Accounting, Audit, Advisory and Tax Services in Kuwait

In the business world, most of us are aware of the basics necessary to keep the business going. However, some might be unaware. This article will give you an overall picture of the Accounting and Business world.  Accounting, Audit, Advisory and Tax are basically the foundation of all the organizations. To give a very brief summary, accounting is used to record transactions, tax is a contribution to the country’s revenue, audit is used to see if the transactions recorded and the tax paid are in accordance to the rules and regulations and lastly Advisory is a vast variety of services which companies use to enhance the operations and efficiency of their organization. Now that we have a brief summary and an understanding of the basics, we will discuss in detail how these things work specifically in the State of Kuwait.

Accounting in Kuwait

In Kuwait, there is no mandatory accounting system, however companies are asked to respect the IFRS standards. Just in case you’re not aware, IFRS is an abbreviation for International Financial Reporting Standards. Basically, it is the international accounting framework which consists of rules required to be followed to properly organize and report financial information. IFRS rules are issued by the London based International Accounting Standards Board (IASB). This framework is currently used in more than 120 countries. IFRS requires businesses to report their financial results and financial position using the same rules, this helps in barring any fraud or manipulation. There is also a uniformity in the financial reporting of all businesses using IFRS, this makes it easy to compare and contrast their financial results. IFRS standards are used primarily by businesses reporting their financial results everywhere in the world except the United States, where GAAP (Generally Accepted Accounting Principles) is used.

In Kuwait - Small, Medium or Large - each company is required to have an adequate accounting system and is required to keep several accounting books.

To say the least, accounting is the backbone of any company. Keeping record of every transaction gives the company an opportunity to look at the bigger picture afterwards. It can help to monitor the performance of the company, and even develop strategies, budgets and plans by looking at the trends of sales and expenditures.

Large organizations usually have a separate department and proper system set for accounting, although it is not easy for startups to hire an accountant in the start since it isn’t very cost-effective. Sometimes SMEs also don’t use a proper accounting system and try to record transactions on their own. It can work in the beginning; however, it can cause problems afterwards when your business will get to the stage where it’s time to expand, open a new location or build out a team, a lack of financial records will make things difficult.

Bookkeeping Services in Kuwait:

If you’re suffering from these problems and looking for an Accounting Firm in Kuwait, Alkhuzam and Co. – Morison KSi has the solutions to all of these problems and provides an accounting software specifically designed for Bookkeeping services in Kuwait for SMEs. Its cost-effective and as well as secure to use. This software will manage all your bookkeeping and financial statements including Income Statement, Balance Sheet even your Inventory, Payroll management and much more.

Advisory in Kuwait

Companies usually hire consultants for expert opinion in a specific matter or problem they face. Advisory is actually a very vast service. It includes Business Planning, Feasibility Studies, Market Research Intelligence, Organizational Restructuring, Marketing Plans, Digital Marketing, Brand Advisory, Business Valuation, Digital Marketing and many more. 

So, when does your business need an advisory service? If you’re planning to start a business but unaware of the risk, or If you’ve made up your mind to start a business, but you have no clue about who your target customers are? Or where you should re-direct your business? Then all you need is a business advisor. In short, if your business is starting to feel like a sinking boat then you should hire an advisor to rescue it!

Our team at Morison Advisory analyses your business, detects the problem and provides the full solution for it. For more understanding of our advisory services, we’ve discussed a case study of one of our clients to whom we provided with a Market Research service for their Business Plan.

Case Study: One of our clients related to the Medical Industry required Market Research for their Business Plan which was based on providing a Physiotherapy Habitation Hospital to the patients in Kuwait. They required to find the Market and industry trends in the relevant medical department. Our team conducted a Market Research and our findings consisted of analyzing the physiotherapy differences in the Governmental and Private Hospitals in the Kuwait District. All our findings were a result of both Primary and Secondary Research. After thorough research, we provided a detailed overview along with full solutions for their Business Plan through our Study. The project is now ongoing and moving towards success!

We have talked about advisory for startups, and for existing businesses; but Business Advisory can also be seeked when buying or selling a business. This part of Advisory is called Business Valuation also referred as Due Diligence. It is a process of gathering necessary information for actual or potential risks involved in an investment. So for instance, if you're buying an existing business and need to find the actual value of the business to ensure that the seller isn’t charging you more, or maybe you’re an Investment Company looking for an assessment of the financial health and stability before the purchase of an asset – In any case, Alkhuzam and Co.–Morison KSi can help provide you with high-quality services for various investment opportunities inside or outside Kuwait.

Audit in Kuwait

Audit services can be classified as; Internal Auditing and External Auditing.

For External auditing, it is mandatory for All types of companies in Kuwait under Companies Law No. 1 of 2016 to audit their financial statements by a certified auditor. It ensures that the company is free from fraud and that the financial statements do not contain any form of error or misstatement. It also ensures that the financial statements are made in accordance to the IFRS and are in compliance to the rules and regulations of the country (Kuwait Law).

External Audit gives shareholder’s confidence as an independent review on the financial statements can provide transparency to the shareholders that the company is being run within their best interests. Audit is usually conducted by an independent auditor. The auditor is required to be independent so that the audit opinion wouldn’t be affected by any relations since the audit is expected to have an unbiased and honest professional opinion.

When looking for an Independent auditor to audit the financial statements, companies should usually look for independent auditors in a CPA firm who are licensed by the Ministry of Commerce or the CMA (Capital Market Authority).

Most people are aware of External Audit but are clueless when it comes to Internal Auditing. So, what is Internal Audit and How may it add value to your business? To explain briefly, it is essentially a consulting service that monitors an organization’s internal controls in order to improve the effectiveness of their control, processes and operations and evaluates risk. It assesses the culture, policies and procedures and ensure everything is complying to the laws and regulations of the State.

Internal Auditing is not mandatory for all companies but only to those who are licensed by the CMA  (Capital Market Authority) or seek operational assistance for how their firm is run internally.

Although the external auditor’s responsibility is limited to the financial unit, internal controls are also tested as a part of external audit. A letter is issued to the management to convey the deficiencies of the internal controls. This is done only to ensure that any deficiencies in internal control have not resulted in errors or omissions in the financial statements because nowadays internal controls surround the accounting data collection. However, this is only a by-product of external audit and not the responsibility of an external auditor.

Tax in Kuwait

There is actually no personal tax in Kuwait. You can say that Kuwait is tax free. The foreign companies working in Kuwait however are required to pay a tax of 15% flat. The local companies in Kuwait on the other hand are exempted from paying tax.

Zakat Tax under Law No. 46 of 2006 by the Ministry of Finance states that Kuwaiti public companies and closed joint-stock companies are required to pay Zakat at 1% of the annual profit. Similar GCC entities with entities in Kuwait are also charged with Zakat.

Value added tax (VAT) isn’t applicable in Kuwait yet, but is most likely to be implemented in the future. VAT actually consists of non-complex calculations unlike other tax areas which are implemented by regulatory bodies in foreign countries. The Budget Committee in Kuwait are planning to introduce VAT at a 5% rate on 1st April 2021, the reasons given were that the finance ministry believes they need to accelerate the process of introducing an excise tax on goods such as fizzy / energy drinks and tobacco products first. (VAT Global, 2019)

In a nutshell, running a business can be quite burdensome without proper guidance especially if you’re new to it or don’t have much information. In any case, seeking the help of professionals is recommended. And Alkhuzam and Co. – Morison KSi is one of those places you can seek guidance from, as it consists of professionals who can help you with any area in your business from Accounting to Advisory to Audit or even Tax.