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Bahrain

Why bahrain?

Bahrain is a small island country located in the Persian Gulf, just off the eastern coast of Saudi Arabia. It is an archipelago of 33 islands, with the largest island being Bahrain Island. Bahrain is known for its thriving economy, rich culture, history, and its strategic location as a hub for business and trade. The capital city of Bahrain is Manama, which is the country’s largest city and its financial and commercial center. The official language of Bahrain is Arabic, although English is widely spoken and is the language of business and commerce. The currency used in Bahrain is the Bahraini Dinar (“BHD”). Bahrain has a diverse economy, with oil and gas production being the primary industries. The country has also invested heavily in infrastructure, including transportation, telecommunications, and tourism, which has helped to attract foreign investment and promote economic growth. The government of Bahrain has implemented several economic reforms to attract more foreign investment and diversify the economy, including the establishment of free trade zones and the simplification of business registration procedures.

Advantages

Bahrain is a favorable destination for doing business due to several advantages that it offers to investors and entrepreneurs. Some of the key advantages of doing business in Bahrain are:

Strategic location:

Bahrain’s location in the heart of the Gulf region provides easy access to the Middle Eastern, Asian, and European markets. The country is strategically positioned as a hub for trade and commerce, making it an ideal destination for businesses looking to expand their reach.

Stable political and economic environment:

Bahrain has a stable political and economic environment, with a well-developed legal framework that provides a safe and secure environment for doing business. The country is also known for its transparent and efficient regulatory system, making it easier for businesses to operate.

Competitive tax regime:

Bahrain has one of the lowest tax rates in the Gulf region, with no personal income tax, no corporate tax, and no value-added tax (“VAT”). This makes Bahrain an attractive destination for businesses looking to minimize their tax burden.

1. Skilled workforce:

Bahrain has a highly educated and skilled workforce, with a strong emphasis on education and training. The country also has a favorable labor market, with flexible labor laws and a competitive wage structure.

2. Business-friendly policies:

Bahrain has implemented several business-friendly policies, including the establishment of free trade zones and simplified business registration procedures. The government also provides incentives to attract foreign investment, including tax exemptions and other benefits.

Infrastructure:

Bahrain has a well-developed infrastructure, including modern airports, seaports, and a well-connected road network. The country has also invested heavily in telecommunications, making it easy for businesses to communicate and access information.

Simple Tax Regime

Bahrain has a relatively simple and competitive tax regime compared to many other countries. Here are some of the key features of the tax regime in Bahrain:

No personal income tax:

Bahrain does not impose personal income tax on its residents, which makes it an attractive destination for highly skilled workers and expatriates.

No corporate tax:

There is no corporate tax on profits earned by companies registered in Bahrain. This has helped to attract foreign investment and promote economic growth.

No value-added tax (“VAT”):

Bahrain does not currently impose VAT on goods and services, although there have been discussions about implementing a VAT system in the future.

Customs duty:

Bahrain imposes customs duty on certain imported goods. The rates vary depending on the type of product and can range from 0% to 100%.

Excise tax:

Bahrain imposes an excise tax on specific goods, including tobacco, energy drinks, and soft drinks. The rates vary depending on the type of product and range from 50% to 100%.

Social insurance:

Employers in Bahrain are required to contribute to the country’s social insurance system, which provides benefits such as healthcare, retirement, and disability benefits to employees.

Withholding tax:

Bahrain imposes withholding tax on payments made to non-residents, including dividends, interest, and royalties. The rates vary depending on the type of payment and can range from 0% to 10%.

Overall, Bahrain’s tax regime is relatively simple and competitive, with no personal or corporate income tax and a low tax burden on businesses. These factors make Bahrain an attractive destination for foreign investment and business expansion.

Bahrain Companies

Limited Liability Company (“LLC”):

An LLC is the most common type of company in Bahrain and is suitable for small to medium-sized businesses. An LLC can have up to 50 shareholders, and the liability of each shareholder is limited to their investment in the company. LLCs are required to have a minimum share capital of BHD 20,000.

Joint Stock Company (“JSC”):

A JSC is suitable for large businesses, and it can be formed as a public or private company. A JSC can have unlimited shareholders, and the liability of each shareholder is limited to their investment in the company. The minimum share capital for a JSC is “BHD” 250,000.

Partnership:

A partnership can be formed between two or more individuals or entities. There are two types of partnerships in Bahrain: general partnership and limited partnership. In a general partnership, all partners have unlimited liability for the debts of the partnership. In a limited partnership, there are general partners who have unlimited liability and limited partners whose liability is limited to their investment in the partnership.

Branch Office:

A foreign company can establish a branch office in Bahrain, which can conduct business under the parent company’s name. The branch office must be registered with the Ministry of Industry, Commerce, and Tourism, and it must appoint a local agent to represent the company in Bahrain.

Representative Office:

A foreign company can also establish a representative office in Bahrain, which can carry out market research, promote the company’s products or services, and establish business contacts in Bahrain. A representative office cannot engage in any commercial activity, and it must be registered with the Ministry of Industry, Commerce, and Tourism.

Sole Proprietorship:

A sole proprietorship is a type of business that is owned and operated by a single individual. The owner has unlimited liability for the debts of the business.

Single Person Company (“SPC”):

An SPC is a new type of company in Bahrain that allows a single person to form a limited liability company. An SPC is suitable for small businesses and entrepreneurs.

Holding Company:

A holding company is a company that owns a controlling interest in one or more other companies. The holding company does not engage in any commercial activity but instead holds assets such as shares, patents, and intellectual property.

Closed Shareholding Company (“BSC”):

A BSC is a type of company that is similar to an “LLC” but with a minimum of five shareholders. The liability of each shareholder is limited to their investment in the company.

Author: Chandrawat & Partners

Topic: Doing Business in Bahrain

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