Government contracts and a new Kuwait company

The situation

Government bodies retain 5% from contract payments until a tax clearance certificate is presented, and may not serve shareholding companies without a clearance certificate.

The law

• Income Tax Law Executive Bylaws: 5% tax retention: Public and private contract owners retain 5% of each payment to contractors and suppliers until a tax clearance certificate is shown; final payment at least 5% of contract value
• Executive rules for the FY 2026/2027 State budget: Government bodies keep retaining 5%; DMTT tax card holders are exempt from retention; balances older than five years go to the MOF

What it means for you

Get the tax card early and keep filings current, because the 5% held on each payment is released only with clearance. Contracts cannot make government bodies bear your income tax under the FY 2026/27 budget rules. Price your bids with the retention cash flow in mind.

What to do

1. Register for tax and get the tax card.
2. Price bids for 5% retention cash flow.
3. Keep declarations current.
4. Apply for clearance at project end.

Related

• Doing business in Kuwait without a local agent
• Kuwaiti or GCC owned company and income tax
• Activities that need extra approvals in Kuwait
• Choosing between a WLL and a KDIPA entity
• Foreign ownership limit in a Kuwait WLL
• Income tax on a foreign partner's share of a Kuwait WLL