Vacant Land Fee in the State of Kuwait
By: Suha Al-Sahli
Law No. 126 of 2023 on Combating the Hoarding of Vacant Land has redefined the relationship between real estate ownership and economic behavior in the State of Kuwait by imposing a progressive annual fee on undeveloped residential land. Although the legislator did not use the term “tax,” the economic effect of this fee places it within the same category in terms of objective and regulatory function.
Unlike traditional forms of taxation, where the primary focus is revenue collection for the state, fees or taxes imposed on vacant land operate within a different framework. The objective here is not revenue generation; rather, it is directly linked to influencing the landowner’s behavior either encouraging economically productive decisions or imposing an increasing financial burden over time.
Comparative international experience shows that vacant land fees or taxes aim to address what is commonly referred to as real estate stagnation that is, the retention of large land areas without development, whether for waiting or speculative purposes. The Kuwaiti Constitutional Court affirmed this direction in Appeal No. (15 of 2024), stating that such fees do not constitute a penalty, nor do they infringe upon property rights or other constitutional principles. Instead, they are a legitimate regulatory instrument intended to limit land hoarding in pursuit of a public interest related to housing, land use, and urban planning, within the discretionary authority granted to the legislator in regulating the real estate market.
Within this context, the law is expected to have a direct impact on the decisions of landowners subject to the fee in the coming phase precisely because of the method of calculation and its relatively rapid temporal escalation.
In most international models, fees are imposed on an ad valorem basis – a percentage of the land’s market value. These rates typically begin at 1% of the land value, as in Australia and Canada for example, with a statutory cap usually not exceeding 3%. In some other jurisdictions, such as the Kingdom of Saudi Arabia following recent amendments, the law stipulates a maximum fee “not exceeding 10% of the land value,” subject to regulatory controls set out in executive regulations. The Saudi system also introduced a fee on vacant properties calculated based on equivalent rental value, not exceeding 5% of the property value, with the possibility of increasing it to 10% by a decision of the Council of Ministers upon the recommendation of the competent ministerial committee established by the Minister of Housing.
It is noteworthy that Saudi Arabia adopts two distinct bases for fees: “white land” (undeveloped land) and “vacant properties,” while maintaining valuation-based calculation, whether linked to land value or property value and equivalent rent.
Some systems go further in addressing these issues. In Brazil, for example, municipalities are granted progressive powers beginning with the imposition of a graduated tax on vacant land at increasing rates, which in certain cases may culminate in expropriation of the land in favor of the state. This framework reflects a legislative logic that treats progressive vacant land charges as part of an integrated pathway aimed at breaking real estate inertia and compelling owners to reallocate land in a manner consistent with the public interest.
Despite variations among these models, the common denominator remains that the financial burden is generally limited in relative terms and tied to market fluctuations and property valuation mechanisms.
By contrast, the Kuwaiti legislator adopted a different model. The fee is not calculated as a percentage of land value but is instead based on a fixed amount per square meter (KWD 10/m²), escalating to KWD 100/m² in the fourth year. This difference in mechanism is a decisive element in understanding the practical impact of the fee. Land area, unlike value, is a fixed element unaffected by market conditions or transaction freezes, meaning that costs accumulate over time regardless of surrounding circumstances.
To illustrate the practical effect on landowners, consider an owner holding 5,000 m² of vacant residential land. After excluding 1,500 m² not subject to the fee, 3,500 m² remain subject to calculation: • Year 1: 3,500 × 10 = KWD 35,000 • Year 2: 3,500 × 40 = KWD 140,000 • Year 3: 3,500 × 70 = KWD 245,000 • Year 4 and thereafter: 3,500 × 100 = KWD 350,000 annually
The proportional increase rises by approximately 400% over the base year in the second year, 700% in the third year, and approximately 1,000% in the fourth year compared to the base year.
This progression demonstrates that three years of inaction may shift the owner from an annual burden measured in tens of thousands to a stable annual obligation approaching hundreds of thousands of dinars. This places the Kuwaiti model in a distinct category in terms of the speed of escalation and magnitude of financial impact compared to many other international models.
Nevertheless, the legislative framework, to date, has not introduced severe enforcement penalties for non-compliance. The law does not provide for fines, accumulated interest, account or wage attachment, or expropriation. Instead, it requires governmental authorities to prohibit dealings with non-paying owners and to block the transfer of ownership for vacant lands with unpaid fees. Overall, this constitutes a relatively moderate enforcement regime.
What does this mean for owners of vacant land subject to the law?
Certain executive details of the law remain under development, which is natural in legislation with significant economic impact. However, the absence of executive regulations at this stage does not necessarily suspend the law’s application. Their role is primarily procedural. It’s concerned with organizing and detailing implementation mechanisms and not creating or negating the underlying obligation.
In light of the existing legislative framework and the settled judicial position of the Constitutional Court, it is reasonable to expect that fee calculation will commence at the beginning of the upcoming phase, most likely the first quarter of 2026.
This reality places landowners before a delicate equation. Rushed and insufficiently considered decisions may lead to unforeseen financial or legal consequences. Conversely, relying on postponement or awaiting further clarity may not constitute a safe strategy in light of the explicit statutory timeline for escalation.
A careful reading of the figures, and a clear understanding of the law’s rationale and its intersections with financial, real estate, and regulatory considerations, are essential before taking any step whether related to development, restructuring, or any other action that may affect the calculation of the fee.
Suha Al-Sahli
Master’s in International Law and International taxation
Suha Al-Sahli holds a Master’s degree in International Law and International Taxation from the University of Lausanne. She works as a Legal Counsel and is associated with Emtithal Law, focusing on legal matters related to international regulation and taxation.
