A Kuwaiti Ministerial Resolution that applies as from 1 April 2023 introduces an obligation for entities to identify individuals who are their ultimate beneficial owners (UBOs or BOs), maintain a register of UBOs/BOs and provide the information to the Kuwaiti authorities. The UBO rules apply to all entities registered or licensed in Kuwait and are therefore likely to apply to foreign entities registered in Kuwait. The first submission of UBOs/shareholders/nominee directors must be completed by 30 May 2023.
Kuwait’s introduction of a UBO disclosure requirement is an important measure to meet international standards of tax transparency to combat tax evasion, money laundering and terrorist financing.
A UBO is defined as the individual who directly or indirectly ultimately and effectively owns or controls a customer, or an individual on whose behalf a transaction is being conducted. It also includes any person who exercises ultimate effective control over a legal person or arrangement. As per the Resolution, the UBO of a company can be identified in the following manner:
- The individual who directly or indirectly owns or ultimately controls 25% or more of a Kuwaiti company or has voting rights equal to or exceeding 25%, or the individual who has the right to appoint or remove the majority of the company directors;
- If a UBO cannot be identified based on the criteria in the first bullet or if there are doubts, the UBO is the individual who controls the company through other means; or
- If the UBO still cannot be identified, the UBO is the individual who holds a senior management position in the company.
Overview of the rules
The Resolution applies to all legal persons registered or licensed in Kuwait, except for wholly owned Kuwait government entities and entities subject to the supervision of the Kuwait Central Market Authority. Such entities must collect and maintain certain information about their BOs, shareholders and nominee directors and submit the information to the Ministry of Commerce and Industry (MOCI) and/or another regulatory authority.
Covered entities must comply with the following requirements:
- Implement procedures to identify UBOs, including obtaining and maintaining sufficient, accurate and recent information in respect of their UBOs, shareholders and nominee directors;
- Notify MOCI of an address where correspondence can be received. Foreign entities must provide the name and address of their Kuwait representative.
- Prepare, maintain and file by 30 May 2023:
- Register of UBOs;
- Register of shareholders; and
- Register of nominee board members, if applicable.
- When incorporating an entity or renewing a license, provide MOCI with the information stipulated in the Resolution.
The register must contain specific information on UBOs, shareholders/partners and nominee board members, with any changes notified to MOCI within 15 business days:
- For UBOs:
- Full name of the UBO, date and place of birth;
- Address for purposes of receiving official correspondence;
- Passport or civil ID number, date and place of issuance and validity date;
- Basis for being a UBO; and
- Date appointed as a UBO and date ceased to be a UBO, if applicable.
- For shareholders/partners and nominee board members:
- Details of the shareholder/partner;
- Number and types of shares and associated voting rights; and
- Date the individual became a shareholder/partner.
Entities registered in Kuwait that are owned by a company listed on a recognised stock exchange and subject to disclosure requirements relating to UBOs, or a company wholly owned by such a listed company, are exempt from the UBO identification and disclosure requirements.
Information about registered entities, including their UBOs, will be accessible to the public and shared by MOCI with the relevant authorities upon request. (It is interesting to note that the Court of Justice of the European Union ruled in 2022 that public access to UBO information violates the EU rules on the privacy of personal data (for prior coverage, see the tax alert dated 19 December 2022)).
If an entity fails to comply with the provisions of the Resolution, MOCI will not approve or renew the entity’s license and penalties will be imposed under the Anti-Money Laundering and Combating the Financing of Terrorism Law of Kuwait.
Comments
The Resolution will help Kuwait fulfil its international commitment to tax transparency and anti-money laundering, and to effectively exchange information for tax purposes.
Foreign companies operating in Kuwait through a Kuwaiti/GCC company under a nominee arrangement should carefully assess the Kuwait income tax impact.
The Ministry is expected to issue further instructions in the near future, including the mechanism for filing UBO and shareholders/partners registers.
Harpreet Jolly
Rami Alhadhrami
BDO in Kuwait
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