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Tax Services in Bahrain

Decisions over taxation can save or cost a company a substantial amount of money. It is worthwhile for a firm to develop a proper tax regime with respect to its operations and locations to make the most of the tax laws applicable in a region.

Taxes are not popular with most businesses as they detract from the firm’s bottom line profitability. However, for a business, to be successful, an effective taxation strategy will be beneficial in a long run. Taxation planning is employed by a business to help them achieve the financial goal by reducing the tax liability and increase the profitability of the company.

The Kingdom of Bahrain is said to be one of the most modern economies of the Gulf region due to its attractive foreign investment reforms, a reason why most of the investors set up a company in Bahrain. Especially in the regional banking and financial services sector, Bahrain was able to secure a leading market position over the past years. The taxation policy in Bahrain is also deemed to be most liberal compared to other countries. The issue of taxation is relatively straight-forward and hassle-free.

How Does Taxation in Bahrain Work?

The taxes paid in Bahrain are minimal and there is no system of income tax as there is in most of the countries. However, in the last few years, a small tax has been imposed on all the workers but considered to be a ‘social insurance’ tax rather than income tax. This Bahrain tax applies to all workers and amounts to 1% of the total salary earned. This has been implemented in order to fund a scheme for the unemployed. Some groups are exempt from this tax including military personnel and elected officials. There are many such small taxes paid by an individual or businesses in one way or other in the Kingdom of Bahrain.

Municipality Tax

The Municipality Tax is levied at 10% on the rental of commercial and residential property to expatriates in Bahrain. It must be paid by the owner.

Payroll Taxes

Every person who is employed in Bahrain has a social insurance. The employee contribution under this is calculated as:

  • 12% for Bahraini workers
  • 3% for non-Bahraini workers

Employees are also required to contribute to Social Insurance at the following rates (calculated on monthly salaries:

  • 7% for Bahraini workers
  • 1% for non-Bahraini workers

These rates apply up to an income ceiling of BHD 4,000 per month. No contribution is paid for income above this ceiling.

Customs Duty

The general tax rate in Bahrain for customs duty is 5% of the value in cost, insurance, and freight (CIF) except for alcoholic beverages (125%) and cigarettes (100%).

The entities in Bahrain are exempt from paying most of the taxes including corporate income tax, personal tax, withholding tax, capital gains tax, and VAT. However, oil companies are being taxed at 46%. Property and wealth obtained by inheritance are also untaxed and there is no wealth tax payable either.

It should be also noted that there are a number of tax treaties Bahrain has with other countries which have been set up so that information can be easily exchanged between countries and the citizens of Bahrain can take advantage of the benefits of these treaties. Bahrain is able to offer this tax-free system due to the relatively small size of the country and the large gas and oil industries that are established there. The funds that the businesses pay in taxes more than covers the requirements of the government and these funds are added to by the charges levied on the importation of goods into the country.

VAT in Bahrain

It is anticipated that just like the other GCC countries, Bahrain is also going to introduce Value Added Tax effectively from October 2018 at the rate between 3-5%. All businesses in Bahrain will be affected since VAT will impact most sales of goods and services within Bahrain, where it is anticipated there would be limited exemptions and consumption tax relief. There will be a right for businesses to claim a credit for VAT paid on their expenditures, relating to their business activities. The collection from VAT will be contributed to the improvement of transport and communications, construction of hospitals, educational facilities and other services of the country.

Our Offerings

We at Business Setup Worldwide utilize our knowledge to provide companies with a range of effective solution. Our services in Bahrain include:

  • Tax structuring
  • Transfer pricing
  • Tax due diligence
  • Handling tax issues
  • Filing tax according to the tax legislation and system of Bahrain

Why Us?

Business Setup Worldwide provides taxation services in Bahrain that are compliant with the tax legislation and system. Our advisors having expertise in this area of legal and tax consulting will provide hands-on solutions to all your tax related problems. We offer our client’s comprehensive professional services from a single source – be it company formation or accounting, bookkeeping, and taxation services. Contact us for more information.