Bahrain Tax & Business Guide - Deloitte

Basic facts
Population 724,645 Inflation 2.1% (2006)*
Main languages Arabic, English, Farsi, Urdu GDP per head US$20,750*
Currency Dinar (BHD) GDP growth 7.8% (2006)*
Economic communities WTO, Gulf Co-operation Council (GCC)
GDP sources 0.4% agriculture, 39.6% industry, 60.0% services
*Economist Intelligence Unit estimates.
Political environment

The Kingdom of Bahrain, previously an absolute monarchy, became a constitutional monarchy in February 2002. A parliament with powers to propose and ratify legislation was elected in October 2002.

The current ruler, King Hamad bin Isa al-Khalifa, acceded to the throne in March 1999. The next legislative election is due in 2010.
Foreign trade and investment
Exports US$11.6bn (2006)* Imports US$8.5bn (2006)*
*Economist Intelligence Unit estimates.

Major exports: Oil and mineral products, base metals and textiles.

Main export markets: India, Japan and Korea.

The kingdomÌs major exports are petroleum-related, consisting of petroleum products from the refinery at Sitra and revenue from the sales of crude oil pumped at the Saudi Arabian-run Abu Saafa oilfield (although this was recently suspended and it is unclear whether Saudi Arabia will resume this arrangement in the future). Energy exports are sold predominantly in India. Japan and Korea are also major destinations for exportsÛprimarily oil-related and aluminium.
Business and financing
Business forms Limited liability company, joint stock company, single-person company

A foreign investor may operate as a limited liability company, single-person company, closed joint stock company, branch office, regional office or holding company. The choice of legal vehicle is based on the size of the company and investorsÌ requirements.

One hundred per cent foreign ownership is permitted in certain circumstances and for certain activities. Otherwise, foreign ownership may be limited to 49%.
Labour environment
Unemployment rate N/a Minimum wage Under consideration

The government is examining the difficulties facing the labour market and is considering proposals to implement a minimum wage for private-sector workers. BahrainisationÛthe policy of replacing foreign workers with local workersÛhas failed to stem increased unemployment, and the government is contemplating significant changes to labour laws to stimulate employment of locals, including the levying of fees on employers of foreign workers.

Social insurance is charged with respect to expatriate employees at 3% of salary, payable by the employer. For Bahraini employees, the social insurance rate is 15% (10% payable by the employer and 5% by the employee).
Taxation
Corporate tax
Main rate 46% applies to oil companies only

There is no corporate tax for most companies in Bahrain, but income tax is levied on the profits of oil companies. The tax is payable by any company engaged in the exploration, production or refining of oil in Bahrain.
Individual tax
No individual income tax

There is no individual income tax in Bahrain.
Capital gains
Gains are not taxed

There is no taxation of capital gains.
Indirect tax
No VAT or general sales tax

There is no value-added tax (VAT) or general sales tax in Bahrain.
Tax administration and compliance
Tax year Calendar year

The tax year for companies that must pay tax is the calendar year.
Additional tax information
Withholding taxes There are no withholding taxes.
Tax treaties Bahrain has signed more than five tax treaties.
Dividends There is no taxation of dividends.
Revenue protection There is no transfer-pricing or anti-haven (CFC) legislation.
Groups There is no provision for group taxation.
Incentives There are no specific tax incentives.
Other taxes Company registration fees, Customs duties, Sales tax on gasoline, Training levy, Municipal tax on commercial rented property.