Kuwait’s new law tightens grip on hidden businesses

KUWAIT CITY, Aug 2: Kuwait issued on Sunday Decree-Law No. 78 of 2026 on combating commercial concealment, introducing a comprehensive legal framework to regulate economic activities, enhance market transparency and curb illegal business practices. The 14-article decree-law seeks to address the phenomenon of conducting economic activities without the required licenses, regulate the business environment, promote fair competition and strengthen the state’s oversight, regulatory and revenue collection capabilities. According to the explanatory memorandum, the legislation comes in response to the increasing practice of individuals engaging in economic activities without proper authorization, a situation that has disrupted market stability and undermined the principles of a fair business environment.

The decree-law prohibits any natural or legal person from conducting economic activities in Kuwait without obtaining the necessary license from the competent authority or exceeding the scope of the granted license. It also criminalizes commercial concealment by banning any person from enabling another to engage in economic activities by licenses, commercial names, or other means in violation of the law.

The legislation imposes penalties ranging from one to three years’ imprisonment and fines between KD 10,000 and KD 100,000, or an amount equivalent to the total profits generated from the violation, whichever is greater. Courts may also impose either imprisonment or fines, with penalties multiplied based on the number of offenders or violations. It also provides for penalties of up to six months’ imprisonment and fines of up to KD 10,000 for obstructing enforcement officials or violating provisions related to inspections and investigations.

The decree-law holds managers responsible for violations committed under their supervision if they were aware of, or failed to prevent, the offenses. Legal entities are also jointly liable for violations committed in their name or for their benefit. Courts are required to confiscate proceeds and assets derived from commercial concealment offenses, in addition to closing violating establishments, revoking licenses and deporting foreign offenders while safeguarding the rights of bona fide third parties.

The legislation doubles penalties for repeat offenders who commit similar offenses within five years of a final conviction. It also introduces a reconciliation mechanism allowing offenders to settle violations before or during court proceedings by paying no less than half the maximum prescribed fine, provided the violation is remedied and the legal status corrected. Repeat offenders are excluded from this option. The decree-law further establishes a financial reward system for individuals who report commercial concealment offenses, granting informants up to 10 percent of collected fines, subject to the provision of credible evidence leading to a final conviction. It grants judicial enforcement powers to designated officials responsible for implementing the law and prohibits any obstruction of inspection or regulatory duties, including withholding documents or providing false information. (KUNA)