There are a number of options available for establishing a business in Bahrain and, generally, there are no foreign investment restrictions other than in certain limited circumstances. In addition, there is no withholding tax, value added tax (VAT) or personal income tax.
A Limited Liability Company (WLL) is recommended where the purpose of the entity is to make retail sales within the region. WLLs cannot issue shares, negotiable warrants or debentures to the public and are not permitted to undertake certain business activities, including insurance or banking activities or the investment of funds for the account of third parties.
A WLL requires a minimum of two shareholders and a maximum of 50 shareholders. The minimum capital is BD20,000 (US$53,800), which must be paid up on incorporation. The minimum par value of shares is BD50. There is a mandatory reserve under which 10% of net profits must be set aside until the amount reserved equals 50% of the WLL’s capital.
A WLL can be 100% foreign owned provided that either the majority of the company’s capital is to be invested in an industrial development or the company is to be the primary centre for capital investment by the foreign shareholders related to the distribution of its goods and/or services, including tourism, telecommunications, healthcare, education and business services.
To encourage foreign investment in manufacturing and industrial enterprises, a WLL is exempt from customs duty on capital goods and goods for re-export, raw materials for manufacturing, semi-finished commodities imported for further processing, imports required for development projects, and initial import of capital goods by a manufacturing company. A WLL can remit capital, profits and dividends freely from Bahrain.
A Single Person Company (SPC) enables the provision of professional services. Its main attraction is that only one shareholder is required for a SPC, which can be managed by the shareholder or an appointed manager. The minimum capital is BD50,000, which must be paid up.
Where there is no requirement to actually conduct sales or manufacturing, a Branch of a Foreign Company may establish an operational office, a representative office or a regional office in Bahrain. A parent company is required to provide a guarantee to the authorities of the financial status of the branch office.
Only an operational office can perform local operations in Bahrain and it is the only type of branch that may perform banking and insurance services. An operational branch requires a Bahraini national sponsor to liaise with the relevant authorities. A representative office or a regional office is permitted only to provide marketing and promotion in Bahrain.
Y. ECONOMIDES & CO LCC can assist with establishing business entities and opening local bank accounts in Bahrain, or in all the major financial services centres worldwide.