Payroll in Kuwait
What tax considerations are there?
Personal Income Tax
Employees are not subjected to income tax in Kuwait. There is a Social Security system, for which employees must pay 10.5% of their monthly salary and employers must pay 11.5%. The purpose of the system is to provide pensions and allowances for disability, sickness, and death.
Corporate Income Tax (CIT)
Kuwait-owned business, and those owned by other Gulf Cooperation Council (GCC) countries are exempt from tax in Kuwait. Foreign-owned companies are subjected to CIT on all profits and capital gains obtained from within Kuwait. CIT is a flat rate of 15%.
Foreign companies operating business in the Saudi-Kuwaiti neutral zone will be subject to Kuwait CIT on 50% of their taxable profit.
HR in Kuwait
What are the regular working hours in Bahrain?
The working week in Kuwait is a maximum of 48 hours, and 8 hours per day over a 6 day week. Employees cannot work for more than five hours consecutively, without a one hour break – apart from in the financial, commercial, and investment sectors. Office hours are generally between 8.30am and 6pm. During Ramadan the working day should be reduced to six hours (36 hours per week) – this should legally apply to all employees, not just Muslims observing Ramadan.
For work outside, employees must not work between 11am and 5pm from 1st June to 31st August, due to excessive heat. In Islam, Friday is the day of rest. Therefore, in Kuwait, the weekend will usually be Thursday and Friday (as for schools), or Friday and Saturday. Many companies opt for the latter, so as to minimise interruption with international business.
Vacation, maternity and sickness
After nine months of service, employees are entitled to 30 days of annual leave. This must be taken within one year, and should be paid prior to the leave period. In the event of a contract termination, employees are entitled to be paid for untaken accrued leave. In addition to this, after two years of service, Muslims are entitled to another 21 days of leave to pilgrimage to Mecca if they have not done so before. There are also 13 national holidays in Kuwait, on which employees are not expected to work.
Upon presenting a medical certificate, pregnant employees can take 30 days of paid maternity leave before their expected due date, and 40 days after the birth. Women are also entitled to an additional 100 days of unpaid leave (this does not need to be consecutive) after maternity leave, as long as they present a medical certificate explaining that they cannot work.
Employees in Kuwait are entitled to sick leave as long as a medical report is supplied. This is for up to 75 days; the first 15 of these are fully paid, then 10 days at 75% pay, 10 days at 50% pay, 10 days at 25% pay, and the final 30 with no pay.
A probation period can be for no longer than 100 days, during which either party can terminate the contract without notice. It is common for people to end employment during this time to avoid the tricky termination process in Kuwait. Should either party which to terminate the contract after the probation period, they must give at least three months of notice and pay termination compensation/indemnity to the other party. The amount will depend on the employee’s length of service, and whether they are on a salary or hourly rate.