On 10 May 2024, Sheikh Mishal Al-Ahmed Al-Sabah, the Emir of Kuwait, dissolved the National Assembly, the country’s democratically elected parliament, and suspended the articles of the Kuwaiti Constitution that would result in new elections, declaring that the suspension would be in effect for a period of up to four years. Sheikh Mishal, who is 83 years old, became Emir and Ruler of Kuwait on 3 December 2023, succeeding his older half-brother Nawaf Al-Ahmad Al- Jaber Al-Sabah.
The 1962 Kuwaiti constitution established the National Assembly as the country’s legislative body. Until the latest dissolution, it was made up of 50 elected members and up to 16 members of the cabinet appointed by the government. Kuwaiti women received the right to vote in 2005 and the first female members were elected in the 2009 election. Political parties are not permitted but in practice it is recognized there are several political factions. Many academics have claimed that Kuwait’s National Assembly is the most independent and assertive legislative body in the Arab world.
When the National Assembly is dissolved, Article 107 of the Constitution provides for new elections to be held. The suspension means that the country will be ruled by the Emir through the issuance of decrees, according to Article 71 of the Constitution. While the dissolution of the National Assembly is not uncommon, having already taken place in 2022, 2023 and earlier in 2024, the National Assembly has not been suspended since 1986.
Kuwait is the only country in the GCC where the International Monetary Fund (IMF) anticipates negative projected real GDP growth of -1.4%. The IMF has been urging fiscal reforms to promote economic growth and investor confidence. Legislative and tax reform is widely viewed as an urgent national priority. Kuwait has been in a political deadlock for several years and the suspension of the National Assembly is expected to accelerate these reforms.
New Government Formation and Succession Issues
Sheikh Mishal has appointed a new Prime Minister, Sheikh Ahmad Al-Abdullah Al-Ahmad Al-Sabah. The former Prime Minister, Sheikh Mohammad Sabah Al-Salem Al-Sabah, who had been in the position since 17 January 2024, has declined to act in the new government. The cabinet is made up of 13 ministers, several of whom will continue in their positions from the previous government.
Sheikh Mishal has not yet named a crown prince. This appointment of such a successor would normally need to be endorsed by the National Assembly. The suspension of the National Assembly should allow Sheikh Mishal to appoint a crown prince by decree without the need for legislative ratification.
Introduction of Value-Added Tax
Kuwait joined the other GCC states in signing the Common VAT Agreement of the States of the Gulf Cooperation Council when it agreed to introduce VAT at a rate of 5%. At present, only Kuwait and Qatar have not yet introduced VAT, although Qatar has taken steps to implement VAT in 2025 at the latest.
The idea of VAT implementation in Kuwait has been discussed, at the request of the government, in numerous sessions of the National Assembly. However, it has always faced strong opposition from the National Assembly.
Following suspension of the National Assembly, and facing strong pressure from the other GCC countries, it would be no surprise if Kuwait were to release draft VAT and excise tax laws in the near future together with a timeline for their implementation.
Overhaul of Corporate Tax
Kuwait has a relatively outdated tax system dealing with selective corporate tax and retention tax. Corporate tax is imposed at a rate of 15% on profits and capital gains income only on foreign entities that do business or trade in Kuwait, thus creating a significant tax vacuum for entities owned by Kuwaiti nationals or citizens of other GCC countries.
With the introduction of OECD Pillar Two, multinational enterprises with turnover exceeding EUR 750 million will need to pay at least 15% tax on their profits. This will have a significant impact on Kuwaiti-owned entities that exceed this turnover.
Whilst under the current tax regime Kuwaiti-owned entities do not pay tax in Kuwait, Pillar Two requires that tax will need to be paid in countries where they operate through various mechanisms. Hence, to avoid the obvious revenue leakage, the Kuwaiti government has in the past discussed the introduction of a Business Profits Tax (BPT).BPT would then be applicable also to Kuwaiti-owned enterprises. The suggested rate of 15% would help those entities to avoid paying tax outside Kuwait, which appeared to be the main reasoning behind introduction of the BPT.
Foreign Investment Liberalization
A step towards liberalization of foreign investment came with Law No. 1 of 2024 published on 21 Page 3 of 5 January 2024, which effectively eliminated the requirement for foreign companies and investors to engage a local agent or representative when operating in Kuwait. Otherwise, Kuwait follows the classic restriction on foreign investment that caps non-Kuwaiti shareholdings at 49% of share capital. Moves to grant foreign investment licenses to allow for 100% foreign ownership have been largely unsuccessful. This may be another government priority as part of economic diversification and liberalization.
Sovereign Wealth Funds
The Kuwait Investment Authority (KIA) is the oldest sovereign wealth fund in the world, tracing its roots back to 1953, before Kuwaits independence. However, KIA’s assets are overwhelmingly invested in overseas assets, with the mission to secure income for future generations.
In response to domestic investment needs, a new local development sovereign wealth fund was proposed in late 2023 under the name “Ciyada”. Whether or not Ciyada will be part of KIA or an independent organization is not yet clear, as no developments have been published since the first announcement in mid-2023, but it is widely viewed that the new government will accelerate this initiative.
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