Accounting and tax

Bahrain taxation information

Tax considerations

  1. Bahrain entities are exempt of most taxes including i) corporate income tax; ii) capital gain tax; iii) withholding tax and iv) personal income tax. However, oil companies are taxed at 46%;
  2. Value Added Tax (VAT) has been introduced and implemented in the Kingdom of Bahrain w.e.f. 1st January 2019 at a standard rate of 5%. Basic food items, private education as well as domestic oil and gas industries 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 vice goods such as alcohol and cigarettes.

Miscellaneous tax matters

  1. Bahrain companies are required to file an estimated income tax declaration by the 15th day of the third month of the tax year;
  2. All resident companies must also submit audited financial statements to the authorities, 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 35 countries including: i) China ii) India iii) Canada iv) Germany and v) Ireland, and a free trade agreement with the USA;
  5. There is a 1% monthly penalty for failure to file and pay taxes.

Services Healy Consultants Group PLC provides

  1. Healy Consultants assists 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’ help 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 business entity must appoint a manager. The manager is appointed by the memorandum of association (MA) or by 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 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 i) the World Intellectual Property Organization (WIPO) ii) World Trade Organization (WTO) (1995) iii) the Paris Convention iv) the Patent Cooperation Treaty (PCT) v) the WIPO Copyright Treaty vi) the WIPO Performances and Phonograms Treaty (WPPT) and vii) the Rome Convention.

Contact us

For additional information on our accounting and legal services in Bahrain, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi