Bahrain: What you need to know about the country
Bahrain stands out for its liberal business environment and status as a MENA financial hub. The absence of corporate income tax for most business sectors and a developed digital infrastructure make it attractive to startups and international companies. However, it is important to consider the competition with Dubai and the limited domestic market: the country's population is 1.5 million people.
Legal system
Sources of law
- Sharia (applied in family and inheritance matters).
- International treaties (if they do not contradict Sharia).
- Constitution.
- Royal decrees and ordinances (Nizams) are the main instruments of legislation and regulate a wide range of issues, including the economy, trade and social relations.
Reforms for business
- Commercial Companies Act (2021): simplified business registration, allowed 100% foreign ownership.
- Bankruptcy Law (2018): Accelerated restructuring procedures.
- Intellectual property: integration into the international system of intellectual property protection, tightening the fight against piracy in accordance with WIPO standards.
Trends
Diversification of the economy
- Reducing dependence on oil: by 20243, the share of oil in GDP is reduced to 108%.
- Development of the financial sector (20% of GDP) and tourism.
Development of the financial sector
- Bahrain Leads MENA in Fintech: Central Bank of Bahrain’s Regulatory Sandbox Attracts 150+ Fintech Startups
- Bahrain is home to the headquarters of Citi, BNP Paribas, JP Morgan in Bahrain Fintech Bay.
- Binance and CoinMENA received cryptocurrency licenses.
- Opening of the first Islamic bank (Bahrain Islamic Bank) and digital banks (ilaa Bank).
Tourism
- Simplification of visa procedures.
- Development of cultural tourism (Formula 1, Bahrain International Circuit).
Taxes
VAT
Bahrain has a VAT rate of 10%.
A 0% rate applies to certain types of supplies and exports outside the GCC countries.
Income tax
Most companies in Bahrain are exempt from income tax.
However, there is a trend towards its introduction into more and more sectors of the economy.
Tax at source
There is no withholding tax on payments of dividends, interest or royalties to non-residents in Bahrain.
Personal Income Tax
There is no personal income tax in Bahrain. However, it is important to remember that when hiring employees, the employer is required to pay social security contributions for the employees.
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Over the years of working in the UAE and other MENA countries, we have acquired a deep knowledge of local legislation, which, combined with knowledge of international standards, allows us to offer solutions tailored to the unique needs of each client.
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