7 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 1.7 16.7 3.0 0.0 (2 Economies) Procedure – Women (number) 6 7.1 4.9 1 (2 Economies) Time – Women (days) 20 20.3 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 1.7 16.7 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 8.9 7.6 0.0 (120 Economies) Figure – Starting a Business in Kuwait – Score 73.6 80.9 99.2 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Kuwait and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 93.5: Oman (Rank: 32) 89.6: Bahrain (Rank: 67) 88.4: Kuwait (Rank: 82) 84.5: Jordan (Rank: 120) 84.0: Regional Average (Middle East & North Africa) 77.3: Iraq (Rank: 154) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Kuwait Figure – Starting a Business in Kuwait – Procedure, Time and Cost Time (days) Cost (% of income per capita) 20 0.8 0.7 Cost (% of income per capita) 15 0.6 Time (days) 0.5 10 0.4 0.3 5 0.2 0.1 0 0 1 2 3 4 *5 *6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Kuwait Details – Starting a Business in Kuwait – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 APPLIES TO WOMEN ONLY: Obtain permission to work outside the marital home 1 day no charge Agency : Home As per Article 89 of the Personal Status Law, 1984, if a woman fails to obtain the permission/support of her husband to work outside the marital home (for example, for entrepreneurial ventures) it is possible that she may suffer consequences under the law. For example, if the husband consider that the work of his wife is against the well-being of the family, she could be considered disloyal (Nashez) and may not be entitled to financial alimony 2 Register at the Kuwait Business Center (KBC) 2 days to complete the no charge Agency : Kuwait Business Center (KBC) registration + 1 day to To register, the entrepreneur must submit online a completed standard application form to the get the confirmation Kuwait Busines Center (KBC) and submit a copy of the memorandum of association. email and go in person to KBC The completed application must include the names of the founding partners and their respective shares; the capital, scope and objective of the company; and the name of the manager. The applicant submits the paperwork online (www.kbc.gov.kw/) The entrepreneur can select up to 5 potential company names during the online application. Once the application is approved by the KBC, the entrepreneur receives a confirmation email notifying that the license is ready. The entrepreneur can access the document online; however, the majority of entrepreneurs still visit the KBC center to pick up the original document. The KBC electronically sends information for further checking to the Ministry of the Interior and the Kuwait Fire Service Directorate. 3 Sign and notarize the memorandum of association before the public notary of the Ministry 1 day KWD 2 for the first page of of Justice the Memorandum and Agency : Notary - Ministry of Justice KWD 1 for every The entrepreneur submits the draft memorandum of association along with Department of subsequent page Companies' letter and the bank capital deposit certificate to the Notary Public Department at the Ministry of Justice. The officer verifies that the required documents are complete and schedules an appointment for signing before the notary public at the Company Formation Department of the Ministry of Justice, during which the memorandum of association is signed by the founding partners and notarized on the set date in 3 originals: one for the company, one for the Ministry of Justice, and one to be field with the Ministry of Commerce and Industry. 4 Obtain the commercial license from the Kuwait Business Center 1-2 days KWD 80 Agency : Kuwait Business Center Once the commercial registration certificate is issued, the entrepreneur obtains the commercial license from the Kuwait Business Center. The entrepreneur can apply online, through the KBC portal (http://www.kbc.gov.kw/). There is a full integration between the KBC platform with the Public Authority for Civil Information (PACI) and the Municipality. Thus, once the entrepreneur applies for the commercial business license, the company information is submitted directly and automatically from the KBC to the Municipality. The Municipality will approve internally the premises and that approval will be reflected in the commercial license. The commercial license must also have a civil number, which will be internally provided by the PACI to the KBC. 5 Register at the Public Authority for Manpower 15 days (simultaneous KWD 25 Agency : Public Authority for Manpower with procedures 6 and 8) The Public Authority for Manpower may inspect the premises to determine whether the size of the company premises and its business scope are commensurate with the number of employees declared at the Ministry. 6 Register with the Kuwait Chamber of Commerce and Industry 1 day (simultaneous with KWD 82 for registration Agency : Chamber of Commerce procedures 6 and 7) and KWD 55 for annual The company must apply for membership at the Chamber of Commerce and Industry by renewal submitting copies of its commercial license and memorandum of association, and filling out a specimen signature form signed by the company's authorized signatories. The membership is a pre-requisite to dealing with other government authorities, banks and participation in public tenders. Applies to women only. Takes place simultaneously with previous procedure. Page 8 Doing Business 2020 Kuwait Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2020 Kuwait Dealing with Construction Permits - Kuwait Standardized Warehouse Estimated value of warehouse KWD 584,951.70 City Covered Kuwait City Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Procedures (number) 19 15.7 12.7 None in 2018/19 Time (days) 103 123.6 152.3 None in 2018/19 Cost (% of warehouse value) 5.5 4.4 1.5 None in 2018/19 Building quality control index (0-15) 14.0 12.5 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Kuwait – Score 44.0 77.8 72.6 93.3 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Kuwait and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 83.1: Bahrain (Rank: 17) 75.2: Oman (Rank: 47) 71.9: Kuwait (Rank: 68) 67.7: Iraq (Rank: 103) 61.7: Regional Average (Middle East & North Africa) 60.3: Jordan (Rank: 138) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 10 Doing Business 2020 Kuwait Figure – Dealing with Construction Permits in Kuwait – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 6 100 5 Cost (% of warehouse value) 80 4 Time (days) 60 3 40 2 20 1 0 0 1 2 3 *4 *5 6 7 *8 9 10 11 12 13 14 15 16 * 17 * 18 19 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 11 Doing Business 2020 Kuwait Figure – Dealing with Construction Permits in Kuwait and comparator economies – Measure of Quality 16 14.0 14 12.0 12.5 Index score 12 11.0 11.0 10 8 5.5 6 4 2 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Details – Dealing with Construction Permits in Kuwait – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Conduct soil test with private laboratory 7 days KWD 200 Agency : Private Laboratory The soil test is no longer required to be submitted as part of the building permit application, however it must be submitted within three months of obtaining the permit and before starting the construction. In practice this is done early in the process as the soil test is required to design the foundation of the building. 2 Submit drawings and receive certificate from the Public Authority for Industry (PAI) 14 days no charge Agency : Public Authority for Industry (PAI) Since the warehouse will be used for storage, BuildCo must submit the project drawings to the Public Authority for Industry (PAI) using the online system. PAI will then review the drawings and issue an approval certificate. Submission of drawings to PAI is required for any construction that will be used for storage or industrial activities. A copy of the government’s lease agreement is needed. 3 Obtain lot plan with site map from the Municipal Authority 7 days KWD 5 Agency : Municipality of Kuwait BuildCo must obtain lot plan and the site map which determine the zoning of the plot. The request is done physically at the Urban Planning Department (UPD) of the Kuwait Municipality. This involves designating permitted uses of land based on mapped zones which separate one set of land uses from another (e.g. residential, industrial, recreational, etc). Once an area has been “zoned” (e.g. for industrial use), the location of an actual project / industry within the zone has to be approved by the Municipality. The documents that need to be submitted include: - Area plans - Level plans - Sector plans - Floor plans - Boundaries - Sanitary certificate - Contract with the client - Civil IDs - Land deed - Electrical drawings - Mechanical drawings - Fire safety drawings - Master plan approval - Architectural drawings If a change needs to be made, the process has to be started from the beginning. 4 Request and obtain electricity and water plans approval from Ministry of Electricity and 1 day no charge Water Agency : Ministry of Electricity and Water According to No. 30/2012 issued by Kuwait Municipality on August 2012, the building permit will not be granted unless the Ministry of Electricity and Water (MEW) gives its approval on the electric supply. A site inspection must be conducted before the approval can be issued. MEW is understaffed and therefore, it can take anywhere from 1 week to 1 month for the site inspection to happen. Approval of the plans can take 1-2 months after the inspection takes place. 5 Request sewage plans approval (sanitary certificate) from Ministry of Public Works 1 day no charge Agency : Ministry of Public Works BuildCo must request approval of sewage plans from the Ministry of Public Works. Upon approval, the Ministry will issue a sanitary certificate. A site inspection must be conducted before the certificate is issued. 6 Receive sewage inspection from Ministry of Public Works 1 day no charge Agency : Ministry of Public Works Page 12 Doing Business 2020 Kuwait 7 Obtain approval of plans from Kuwait Fire Services Directorate 37 days KWD 100 Agency : Kuwait Fire Services Directorate BuildCo submits the following documents online for approval: - Architectural design - Ventilation design - Elevators design - Hazard sector plans - Alarm system plans 8 Obtain sewage plans approval from Ministry of Public Works 7 days no charge Agency : Ministry of Public Works 9 Request and obtain building permit 7 days KWD 200 Agency : Municipality of Kuwait The initial packet of documents needs to be submitted electronically to the Municipality. Most of the documents are submitted as scanned copies. The website for submission is: www.baladiya.gov.kw BuildCo must submit Application Form 1 for a building license and attach the following documents (including the documents described in the procedures above): • A copy of the deed of title to the land, allocation decree, or lease agreement. In the case of an allocation decree or lease agreement, a recent rent receipt must be submitted. • A copy of the architectural contract between BuildCo and an accredited engineering firm responsible for the architecture of the building • Scanned letter of the zoning approval • Original soil test report • Approval from the Fire and Safety Department • Approval from the Roads Department, if underground parking is included (which does not apply to the warehouse project) • Scanned Form 2, Undertaking of compliance of the plans with the buildings codes and cadastres, which should be signed and submitted (by an engineering firm) • Scanned Form 3, Undertaking of compliance with the construction plans, which should be signed and submitted (by an engineering firm) • Civil ID of the owner • Undertaking to provide specific plans (done by an engineering firm) that meet the requirements of: 1. The Ministry of Electricity and Energy for the electric supply. 2. The Ministry of Public Works for the sewerage system. These documents are scanned and uploaded electronically. Once approved, the private engineer receives a notification that the building permit is approved. 10 Hire an external firm/engineer to supervise construction 1 day KWD 30,000 Agency : Private Firm 11 Submit site take-over letter (supervision commitment license) 0.5 days KWD 16 Agency : Municipality of Kuwait BuildCo submits online a site take-over letter and attach the following documents: • A copy of the construction license • An undertaking from BuildCo that it shall carry out the construction work on the warehouse or, alternatively, that it has a construction contract with a contractor. In case of a construction contract with a contractor, a copy of the performance bond should be submitted. • An undertaking from an accredited supervising engineer to supervise the construction approved by the municipality. 12 Submit final report and the file of cadastral measure of the structure to the Municipality for 0.5 days KWD 10 approval Agency : Municipality of Kuwait BuildCo prepares the end of supervision commitment report with the supervising engineer's signature and the file of cadastral measure of the structure and submits them to Kuwait Municipality. The file will be reviewed by the Engineering Supervisor (an employee of the Kuwait Municipality) to ensure it contains all the required documentation and information. The file can be submitted online. Kuwait Municipality will then conduct a final inspection to ensure that the construction has been carried out to the necessary specifications (as per the building plans submitted and approved) and complies with the relevant constructions regulations entirely. Once the Kuwait Municipality is satisfied with the information and documentation concerning the building’s specifications and construction works, it will grant the necessary approvals. 13 Receive final inspection from the Municipality 1 day no charge Agency : Municipality of Kuwait The municipality inspects the buildings to ensure compliance with the drawings. Page 13 Doing Business 2020 Kuwait 14 Receive final approval certificate from Municipality 10 days no charge Agency : Municipality of Kuwait Once the final inspection is carried out, BuildCo typically receives the final approval certificate from the Municipality within a week. The Municipality then forwards the certificate of no objection to the Ministry of Electricity and Water, the Kuwait Fire Services Directorate and the Ministry of Public Works. 15 Receive inspection from the Kuwait Fire and Safety Department 1 day KWD 5 Agency : Kuwait Fire and Safety Department Upon conducting a final inspection, the Kuwait Fire and Safety Department will issue a certificate of fire and panic safety. 16 Obtain certificate of fire and panic safety from the Kuwait Fire and Safety Department 7 days no charge Agency : Kuwait Fire and Safety Department After the inspection from KFSD is done and the building deemed compliant, BuildCo receives the Certificate of Fire and Panic. Obtain water connection 7 days KWD 750 17 Agency : Ministry of Electricity and Water After the final approval certificate is issued, the Kuwait Municipality sends a letter to the Ministry of Electricity and Water to do the water connection. Obtain sewage connection 7 days KWD 750 18 Agency : Ministry of Public Works After the final approval certificate is issued, the Kuwait Municipality sends a letter to the Ministry of Public Works to do the sewage connection. 19 Obtain commercial license from Ministry of Commerce 7 days no charge Agency : Ministry of Commerce BuildCo must obtain a commercial license from the Ministry of Commerce certifying that building is for commercial use. Without this license, the warehouse cannot become operational. Takes place simultaneously with previous procedure. Page 14 Doing Business 2020 Kuwait Details – Dealing with Construction Permits in Kuwait – Measure of Quality Answer Score Building quality control index (0-15) 14.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by 1.0 external engineer or firm; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice; Inspections are not mandated by law but commonly occur in practice during construction. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, external engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 2.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Professional in charge of the supervision; Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 1.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance ; Architect or engineer. Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Being a registered architect or engineer; Passing a certification exam. Page 15 Doing Business 2020 Kuwait What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer; Passing a certification exam. Page 16 Doing Business 2020 Kuwait Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 17 Doing Business 2020 Kuwait Getting Electricity - Kuwait Standardized Connection Name of utility Ministry of Electricity and Water (MEW) Price of electricity (US cents per kWh) 0.7 City Covered Kuwait City Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Procedures (number) 5 4.4 4.4 3 (28 Economies) Time (days) 49 63.5 74.8 18 (3 Economies) Cost (% of income per capita) 55.7 419.6 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 6 4.4 7.4 8 (26 Economies) Figure – Getting Electricity in Kuwait – Score 66.7 86.5 99.3 75.0 Procedures Time Cost Reliability of supply and transparency of tariff index Figure – Getting Electricity in Kuwait and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 87.1: Oman (Rank: 35) 81.9: Kuwait (Rank: 66) 80.5: Jordan (Rank: 69) 79.7: Bahrain (Rank: 72) 72.4: Regional Average (Middle East & North Africa) 61.9: Iraq (Rank: 131) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Kuwait – Procedure, Time and Cost Time (days) Cost (% of income per capita) 50 Cost (% of income per capita) 40 40 Time (days) 30 30 20 20 10 10 0 0 1 2 3 *4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 18 Doing Business 2020 Kuwait reflected here, see the summary below. Figure – Getting Electricity in Kuwait and comparator economies – Measure of Quality 8 7 7 6 6 6 Index score 6 5 4.4 4 3 2 1 0 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Page 19 Doing Business 2020 Kuwait Details – Getting Electricity in Kuwait – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Hire licensed electrical engineer to prepare study of electrical load and power requirement 2 calendar days KWD 1,250 Agency : Electrical engineer licensed by the Ministry of Electricity and Water (MEW) The client hires an engineering consulting firm that is approved by the union of engineers and that has a Supervision Engineer licensed by MEW. The consulting firm (i.e. contractor), will then study and estimate the electrical load and power requirement of the project so as to obtain MEW's approval/authorization for availability of electricity supply (see procedure below). The fees vary depending on the prices set by the contractor. 2 Submit application to Ministry of Electricity and Water and await estimate 7 calendar days KWD 0 Agency : Ministry of Electricity and Water (MEW) The client submits an application to the Distribution department of MEW to get the approval/authorization of electricity supply. The client needs to submit: - The study and estimate done by the consulting firm in Procedure 1. - 3 copies to the concerned governorate engineer of the electrical distribution network (EDN) department requesting approval/authorization for the electricity supply - Copy of the application after necessary approval duly signed and stamped by the governorate engineer - Licenses of construction The request can be submitted online through the following link:https://portal.mew.gov.kw/ All forms can be also submitted online. The customer will receive the approval online. 3 Obtain "no objection" letter from municipality 7 calendar days KWD 0 Agency : Municipality After completing the building works and obtaining the approval of the municipality, the applicant will need to apply for a no-objection letter from the municipality. The municipality will then send the letter electronically to the Ministry of Electricity and Water (MEW) so the latter can install the meter and turn on supply of electricity to the project. 4 Submit final electrical drawings for approval and obtain inspection of internal wiring 21 calendar days KWD 0 Agency : Ministry of Electricity and Water (MEW) During or after execution of the internal wiring the client’s licensed engineer will need to submit the final electrical drawings related to the internal wiring for approval to the Electrical Installation Department of the Ministry. These drawings include air-conditioning, lighting and all other electrical equipment, electrical mains, switches, cable sizes, circuit breakers and fuses. The client will also need to submit a load form in order to obtain inspection of internal wiring and final connection. The load form will then be handed over to the applicant themselves. If the applicant is a company, the form will be handed over to an authorized staff of the company. The approval itself is granted after a couple of weeks, but is obtained in parallel with the external works. The inspection however, happens only after the Ministry of Electricity and Water (MEW) has obtained the letter of no- objection from the municipality. If the drawings meet the Ministry’s specifications, then inspectors from the Electrical Installation Department of the Ministry will inspect the internal installation (size of cables, type of fuses, cable connection process and installation of main panels and sub-panels inside and outside the warehouse). The engineer also needs to submit approvals from the Municipality and the Kuwait Fire Department. The Municipality will also check that plans are actually corresponding to latest drawings. 5 Obtain external works from Electrical Installation Department 18 calendar days KWD 5,269.96 Agency : Ministry of Electricity and Water (MEW) Once the drawings are approved, the client needs to pay the fees of the project to Ministry of Electricity & Water (MEW) for the power supply connection. This cost is for the equipment supplied by the ministry. The payment is done online. The estimation department then gives the green light to the Electrical Distribution Networks Department so that external works can be started. External works are designed and carried out by the Electrical Distribution Networks Department of MEW. A 140-kVA load can be supplied from an existing distribution sub-station in the area, if capacity is available. In the absence of the infrastructure facilities, the holder of the license can allocate a space on the plot not exceeding 5x5 m2 for the MEW to install an electrical transformer to provide additional power to the plot. Having the transformer installed will not result in additional cost to the customer. The former scenario is however, the more likely one for the assumed case. As for the meter installation, upon payment of the fees, the consumer affairs department of MEW automatically receives a request to hand over the required meter to the Department of Electrical Distribution Network. The meter is then delivered by the Ministry’s staff to the client’s site after notifying the client by SMS or email about the time of installation. Takes place simultaneously with previous procedure. Page 20 Doing Business 2020 Kuwait Details – Getting Electricity in Kuwait – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 6 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.1 System average interruption frequency index (SAIFI) 0.4 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? No Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online https://www.mew.gov.kw/ NewTariff.aspx Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 21 Doing Business 2020 Kuwait Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 22 Doing Business 2020 Kuwait Registering Property - Kuwait Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Procedures (number) 7 5.4 4.7 1 (5 Economies) Time (days) 17 26.6 23.6 1 (2 Economies) Cost (% of property value) 0.5 5.6 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 18.5 14.6 23.2 None in 2018/19 Figure – Registering Property in Kuwait – Score 50.0 92.3 96.5 61.7 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Kuwait and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 86.2: Bahrain (Rank: 17) 75.1: Kuwait (Rank: 45) 73.0: Oman (Rank: 52) 66.4: Jordan (Rank: 78) 63.4: Regional Average (Middle East & North Africa) 57.3: Iraq (Rank: 121) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 23 Doing Business 2020 Kuwait Figure – Registering Property in Kuwait – Procedure, Time and Cost Time (days) Cost (% of property value) 0.6 16 14 0.5 Cost (% of property value) 12 0.4 Time (days) 10 0.3 8 6 0.2 4 0.1 2 0 0 1 *2 3 *4 *5 *6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 24 Doing Business 2020 Kuwait Figure – Registering Property in Kuwait and comparator economies – Measure of Quality 25 22.5 18.5 19.5 20 Index score 17.0 14.6 15 10.5 10 5 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Details – Registering Property in Kuwait – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Apply for property transfer at the Real Estate Registration Office at the Ministry of Justice 1 day no charge Agency : Real Estate Registration Office at the Ministry of Justice A seller (or a designated third party with authorization from the seller) submits an application to transfer of property together with a preliminary sale/purchase agreement at the Real Estate Registration Office of the Ministry of Justice. Other documents include Civil IDs of both seller and buyer, Articles of Association (if these are two companies) and the original deed. The Real Estate Registration Office reviews the submitted documents and authorizes the deal. Once approved, the Real Estate Registration Office issues a letter to request the Municipality to issue the cadastral description certificate. 2 Apply for the Cadastral Description Certificate (Shahadat Al-Awsaf) from the Municipality 1 day KWD 10 Agency : Kuwait City Municipality The seller must request a Cadastral Description Certificate from the Municipality providing the details of the property in question (i.e. its size, the developments on it, the zoning, etc) and confirming that the property is in compliance with all the Municipality regulations. This document is prepared following an inspection of the property by an architect of the Municipality. The warehouse is likely to be in one of the following areas: Shuwaikh, Sulaibiya, Sabhan, Al Rai, Anghara and Ardiya. This is however not an exclusive list. The Kuwait Municipality, which is the authority responsible for zoning, may authorize the construction of a warehouse in an area that is not ordinarily used for warehousing. The documentation shall include: -Application from the seller on the selling company's letterhead -Copy of the deed of title of the property provided by the seller - A letter issued by the Real Estate Registration Office -Documents proving the authority of the person submitting the application on behalf of the seller The Cadastral Description Certificate will also include among other things: any violations that the property has incurred (e.g. non-maintenance of the property, or encroachment of the property borders on neighboring plots), any violations of the structure (e.g. if the building does not meet the fire regulations), usage of the plot (e.g. for commercial or residential purpose). Any licenses granted to the plot (e.g. license to have machinery brought onto the property to be used on the plot) and drawings of the plot and structures approved from the Municipality showing the areas and utilization of the plot. 3 Inspection of the property by an architect representing the Municipality 14 days KWD 150 Agency : Kuwait City Municipality The Municipality will send out an inspector/architect to inspect the property in question and collect the relevant information; after which the Municipality will issue the Cadastral Description Certificate and transfer the same along with a letter of no objection to the transfer to the Ministry of Justice to continue the process of the property transfer. The process is typically as follows: the seller will go to the Municipality (with jurisdiction over the location of the warehouse to be sold) to submit an application for an allocation letter (specifying the size of the plot and the buildings on it if any) and a description certificate (description of the existing buildings if any on the plot and size/use of such building). The fee to be paid for these documents is KD150 (for a commercial property). The seller concurrently delivers the warehouse's title deed to the Municipality against a receipt thereof. The engineer/architect responsible for the area then fixes a date to meet with the seller at the warehouse to carry out the inspection, or may alternatively carry out the inspection on his own. Meanwhile, the seller should obtain clearance from the utility authorities (i.e. electricity, water and telephone). When the Municipality engineer completes the inspection (verifies the deed against the actual plot of land and stores report at the Municipality) and the Municipality has issued the descriptions certificate and the allocation letter for the property, the seller will be issued with a receipt with a reference number from the Municipality with which the seller will receive the original title deed, the allocation letter and the descriptions certificate from the Real Estate Registry Division at the Ministry of Justice. Page 25 Doing Business 2020 Kuwait 4 Obtain clearance from the Ministry of Communications 1 day no charge Agency : Ministry of Communications The Seller must obtain a clearance from the Ministry of Communications (necessary for all types of properties both commercial and residential). The clearance is to confirm that the previous owner/seller has settled all related utility bills. 5 Obtain clearance from the Ministry of the Electricity regarding outstanding electricity bills 1 day no charge Agency : Ministry of Electricity and Water Parties obtain a certificate of Ministry of Electricity and Water that there are no outstanding electricity bills or other dues to the Ministry. 6 Obtain a certificate from the Ministry of Commerce and Industry evidencing the signatory 1 day KWD 10 authority of the legal representative of the parties Agency : Ministry of Commerce and Industry Parties obtain a certificate from the Ministry of Commerce and Industry evidencing the signatory authority of the legal representative of the parties who will sign the sale agreement, together with copies of their civil identification cards, in order to check that the companies are authorized to buy or sell property in their Articles of Association. They obtain Form I "Undertaking & Acknowledgement" and Form IX "Acknowledgement of the Representative" from the Department of Commercial Companies at the Ministry of Commerce and Industry, that must be submitted for registration in Procedure 6. Form I shows that the parties exist and have the power to conclude the sale/purchase transaction in accordance with their own Article of Association. Form IX confirms the authority of their representatives who follow up the Procedures with the Department. 7 Pay the registration fee, sign a new deed, and register the name of the new owner 1 day KWD 2,929.76; (0.5% of Agency : Real Estate Registration Office at the Ministry of Justice property value (registration Once the Cadastral Description Certificate is issued by the Municipality, the parties receive a fee) + KWD 5 for the phone text message to visit the Ministry of Justice to complete the transaction. The parties must stamp) appear in person, or through their attorneys, to sign the deed before the notary public. The notary public is a governmental employee at the Ministry of Justice. The documentation includes the original deed, IDs of seller and buyer, the Cadastral Description Certificate from the Municipality and the preliminary sale agreement. The notary public reviews the documents, verifies the contents of the written agreement (a form commonly prescribed by the Ministry of Justice) and authenticates the required signatures. The sale agreement is used as the deed of title. An original of the sale agreement is provided to the buyer. It is printed on the official authorized paper and is stamped. The 0.5% registration fee is paid before the parties sign the notarized sale agreement. The notary public delivers the notarized sale agreement to the Contracts Control Department for it to be recorded under the name of the buyer. All the procedures are completed by the one notary. Takes place simultaneously with previous procedure. Page 26 Doing Business 2020 Kuwait Details – Registering Property in Kuwait – Measure of Quality Answer Score Quality of the land administration index (0-30) 18.5 Reliability of infrastructure index (0-8) 3.0 Type of land registration system in the economy: Deed Registration System What is the institution in charge of immovable property registration? Real Estate registration and authentication department of the the Ministry of Justice In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, No 0.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Municipality In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Scanned 1.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information No 0.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 2.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Only intermediaries 0.0 in the largest business city? and interested parties Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: https://www.moj.gov.k w/AR/pages/eStateFo rms.aspx https://www.moj.gov.k w/AR/pages/DeptPro cedure.aspx? ItemID=154 Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? Link for online access: https://www.moj.gov.k w/AR/pages/eservice s10.aspx https://www.moj.gov.k w/AR/pages/DeptPro cedure.aspx? ItemID=154 Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: https://www.moj.gov.k w/AR/pages/DeptPro cedure.aspx? ItemID=154 Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Page 27 Doing Business 2020 Kuwait Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 518.0 Who is able to consult maps of land plots in the largest business city? Only intermediaries 0.0 and interested parties Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: http://www.baladia.go v.kw/sites/ar/municipa lityServices/Pages/m unicipalityLows/fees/6 1-2000.aspx? menuItem=item39&g 1=demo6&g2=SubMe nu11 Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 8.0 Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? Yes 2.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? Yes 2.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Articles 7, 8 and 9 of Law No. 5 of 1959 (as amended). Is the system of immovable property registration subject to a state or private guarantee? No 0.0 Type of guarantee: Legal basis: Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? No 0.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Court of First businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Instance in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Page 28 Doing Business 2020 Kuwait Are there publicly available statistics on the number of land disputes at the economy level in the first instance Yes 0.5 court? Number of land disputes in the economy in 2018: 164.0 Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 29 Doing Business 2020 Kuwait Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 30 Doing Business 2020 Kuwait Getting Credit - Kuwait Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Strength of legal rights index (0-12) 1 3.1 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 5.3 6.8 8 (53 Economies) Credit registry coverage (% of adults) 16.8 15.8 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 31.6 16.3 66.7 100.0 (14 Economies) Figure – Getting Credit in Kuwait – Score 45.0 Score - Getting Credit Figure – Getting Credit in Kuwait and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 95.0: Jordan (Rank: 4) 55.0: Bahrain (Rank: 94) 45.0: Kuwait (Rank: 119) 41.8: Regional Average (Middle East & North Africa) 35.0: Oman (Rank: 144) 0.0: Iraq (Rank: 186) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 31 Doing Business 2020 Kuwait Figure – Legal Rights in Kuwait and comparator economies 12 11 10 Index Score 8 6 4 3 3.1 2 1 1 0 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Page 32 Doing Business 2020 Kuwait Details – Legal Rights in Kuwait Strength of legal rights index (0-12) 1 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description No of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; No and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an No electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell No the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Kuwait and comparator economies 9 8 8 8 8 Index Score 7 6 6 5.3 5 4 3 2 1 0 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Page 33 Doing Business 2020 Kuwait Details – Credit Information in Kuwait Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 997,479 513,005 Number of firms 0 18,498 Total 997,479 531,503 Percentage of adult population 31.6 16.8 Page 34 Doing Business 2020 Kuwait Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 35 Doing Business 2020 Kuwait Protecting Minority Investors - Kuwait Stock exchange information Stock exchange Boursa Kuwait Stock exchange URL https://www.boursakuwait.com.kw Listed firms with equity securities 175 City Covered Kuwait City Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Extent of disclosure index (0-10) 5.0 6.4 6.5 10 (13 Economies) Extent of director liability index (0-10) 9.0 4.8 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 4.0 4.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 2.0 3.2 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 6.0 3.6 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 7.0 3.5 5.7 7 (13 Economies) Figure – Protecting Minority in Kuwait – Score 66.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Kuwait and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 66.0: Bahrain (Rank: 51) 66.0: Kuwait (Rank: 51) 56.0: Oman (Rank: 88) 51.9: Regional Average (Middle East & North Africa) 50.0: Jordan (Rank: 105) 46.0: Iraq (Rank: 111) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 36 Doing Business 2020 Kuwait Figure – Protecting Minority Investors in Kuwait and comparator economies – Measure of Quality Kuwait 7 9 5 6 2 4 Bahrain 4 4 8 7 5 5 Iraq 1 5 4 3 5 5 Jordan 6 4 4 6 2 3 Oman 3 5 8 5 4 3 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Middle East & North Africa 3.5 4.8 6.4 3.6 3.2 4.7 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 37 Doing Business 2020 Kuwait Details – Protecting Minority Investors in Kuwait – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 5.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders 3.0 excluding interested parties Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) No disclosure 0.0 obligation Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 1.0 transaction only Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 9.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) Yes 1.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if unfair or 2.0 prejudicial Ease of shareholder suits index (0-10) 4.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Documents that the 1.0 defendant relied on Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) No 0.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 2.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? No 0.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? No 0.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 6.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0 Page 38 Doing Business 2020 Kuwait Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 7.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 39 Doing Business 2020 Kuwait Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 40 Doing Business 2020 Kuwait Paying Taxes - Kuwait Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Payments (number per year) 12 16.5 10.3 3 (2 Economies) Time (hours per year) 98 202.6 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 13.0 32.5 39.9 26.1 (33 Economies) Postfiling index (0-100) 53.3 86.7 None in 2018/19 Figure – Paying Taxes in Kuwait – Score 85.0 92.4 100.0 Payments Time Total tax and contribution rate Figure – Paying Taxes in Kuwait and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 92.5: Kuwait (Rank: 6) 90.2: Oman (Rank: 11) 78.7: Jordan (Rank: 62) 75.1: Regional Average (Middle East & North Africa) 63.5: Iraq (Rank: 131) 100: Bahrain (Rank: 1) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 41 Doing Business 2020 Kuwait Figure – Paying Taxes in Kuwait and comparator economies – Measure of Quality 90 85.3 80 Index score 70 60 53.3 50 40 35.7 30 21.4 20 10 null null 0 Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Page 42 Doing Business 2020 Kuwait Details – Paying Taxes in Kuwait Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Employer paid - 12.0 98.0 11.5% gross salaries 12.97 Social security contributions Employee paid - 0.0 withheld 10.5% gross salaries 0.00 not included Social security contributions Totals 12 98 13.0 Page 43 Doing Business 2020 Kuwait Details – Paying Taxes in Kuwait – Tax by Type Taxes by type Answer Profit tax (% of profit) 0.0 Labor tax and contributions (% of profit) 13.0 Other taxes (% of profit) 0.0 Page 44 Doing Business 2020 Kuwait Details – Paying Taxes in Kuwait – Measure of Quality Answer Score Postfiling index (0-100) VAT refunds Does VAT exist? No Does a VAT refund process exist per the case study? N/A Restrictions on VAT refund process Not Applicable Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? Not Applicable Time to comply with VAT refund (hours) No VAT No VAT Time to obtain VAT refund (weeks) No VAT No VAT Corporate income tax audits Does corporate income tax exist? No Percentage of cases exposed to a corporate income tax audit (%) Not applicable Time to comply with a corporate income tax correction (hours) No corporate income No CIT tax Time to complete a corporate income tax correction (weeks) No corporate income No CIT tax Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 45 Doing Business 2020 Kuwait Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 46 Doing Business 2020 Kuwait Trading across Borders - Kuwait Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Time to export: Border compliance (hours) 84 52.5 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 665 441.8 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 72 66.4 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 227 240.7 33.4 0 (20 Economies) Time to import: Border compliance (hours) 72 94.2 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 634 512.5 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 96 72.5 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 332 262.6 23.5 0 (30 Economies) Figure – Trading across Borders in Kuwait – Score 47.8 37.3 58.0 43.3 74.6 47.2 60.3 52.6 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Kuwait and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 84.1: Oman (Rank: 64) 79.0: Jordan (Rank: 75) 78.7: Bahrain (Rank: 77) 61.8: Regional Average (Middle East & North Africa) 52.6: Kuwait (Rank: 162) 25.3: Iraq (Rank: 181) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 47 Doing Business 2020 Kuwait Figure – Trading across Borders in Kuwait – Time and Cost Time (hours) Cost (USD) 120 665 700 634 100 96 600 84 Time (hours) 500 Cost (USD) 80 72 72 332 400 60 300 227 40 200 20 100 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 48 Doing Business 2020 Kuwait Details – Trading across Borders in Kuwait Characteristics Export Import Product HS 29 : Organic chemicals HS 8708: Parts and accessories of motor vehicles Trade partner India Japan Border Shuwaikh port Shuwaikh port Distance (km) 10 10 Domestic transport time (hours) 2 2 Domestic transport cost (USD) 153 125 Details – Trading across Borders in Kuwait – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 48.0 178.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 60.0 487.0 Import: Clearance and inspections required by 72.0 172.7 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 72.0 461.0 Page 49 Doing Business 2020 Kuwait Details – Trading across Borders in Kuwait – Trade Documents Export Import Bill of lading Certificate of origin Certificate of origin Cargo release order Packing list Terminal handling receipt Invoice Commercial invoice Export order Manifest/Bayan EPA approval Bill of lading Customs export declaration Packing list SOLAS certificate SOLAS certificate Delivery Order Page 50 Doing Business 2020 Kuwait Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local currency of • Court costs USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 51 Doing Business 2020 Kuwait Enforcing Contracts - Kuwait Standardized Case Claim value KWD 20,397 Court name Kuwait City Court of First Instance, Commercial Circuit City Covered Kuwait City Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Time (days) 566 622.0 589.6 120 (Singapore) Cost (% of claim value) 18.6 24.7 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 7.5 6.6 11.7 None in 2018/19 Figure – Enforcing Contracts in Kuwait – Score 63.4 79.2 41.7 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Kuwait and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 63.8: Bahrain (Rank: 59) 61.9: Oman (Rank: 69) 61.4: Kuwait (Rank: 74) 56.0: Regional Average (Middle East & North Africa) 55.6: Jordan (Rank: 110) 48.0: Iraq (Rank: 147) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 52 Doing Business 2020 Kuwait Figure – Enforcing Contracts in Kuwait – Time and Cost Time (days) Cost (% of claim value) 635 642 Cost (% of claim value) 622.0 598 35 31.2 566 589.6 600 28.1 520 30 500 24.7 Time (days) 21.5 25 400 18.6 20 14.7 15.1 300 15 200 10 100 5 0 0 Bahrain Iraq Jordan Kuwait Middle OECD Oman East high & income North Africa Page 53 Doing Business 2020 Kuwait Figure – Enforcing Contracts in Kuwait and comparator economies – Measure of Quality Kuwait 2.5 1 0 4 Bahrain 2 3 1 3 Iraq 1.5 0 Jordan 3 2 1 2 Oman 2.5 1 0 4 OECD high income 2.5 3.2 2.4 3.6 Middle East & North Africa 2.2 1.1 0.5 2.9 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Kuwait Indicator Time (days) 566 Filing and service 26 Trial and judgment 420 Enforcement of judgment 120 Cost (% of claim value) 18.6 Attorney fees 15 Court fees 2.6 Enforcement fees 1 Quality of judicial processes index (0-18) 7.5 Court structure and proceedings (-1-5) 4.0 Case management (0-6) 1.0 Court automation (0-4) 0.0 Alternative dispute resolution (0-3) 2.5 Page 54 Doing Business 2020 Kuwait Details – Enforcing Contracts in Kuwait – Measure of Quality Answer Score Quality of judicial processes index (0-18) 7.5 Court structure and proceedings (-1-5) 4.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? No -1.0 Case management (0-6) 1.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made No available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 55 Doing Business 2020 Kuwait 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 56 Doing Business 2020 Kuwait Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 57 Doing Business 2020 Kuwait Resolving Insolvency - Kuwait Indicator Kuwait Middle East & OECD high Best Regulatory North Africa income Performance Recovery rate (cents on the dollar) 32.2 27.3 70.2 92.9 (Norway) Time (years) 4.2 2.7 1.7 0.4 (Ireland) Cost (% of estate) 10.0 14.0 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 7.0 6.3 11.9 None in 2018/19 Figure – Resolving Insolvency in Kuwait – Score 34.6 43.8 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Kuwait and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 58.2: Bahrain (Rank: 60) 44.0: Oman (Rank: 97) 39.7: Jordan (Rank: 112) 39.2: Kuwait (Rank: 115) 34.5: Regional Average (Middle East & North Africa) 0.0: Iraq (Rank: 168) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 58 Doing Business 2020 Kuwait Figure – Resolving Insolvency in Kuwait – Time and Cost Time (years) Cost (% of estate) 4.5 4.2 25 Cost (% of estate) 4 20.0 3.5 20 Time (years) 3.0 3.0 3 2.7 14.0 2.5 15 2.5 2 9.5 10.0 1.7 9.3 10 1.5 7.0 1 5 0.5 0 0 Bahrain No Jordan Kuwait Middle OECD Oman Practice East high Iraq & income North Africa Page 59 Doing Business 2020 Kuwait Figure – Resolving Insolvency in Kuwait and comparator economies – Measure of Quality Kuwait 4 2 1 0 Bahrain 6 2.5 1 2 Iraq 4 2 1 0 Jordan 4 2.5 1 0.5 Oman 4 2 1 0 OECD high income 5.3 2.8 2.1 1.9 Middle East & North Africa 3.7 2.3 1.3 0.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Kuwait and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 45 41.3 41.1 40 35 32.2 30 27.3 27.3 25 20 15 10 5 0 No Practice Kuwait Bahrain Iraq Jordan Oman Middle East & North Africa Page 60 Doing Business 2020 Kuwait Details – Resolving Insolvency in Kuwait Indicator Answer Score Proceeding foreclosure Security documents relating to collateral (Hotel) located in Kuwait would be enforced before the Court of First Instance. After Mirage's default, BizBank would initiate foreclosure by enforcing its security interest over Mirage's assets. Other unsecured creditors will file petition at the Court attempting to convert the foreclosure proceeding into liquidation which however won't stay BizBank to proceed with actions against the property securing their rights according to Commercial Law Article 597. Foreclosure proceedings may only be initiated in the event the security documents were endorsed by a writ of execution. Outcome piecemeal sale The hotel will stop operating and Mirage assets will be sold piecemeal in a public auction upon the completion of the proceeding. Time (in years) 4.2 The foreclosure procedure takes approximately 4.2 years until BizBank is repaid some or all of the money owed to it. The delay is largely due to the difficulty in scheduling a court hearing to resolve appeals from relevant parties to BizBank's foreclosure attempt, as well as the preparation and implementation of the auction. It takes at least half a year (probably 8 months) for the Court to review BizBank's initial foreclosure request. If appeals arise from unsecured creditors , the Court will hold hearings and make the decision, which can take up to 3 years. Cost (% of estate) 10.0 The costs associated with the case would amount to approximately 10% of the value of the debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees (1%), attorney fees (5%), fees of accountants, assessors, inspectors and other professionals (1%), and fees of auctioneers (1%-5%). Recovery rate 32.2 (cents on the dollar) Page 61 Doing Business 2020 Kuwait Details – Resolving Insolvency in Kuwait – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 7.0 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for 0.5 liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 4.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the Yes 1.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.0 Which creditors vote on the proposed reorganization plan? N/A 0.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote No 0.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 62 Doing Business 2020 Kuwait Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 63 Doing Business 2020 Kuwait Employing Workers - Kuwait Details – Employing Workers in Kuwait Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 60.0 Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 216.0 Ratio of minimum wage to value added per worker 0.1 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 25.0 Restrictions on night work? No Restrictions on weekly holiday? Yes Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 30.0 Paid annual leave for a worker with 5 years of tenure (working days) 30.0 Paid annual leave for a worker with 10 years of tenure (working days) 30.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 30.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 13.0 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 13.0 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 13.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 13.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 2.1 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 10.7 Page 64 Doing Business 2020 Kuwait Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 32.5 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 15.1 Unemployment protection after one year of employment? Yes Page 65 Doing Business 2020 Kuwait Business Reforms in Kuwait From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Starting a Business: Kuwait made starting a business easier by merging procedures to obtain a commercial license and streamlining the online company registration. Dealing with Construction Permits: Kuwait made dealing with construction permits easier by streamlining its permitting process, integrating additional authorities in its electronic permitting platform, enhancing inter-agency communication and reducing the time to obtain a construction permit. Getting Electricity: Kuwait made getting electricity easier by digitizing the application process, streamlining connection works and meter installations and using a geographic information system to review connection requests. Registering Property: Kuwait made property registration easier by streamlining the inspection process and property registration. Kuwait also improved the quality of its land administration system by publishing official service standards on property transfers. Getting Credit: Kuwait improved access to credit information by guaranteeing borrowers the legal right to inspect their credit data and offering credit scores as a value-added service to banks and financial institutions. Protecting Minority Investors: Kuwait strengthened minority investor protections by providing a 21-day notice for general assembly meetings. Trading across Borders: Kuwait made trading across borders easier by improving the customs risk management system and by implementing a new electronic clearance system. DB2019 Starting a Business: Kuwait made starting a business easier by eliminating the paid-in minimum capital requirement. Protecting Minority Investors: Kuwait strengthened minority investor protections by requiring an independent review of related-party transactions and clarifying ownership and control structures. DB2018 Starting a Business: Kuwait made starting a business easier by establishing a one-stop shop and improving online registration. Registering Property: Kuwait made registering property easier by lowering the number of days necessary to register property and by improving the transparency of the land administration system. Enforcing Contracts: Kuwait made enforcing contracts easier by introducing an electronic case management system for the use of judges. DB2017 Starting a Business: Kuwait made starting a business more difficult by increasing the time required to register by requiring companies to submit the original documents online and in person. Trading across Borders: Kuwait made exporting and importing easier by introducing customs e-links and electronic exchange of information among various agencies. DB2016 Starting a Business: Kuwait made starting a business easier by reducing the minimum capital requirement. DB2015 Starting a Business: Kuwait made starting a business more difficult by increasing the commercial license fee. DB2014 Starting a Business: Kuwait made starting a business more difficult by increasing the minimum capital requirement. Protecting Minority Investors: Kuwait strengthened investor protections by making it possible for minority shareholders to request the appointment of an auditor to review the company’s activities. DB2011 Employing Workers: Kuwait increased the number of days of paid annual leave and increased the notice period applicable in case of redundancy dismissals. Page 66 Doing Business 2020 Kuwait DB2010 Trading across Borders: Kuwait reduced the time required for customs clearance by improving administrative procedures and staff training. Resolving Insolvency: Kuwait enhanced its insolvency process by introducing a new legal procedure that enables financially distressed companies on the verge of insolvency to restructure. DB2008 Dealing with Construction Permits: Kuwait reduced the time required for dealing with construction permits by introducing an automated system for issuing technical approvals for utility connections. Getting Credit: Kuwait’s private credit bureau expanded its coverage by adding retailers to those supplying it with credit information. Page 67 Doing Business 2020 Kuwait Page 68