Bahrain legal and accounting and tax considerations in 2024

• Tax considerations

  1. Bahraini companies are completely free of taxation except for companies operating within oil, gas and petroleum exploration, extraction, production or refining industries, in which case, companies are taxed at 46%;
  2. Since the 1^st of January 2019, the Bahraini government has imposed a Value Added Tax (VAT) at a standard rate of 5%. Basic food items, private education as well as oil and gas industries operating in exploitation and exploration, are VAT exempt. The financial services, life insurance and real estate sector are also exempt from VAT (with certain exceptions);
  3. There is a 10% municipality tax on commercial and residential property occupied by expatriates;
  4. A 2% stamp duty is levied on all i) sales and ii) registration of real estate;
  5. A custom duty of 5% is levied on the cost of imported goods. A higher rate of 125% and 100% are levied on alcohol and cigarettes respectively;
  6. Bahrain has no capital gains tax, payroll tax nor withholding tax.

• Miscellaneous tax matters

  1. Bahrain companies are required to file tax returns quarterly before the last day of the month following the end of the tax period;
  2. All companies are also required to submit audited financial statements to the authorities within 6 months of the company’s financial year-end, as required by Law 26 of the 1996 Bahrain Commercial Companies Law;
  3. All goods imported into the Bahrain require customs clearance through the Directorate General of Customs which may only be obtained upon payment of the applicable customs duty. If an importer fails to settle the duty, the Bahrain customs are authorized to sell the goods to recover the due amount;
  4. Bahrain has Double Taxation Avoidance Agreements (DTA) with over 40 countries including: i) China ii) India iii) Canada iv) Germany and v) Ireland, in addition to a free trade agreement signed with the USA;
  5. There is a monthly penalty 1% for failure to file and pay taxes on time.

• Services Healy Consultants Group provides

  1. Healy Consultants Group is able to assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets, and sensitivity analysis;
  2. It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfil those obligations annually. Let us know if you need Healy Consultants Group’s assistance to clarify your annual reporting obligations.

• Legal and compliance

  • Corporate matters

    1. The Commercial Companies Law covers establishment, structure, and governance of private businesses in Bahrain;
    2. Each Bahrain company is required to appoint a manager, the manager does not need to be resident in Bahrain. The manager is either to be appointed by i) noting the manager in the memorandum of association (MA) or ii) by employing the manager in a separate management contract. Unless otherwise stated in the MA, the company manager shall enjoy full powers of administration, and his acts shall be binding to the company, provided it is supported by the capacity he enjoys.

  • Business matters

    1. Foreign countries may only conduct business in Bahrain after it is licensed to do so by the Ministry of Industry & Commerce (MOIC). All Bahrain business entities must apply for one of the following licenses:
       • A trade license for buying and selling of goods including wholesale or retail trade enterprises, contractors, hotels, transport and storing establishments etc;
       • An industrial license to discover natural resources or transform raw materials into manufactured products;
       • A commercial or professional license to practice any profession such as engineering consultancy, auditing and accounting, business set up, medical and educational services.
    2. All business activities conducted in Bahrain must first receive government approvals, permits and licenses. There is an obligation to register particular products with the government including i) food ii) medical equipment iii) cosmetics iv) medicine.

  • Miscellaneous matters

    1. The Legal Framework of Bahrain is a dual acting system which comprises of mainly Islamic Shari’a and aspects of conventional civil law. The Shari’a courts often hold precedence, especially in matters involving Muslims;
    2. Bahrain is a full member of both i) the World Intellectual Property Organization (WIPO) and ii) World Trade Organization (WTO) (1995).