Bahrain provides a number of incentives to attract foreign investment, including the following:
The primary incentive for Bahrain is the fact that it is a tax free economy, including no corporate tax, no personal income tax, no withholding tax, no capital gains tax, and no value added tax (In order to mitigate the impact of falling oil prices on Bahrain’s economy, the government has approved the levy of 5% VAT from the year 2018 – See Sec. 12 for details).
Only companies engaged in hydrocarbon exploration, production and refinery activities are taxed. The rate is 46%.
Bahrain is a signatory to the Basic Statute of the Gulf Cooperation Council (GCC) that was signed in 1981, as well as the subsequent Economic Agreement adopted by the GCC in 2001.
Bahrain maintains the following three free trade zones:
A free transit zone for the duty-free importation of machinery and equipment and temporary import of goods destined for export.
A free trade zone for the temporary import of goods destined for export.
A free trade zone for the establishment of product manufacturing operations by foreign investors. Goods produced in the zone are subject to 5% customs duty when sold in the GCC and other Arab markets.
The Bahrain International Investment Park (BIIP) is considered part of the GCC, therefore goods produced in the park and exported to other GCC or Arab market are free from import duties.
In addition, companies established in the park receive a number of incentives, including:
- 0% corporate tax with a 10-year guarantee
- Duty-free access to the GCC markets
- 100% foreign ownership
- Exemption from import duties on raw materials and equipment
- Free trade access to the U.S.
- 100% repatriation of capital
- No minimum capital requirements
In order to promote the development of small and medium sized enterprises in pioneer industries, and the employment of Bahraini nationals in such industries, Bahrain has introduced the following incentives:
- Employment subsidies for the first three years for each Bahraini national employed by companies establishing factories in the following industries:
- US$ 11,925 per year for pioneering industries
- US$ 7,950 per year downstream industries
- US$ 2,650 per year for existing industries
- 10% to 20% tariff protection for pioneering downstream industries, subject to approval by the National Committee on Tariff Protection
- Following incentives for all industries:
- 50% rebate on electricity charges for the first five years
- 100% rebate of rental fees for the first five years
- 100% rebate of customs duties for the first five years
- Provision of export credit facilities for all industries