Bahrain: Business Environment

Accounting Rules

Tax Year: From January 1 to December 31, unless otherwise specified in the company's articles of incorporation.
Accounting Standards: There is no local GAAP in Bahrain. All companies must prepare their financial statements according to the international accounting standards (IFRS). Small and medium enterprises can use the IFRS for SMEs standard (a simplified version of the normal IFRS standards).
Accounting Regulation Bodies: Company Affairs Directorate, Ministry of Industry and Commerce
Accounting Reports: The Bahrain Commercial Companies Law requires each registered entity to produce a balance sheet, a profit-and-loss account and the director's report for each financial year.
Publication Requirements: Article 286 of the Bahrain Commercial Companies Law of 2001 requires all companies incorporated in Bahrain to maintain proper books of accounts and prepare - for each financial year and within at least three months from the end thereof - the company’s balance sheet, profit and loss account, and a report on the company’s activities and financial position, together with their recommendations as regards profit distribution.
The report, the balance sheet, the profit and loss account, and the other reports shall reflect the company’s true financial position.
All branches of foreign companies, limited liability companies and corporations must submit annual audited financial statements by the Directorate of Commerce and Company Affairs of the Ministry of Commerce, as well as articles and/or articles of association. Depending on the company's business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).
Professional Accountancy Bodies: BAA , Bahrain Accountant Association
BCICAI , Bahrain Chapter of the Institute of Chartered Accountants of India
Certification and Auditing: All public and private joint-stock companies, limited liability companies and "exempt companies" must be audited annually. Auditors appointed at the annual meeting of shareholders must be registered with the Ministry of Commerce.
Accounting News

Tax Rates

Consumption Taxes

Nature of the Tax: Value-added tax (introduced on 1 January 2019)
Tax Rate: The standard rate increased from 5% to 10% beginning 1 January 2022.
Reduced Tax Rate: Zero-rated items include the export of goods outside the GCC implementing states' territory (the supply of goods to other GCC implementing states shall be treated as an export until the full integration of the Electronic Services System across all the GCC implementing states); the supply of services from a resident taxable person in Bahrain to a customer residing outside the GCC implementing states and benefiting from such service outside the GCC implementing states; re-export of goods that were temporarily imported for repairs, renovation, modification or processing, and the service added to it; the supply of goods to, within or under a customs duty suspension scheme; transportation services of passengers and goods to or from Bahrain, other services included with such transportation services, and the related means of transport; local transportation sector; oil, oil derivatives and gas sector (The upstream, midstream and downstream activities are generally zero-rated. As an exception, zero-rating does not apply to specific downstream activities, such as import or supply of oil, oil derivatives and gas by-products, for example, plastic and fertilizers); the supply or import investment grade gold, silver and platinum with purity level of not less than 99% and can be traded on global bullion market, based on a certificate issued by the competent authority responsible for testing precious metals and gemstones in Bahrain; the first supply after extraction of gold, silver and platinum for trading purposes; supply or import of pearls and precious gemstones after obtaining the certificate issued by the competent authority responsible for testing the pearls and gemstones to determine their nature; the supply of preventive and basic health care services and related goods and services (the health care services must be qualifying medical services provided by qualified medical professionals or qualified medical institutions to a patient during the course of its treatment); the supply or import of specific medicines and medical equipment; the supply of educational services and related goods and services to nurseries, pre-elementary, elementary, secondary and higher education; the supply and importation of food items listed in the GCC list of basic food items; construction of new buildings.

The supply of bare land and buildings, specific financial services, and certain imported goods are exempt.
Other Consumption Taxes: Tobacco products and energy drinks are subject to excise tax at 100%, while carbonated drinks are subject to excise tax at 50%. Further goods may also become subject to excise tax in the future.

Corporate Taxes

Company Tax: None, except for oil companies, at a 46% rate of net profits
Tax Rate For Foreign Companies: Only entities that operate in the oil and gas sector or derive profits from the extraction or refinement of hydrocarbons are taxed in Bahrain.
Capital Gains Taxation: Capital gains are not taxed in Bahrain.
Main Allowable Deductions and Tax Credits: Bahraini laws provide for deductions for nearly all costs associated with taxable activities in the country, such as the cost of production, refinement, remuneration of employees associated with these taxable activities (including social insurance and pensions paid for the benefit of these employees), and other operational losses.

All reasonable and justifiable costs of production and exploration of products sold during the current taxable year are deductible for tax purposes if these expenses have not been deducted elsewhere in calculating net taxable income.
All taxes and duties not imposed by the Bahrain income tax law - such as customs duties - can also be deducted from taxable income.
Unutilised losses may be carried forward indefinitely and deducted up to an amount equivalent to the net income. Carryback of losses is not permitted.
Other Corporate Taxes: Other taxes include:
- registration and licence fees: companies are subject to registration fees (from BHD 25 to 1,000) and licence fees that vary according to the nature of their activity
- stamp duty: applies to the transfer and/or registration of real estate only and is levied at a rate of 2%. If the duty is paid within 60 days following the transaction date, the rate of the stamp duty is reduced to 1.7%
- municipality tax: levied on the rental of commercial and residential property to expatriates at a rate of 10%
- social security contribution: employer's social security contribution is 15% for Bahraini workers and 3% for non-Bahraini workers. The employer's portion will be increased by one percentage point from 2024 to 2028, resulting in a cumulative share of 20% for the employer in 2028. Penalties ranging from BHD 100 to BHD 500 apply for failure to provide income information and corresponding contributions, which may be doubled for repeated failures.
- a 10% levy is imposed on the gross turnover of hotels and first-grade restaurants.
Other Domestic Resources: Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Bahrain	Middle East & North Africa	United States	Germany
Number of Payments of Taxes per Year	3.0	20.8	10.6	9.0
Time Taken For Administrative Formalities (Hours)	22.5	195.1	175.0	218.0
Total Share of Taxes (% of Profit)	13.8	32.1	36.6	48.8

Source: Doing Business - Latest available data.

Individual Taxes

Tax Rate

Individual income tax	Bahrain does not apply any personal income tax
Social security contributions paid by employees	8% (1% for expat employees), calculated on a maximum monthly earning of BHD 4,000

Allowable Deductions and Tax Credits: No personal income tax is levied in Bahrain.
Special Expatriate Tax Regime: The income of residents or non-residents paid outside Bahrain is not subject to tax or social insurance rules.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: The list of tax treaties signed by Bahrain.
Withholding Taxes: No withholding taxes (interests, dividends, royalties) are levied in Bahrain.

Sources of Fiscal Information

Tax Authorities: Overview of Bahrain's tax measures in response to Covid-19
Ministry of Finance and National Economy
National Bureau for Revenue
Other Domestic Resources: Bahrain VAT guideline
Bahrain tax news

Intellectual Property

National Organisations: The Foreign Trade and Industrial Property Services of the Ministry of Industry and Commerce.
Regional Organisations: Bahrain participates in the work of the GCC Patent Office.
International Membership: Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Act No. 1 of 2004 on Patents And Utility Models et Act No. 14 of 2006 amending some provisions of Law No. 1 of 2004 in respect of Patents and Utility Models	Patents are protected for 20 years (ten years for utility models) from the date of filing or, if priority is claimed, from the date on which it is claimed.	Patent Cooperation Treaty (PCT)
Trademark Legislative Decree No. 11 of 2006 in respect of Trade Marks	Trademark registration is valid for 10 years starting from the day of filing the demand (Decree No. 11 in respect of Trade Marks) and can be renewed for ten-year periods.	Trademark Law Treaty Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design Act No. 6 of 2006 on Industrial Designs and Models	Patent registration is valid for five years and can be renewed twice more, each time again for five years.
Copyright Act No. 22 of 2006 relating to the Protection of Copyright and Neighbouring Rights	Author's rights are protected for the duration of the author's life plus 70 years after his or her death.	Berne convention For the Protection of Literary and Artistic Works Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations WIPO Copyright Treaty WIPO Performances and Phonograms Treaty
Industrial Models Act No. 6 of 2006 on Industrial Designs and Models	Ten years starting from the registration.

Legal Framework

Independence of Justice: Justice is not completely independent from the executive power. Because judges are appointed by the King, courts can be subject to governmental pressure.
Equal Treatment of Nationals and Foreigners: Since Bahrain courts respect the principle of party autonomy, contracts or agreements may be subject to foreign law. Dispute resolution is usually done before the courts, but alternative forms of extrajudicial arbitration can be chosen. The interpretation and application of the law sometimes varies according to the ministry, and may depend on the size and connections of the local partner of the investor. Foreign workers may be discriminated against in favor of Bahrainis.
The Language of Justice: In the courts, Classical Arabic is the official language, but the accused, witnesses and lawyers can speak Barhaini Arabic or English when the issue concerns foreigners. In municipalities (local courts) Arabic is always used, with the possibility to use an interpreter. In Sharia courts (which belong to the Sunni branch or Ja'fari branch and handle cases of divorce, marriage, inheritance and child custody), only Arabic is used.
Recourse to an Interpreter: Possible
Sources of the Law and Legal Similarities: Bahrain has a mixed legal system influenced by the British common law, the Egyptian Civil, Penal and Commercial Codes, the Islamic law (sharia) and the custom law.
Checking National Laws Online: Lexadin

Standards

National Standards Organisations: Bahrain Standards and Metrology Directorate - BSMD, Bahrain Standards and Metrology Directorate (BSMD)
Integration in the International Standards Network: Bahrain is a member of the International Standards Organization (ISO); associated member of the International Electrotechnical Commission (IEC); member fo the International Electrotechnical Commission for conformity testing and certification of Electrotechnical Equipment and Components (IECEE); member of the International Organization of Legal Metrology (IOLM). Bahrain is also closely following the works of the Codex Alimentarius through the Codex Alimentarius Commission (CAC).
On the regional level, Bahrein is the member of the Arab Centre for Standardization and Metrology of the GCC Standardization Organization (GSO) and the Arab Industrial Development and Mining Organization (AIDMO).
Classification of Standards: Standards consistent with the norms of the GCC Standardization Organization (GSO).
Online Consultation of Standards: Consult the catalog of GCC standards of the Golf Countries Standardization Organization.
Certification Organisations: Bahrain Standards and Metrology Directorate - BSMD Bahrain Standards and Metrology Directorate (BSMD)

Business Practices

General Information: Bahrain Country Commercial Guide, Trade guide on Bahrain by BuyUSAinfo
Kwintessential Bahrain
Opening Hours and Days: Government offices are open from 7 am to 2h15 pm Saturday to tuesday. Banks are mostly open from 7h30 am to 2 pm, Sunday to Thursday.
Businesses have specific opening times and their working hours vary. Most businesses are open between 8 am and 5 pm from Sunday to Thursday, small companies closing during luchtime, from noon to 2 pm. Shops and supermarkets are mostly open from 8h30 am to 12h30 pm and from 3 pm to 8 pm. Some supermarkets are open 24/7, large shopping centres (malls) are often open very late, even after midnight on a weekend.

Public Holidays

New Year's Day	1 January
Mawlid (Birth of the Prophet)	Varies, religious holidays are ruled by the lunar calendar and are subject to change
May Day	1 May
Ramadan	July
Eid al Fitr (End of Ramadan)	Varies, religious holidays are ruled by the lunar calendar and are subject to change
Eid al-Adha (Festival of the Sacrifice)	Varies, religious holidays are ruled by the lunar calendar and are subject to change
Hijri New Year	Varies, religious holidays are ruled by the lunar calendar and are subject to change
Day of Ashura	Varies, religious holidays are ruled by the lunar calendar and are subject to change
National Holiday	December 16-17

Periods When Companies Usually Close

The holy month of Ramadan

One month, local religious holidays are ruled by the lunar calendar are subject to change.

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