Legal Entities for Kuwait
A legal entity is a recognized party with rights and responsibilities given by legislation.
These are the rights and responsibilities of a legal entity:
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Own property
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Trade
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Repay debt
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Account for themselves to regulators, taxation authorities, and owners according to rules specified in the relevant legislation
Their rights and responsibilities may be enforced through the judicial system.
A legal entity has responsibility for elements of your enterprise for the following reasons:
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Facilitating local compliance
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Minimizing the enterprise's tax liability
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Preparing for acquisitions or disposals of parts of the enterprise
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Isolating one area of the business from risks in another area. For example, your enterprise develops property and also leases properties. You could operate the property development business as a separate legal entity to limit risk to your leasing business.
No legal entities are predefined. You must create all legal entities that apply to the enterprise you're setting up. Use the Manage Legal Entity HCM Information task in the Setup and Maintenance work area.
When defining legal entities, you must consider the following:
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Roles of Legal Entities
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Types of Legal Entities
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Registrations
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Additional Reporting Information
Role of Legal Entities
In configuring your enterprise structure, the contracting party on any transaction is always the legal entity. Individual legal entities:
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Own the assets of the enterprise
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Record sales and pay taxes on those sales
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Make purchases and incur expenses
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Perform other transactions
Legal entities must comply with the regulations of jurisdictions, in which they register.
To support local reporting requirements, you create and register legal reporting units (LRU).
You are required to publish specific and periodic disclosures of your legal entities' operations based on the different jurisdictions' requirements. Certain annual or more frequent accounting reports are referred to as statutory or external reporting. These reports must be filed with specified national and regulatory authorities.
A legal entity can represent all or part of your enterprise's management framework.
Types of Legal Entities
Two types of legal entities exist:
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A legal employer is a legal entity that employs workers.
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A payroll statutory unit (PSU) is a legal entity that's responsible for paying workers, including the payment of payroll tax and social insurance. A PSU can pay and report on payroll tax and social insurance on behalf of one or many legal entities. That choice depends on the structure of your enterprise.
When defining a legal entity, you must consider the context in which it's to be used:
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If the entity is to be used in an HCM context, designate it as a legal employer. In an HCM implementation, it's mandatory to define legal employers.
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If the entity is to be used in a payroll context, designate it as a payroll statutory unit (PSU) for payroll processing and tax reporting.
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You can define a legal entity that's both a legal employer and a PSU.
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If multiple legal employers must be grouped together for tax reporting purposes, you can associate them all with a single PSU. If legal employers don't report together, they must be segregated by PSU.
Registrations
When you create a legal entity, the entity automatically establishes a registration with the identifying jurisdiction. While creating the legal jurisdiction, select Social Insurance as the legislative category and indicate it as the identifying jurisdiction. For additional jurisdictions, use the registration code Civil Identifier for the Public Authority for Civil Information. Use the registration code Registration Number for the Ministry of Social Affairs and Labor. If the legal entity interacts with other legal authorities, you must create additional registrations as appropriate. Tax registrations are done at the LRU, or PSU level.
Additional Reporting Information
When defining a legal entity, use the Manage Legal Entity HCM Information task in the Setup and Maintenance work area. Provide additional information required for HR and payroll reporting.
If the legal entity is also a legal employer, provide details on the Legal Employer and Kuwaiti Legal Employer details tabs. Indicate the Company Type of the legal employer.
To use the complete contract functionality, you must select the two-tier single contract-single assignment model. Use the Manage Legal Entity HCM Information task and select the employment model in the Legal Employer Details section.
If the legal entity is also a PSU, specify:
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Fiscal Year Start date, and select the associated Legislative Data Group.
The Fiscal Year Start Date for Kuwait is January 1, of the year of going live with the Oracle application.
Note: It is at the PSU level that we associate the legislative data group.