Kuwait Imposes Up to Three Years Jail and 100,000 Dinar Fines for Commercial Concealment Violations

New Legislation Overview

According to Times Kuwait, Kuwait has introduced Decree Law No. 78 of 2026, issued on August 2, which will take effect from February 2027. The law targets hidden business ownership and illegal profits by focusing on arrangements where individuals conduct business using commercial licenses registered under another person’s name.

The practice, often described as incorporation, involves leasing or using someone else’s trade licence to run a company and keep its profits while the establishment remains legally registered in the licence holder’s name. Authorities say the measure aims to curb unfair competition, protect legitimate enterprises and ensure that all commercial activities comply with ownership and licensing rules.

Prohibited Acts and Penalties

The legislation forbids enabling a person to undertake an economic activity for which they lack legal permission. This covers using another party’s trade name, commercial licence or registration, or any other scheme intended to bypass the rules governing business operations and ownership. It also incorporates the foreign‑ownership ceiling, which the source notes cannot exceed 49 percent.

Violators may be sentenced to imprisonment for a minimum of one year and a maximum of three years, and may also face a fine ranging from ten thousand to one hundred thousand dinars or an amount equal to the profits obtained from the offence, whichever is greater. The law permits either the custodial or the financial penalty to be applied, as stipulated in its provisions.

Fines can be multiplied according to the number of individuals or activities involved in the violation. Additional sanctions include confiscation of funds and profits derived from the offence, seizure of tools and means used to commit it, permanent closure of the business premises and revocation of its commercial licence. Foreign offenders may be deported after serving any custodial sentence, and repeat offenders face doubled penalties if a new offence occurs within five years of a final judgment in the earlier case.

Enforcement and Wider Impact

To strengthen implementation, the law grants judicial authority to designated personnel and establishes accountability for the person responsible for the actual management of a legal entity when the conditions for legal liability are satisfied.

It also provides for informants who were not involved in the violation to receive a reward of up to ten percent of the fines collected, subject to applicable regulations, provided their information leads to evidence that secures a final conviction.

Officials state that the measures are intended to treat commercial concealment not merely as a licensing breach but as a practice that can distort competition and undermine businesses operating within the law. By targeting the use of licences to conceal the true operators, the legislation seeks to make compliance, management efficiency, service quality and overall business performance the basis of competition in Kuwait’s market.