The Kingdom of Bahrain has been one of the benchmarks for company incorporation. The zone has been created an environment for business owners to kick-start their business operations.
Business-friendly laws, strategic location and the flexible tax scenario are specific core parameters that have driven the business setup solutions in the zone.
The tax is a crucial part of any business, and following the tax norms is essential for every business. Moreover, the government need tax to boost the overall economy, and foreign investors find the zone very thriving.
So, if you are planning to start a business in Bahrain, then here’s are certain essentials you should know.
Tax in Bahrain
The Bahraini government has made a tax-friendly scenario for business investors to come forward and invest.
The zone gives them plenty of business opportunities to be owned and operated without even paying taxes.
The Bahrain tax rate for the business entities enjoy are:
- 0% corporate tax
- No personal tax
- No wealth and capital gains tax
Apart from the above mentioned, the operating costs also stand low along with feasible foreign ownership laws. Therefore, when business investors pay lower prices, the production of goods and services turns higher, ultimately increasing profit margins.
Different business industries in Bahrain enjoy tax benefits:
- Financial sector services enjoy up to 35% lower tax
- Logistics sector services enjoy up to 43% lower tax
- Manufacturing sector services enjoy up to 33% lower tax
- ICT sector enjoy up to 20% lower tax
Foreign Ownership Laws in Bahrain
The foreign ownership laws in Bahrain allows the goods to be traded freely, which presents the opportunity to start a business or even set up a branch of a foreign company without even being a citizen of Bahrain.
A few of the favourable sectors include:
- Real estate
- Healthcare and social work
- Information and communications
- Food, arts, entertainment and leisure
Payment of Tax
The taxation in Bahrain will be payable in 12 equal monthly instalments; the payments are due from the 15th day of the fourth month of the taxable year.
Based on the subsequent altered estimated income tax statement, the tax payment for the remainder of the 12 months will have to be made.
The final payment will be due on the 15th day of the third month after the taxable year.
There is no provision of withholding taxes for people working towards setting up a business in the Kingdom of Bahrain.
This aspect of the taxation system allows the payments of interest, royalties, or dividends to not depend on withholding taxes in the country.
Double Taxation Tax Treaties
The Kingdom of Bahrain has also signed Double Taxation Agreements (DTAs) with several countries, including:
- The United Kingdom, etc.
The double taxation treaties remove the tax burden during the import and export process. In 2021, the country did not allow the global pandemic to play spoilsport and came up with a hefty stimulus package to lessen the blow.
How to File Corporate Tax in Bahrain?
When it comes to corporate tax filing in Bahrain, the following steps are to be taken into consideration:
- Understand your business structure
- Determine the tax deductions
- Pay the estimated tax
- File the federal tax return
- Do check for the local and international returns
By now, we have a clear understanding of corporate tax filing in the Kingdom of Bahrain. However, the core aspect to be kept in mind is that the entire proceedings are to be carried out error-free.
The most effective way to deal with this is to get in touch with a professional business consultant who is well-versed in the proceedings.
Business Setup Worldwide is one of the top ten business consultants in Dubai who has been helping business owners to incorporate their businesses hassle-free.
Since incorporation, we have been helping business minds set up their business and deal with the tax process. So, while you plan your business, leave the rest of your worries to us.
If you are looking to file a taxing process for your business entity in Bahrain, feel free to contact our experts. Contact us today-we’d be glad to assist!
1. Is group taxation valid in Bahrain?
Yes, business entities are eligible to go for group taxation in Bahrain
2. What goods are exempted from VAT in Bahrain?
The import of a few goods is exempted from VAT in Bahrain, which includes:
• Goods for diplomatic and military use
• Personal effects and household appliances
• Import of returned goods
• Import of personal items and gifts carried in a traveller’s personal luggage
• Goods designed for people with special needs