Bahrain Investment Guide: Strategies For Foreign Investors

Bahrain is an attractive prospect for investors, with a positive and stable investment climate, a business-friendly attitude, and a liberal approach to attracting foreign investment. The country boasts a talented population, a free economy, and the lowest establishment costs in the region. Bahrain is also an ideal entry point into the Middle East, with a diverse economy and a strategic location at the heart of the Gulf.

The Kingdom of Bahrain has a thriving economy with numerous sectors open for investment, including financial services, ICT, manufacturing, logistics, and tourism. The country's pro-innovation business policies and laws give businesses of all sizes the opportunity to thrive.

Bahrain permits 100% foreign ownership in most non-oil-based sectors, making it easy for companies to establish themselves in the country. The country also offers ease of doing business, with minimum hurdles for creating and operating a company.

The Bahrain Economic Development Board (EDB) is the first point of call for entities wanting to establish their business in Bahrain. The EDB provides information and assistance to help companies find the perfect opportunity and navigate the investment journey.

With a supportive business environment, a talented population, and a strategic location, Bahrain offers a wealth of investment opportunities for those looking to expand their business in the region.

Foreign ownership laws

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. The government of Bahrain (GOB) permits 100% foreign ownership of a business or branch office, without the need for a sponsor or local business partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on the repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46%.

In 2016, the Cabinet approved an amendment to the Commercial Companies Law, allowing 100% foreign ownership in residency, food, administrative services, arts, health and social work, information and communications, mining and quarrying, water supplying, real estate and technical activities, and manufacturing, among others.

The Ministry of Industry, Commerce, and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies.

Foreign nationals and companies owned by foreign nationals are permitted to own real property in certain designated areas. Foreigners can own land in designated areas in Bahrain, and non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects, and training centers.

The Bahrain Economic Development Board (EDB) is the first point of call for entities wanting to establish their business in Bahrain. The EDB can help with finding a location for a business and navigating any legal requirements.

Business registration process

The business registration process in Bahrain is facilitated by the Ministry of Industry, Commerce, and Tourism (MoICT) through its online commercial registration portal, Sijilat. The process typically takes two to three weeks to complete but can take longer if specialised approvals are required. In addition to obtaining primary approval to register a company, most business owners must also obtain licences from the following entities:

• Electricity and Water Authority
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• National Bureau for Revenue (if the business revenue exceeds BD 37,500)

To incentivise foreign investment, the Government of Bahrain (GOB) provides industrial lands at reduced rental rates, customs duty exemptions for manufacturing projects, and a five-year exemption from the "Bahrainization" recruitment restriction.

The MoICT is the first point of contact for entities looking to establish their business in Bahrain, providing assistance with finding a business location and navigating legal requirements.

Investment incentives

The Government of Bahrain (GOB) offers a variety of incentives to attract foreign direct investment (FDI) into the country. The Bahrain Economic Development Board (EDB), the Bahrain Logistics Zone (BLZ), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), and the labour market fund Tamkeen all offer incentives to encourage FDI.

Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

The GOB provides industrial lands at reduced rental rates, and customs duty exemptions for industrial and manufacturing projects, including imports of raw materials, plant machinery equipment, and spare parts. There is also a five-year exemption from the "Bahrainization" recruitment restriction, which is a policy that mandates employers to hire Bahraini nationals instead of foreign workers.

The Khalifa bin Salman Port, Bahrain's primary commercial seaport, provides a free transit zone to facilitate the duty-free import of equipment and machinery. The GOB has also developed two main industrial zones, one to the north of Sitra and the other in Hidd. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

The BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain's main Khalifa bin Salman port, offers manufacturing companies the ability to ship their products duty-free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including plots of vacant land designated for new construction, and some warehouse facilities for rental.

The BLZ, a boutique logistics park, offers local and international companies a base from which to operate in a customs-bonded area to export products and services to the northern Gulf and GCC markets. The park accommodates logistics companies engaged in third-party logistics, freight forwarding services, general and specialized storage and distribution activities for re-export purposes, and value-adding logistics services.

Trade zones and free ports

Bahrain has three main Free Trade Zones (FTZ): the Bahrain Logistics Zone (BLZ), the Bahrain International Investment Park (BIIP), and the Bahrain International Airport (BIA). These zones offer a range of benefits to foreign companies, including tax exemptions, reduced utility costs, and excellent infrastructure.

The BLZ is ideal for export-oriented and logistics companies, offering zero-tax and duty exemptions. It is located near Khalifa bin Salman Port, the largest port in Bahrain, and offers modern facilities and 24-hour operations. The BIIP, on the other hand, is better suited for large manufacturing operations and export-led services. It is the largest of the three zones, offering cheap land and easy access to facilities.

While the BIA is not technically a free zone, as there are some duties on exports, it does allow 100% foreign ownership and has a bonded cargo terminal that allows for delayed payment of duties.

In addition to these three main zones, Bahrain also has two special free zones: the Sheikh Khalifa bin Salman Port (KBSP) and the Bahrain Investment Wharf (BIW). The KBSP is a premier transhipment hub for the Northern Gulf, offering a cost-effective option for carriers serving the rapidly expanding Upper Gulf region. The BIW, meanwhile, is a hybrid industrial investment park that offers a range of facilities, including business spaces, logistics zones, and residential development estates.

Overall, Bahrain's free trade zones and ports offer a range of benefits for foreign companies looking to establish a presence in the region, including tax advantages, simplified regulations, and excellent infrastructure.

Property rights

Bahrain enforces property rights protections for land and homeowners. Most land has a clear title, and the government guarantees title to land registered in the land registry. The Survey and Land Registration Bureau is responsible for land registration and maintains a land register where each property's description and legal status are entered.

Foreigners can own property in Bahrain, but there are restrictions and regulations to consider. Foreign ownership is typically restricted to certain designated areas, usually high-end zones developed for luxury living and commercial activities. In these areas, foreigners can own freehold properties, giving them full ownership rights. Outside these zones, ownership rules can be more restrictive, and foreigners may not own land outright.

Bahrain first opened its land to foreign ownership in 1999, allowing citizens of Gulf Cooperative Council countries to own land and buildings. In 2001, the King of Bahrain issued a decree allowing foreign ownership on a freehold basis in designated areas, and in 2003, enabling legislation was passed, formalizing the legal mechanism for foreigners of any nationality to own land.

Legislative Decree No. 43 of 2003, as amended by Edict No. 67 of 2006 and Edict No. 38 of 2023, provides for freehold land ownership in certain designated areas. Additionally, Edict No. 13 of 2011 allowed foreign banks to own property in the context of financing transactions, subject to specific conditions, including obtaining written consent from the Central Bank of Bahrain and reselling the property to a client within a specified timeframe.

Foreigners can obtain property loans in Bahrain, but eligibility criteria and requirements vary depending on the lender and loan terms. Some banks that offer mortgages to foreigners include Ahli United Bank, Bahrain Islamic Bank, and the National Bank of Bahrain. Mortgage rates for a 20-year term range from 5% to 9%.

When purchasing property in Bahrain, engaging a local lawyer is beneficial to ensure a smooth and legally compliant process. They can assist with the Sale and Purchase Agreement and conduct a Title Search to verify ownership and ensure no legal disputes or encumbrances.

There are various taxes and fees associated with property transactions in Bahrain, including Property Registration Fees, Agency Fees, and Property Transfer Fees, which are typically a percentage of the property value.

Overall, Bahrain offers a stable economy and a favourable investment climate for those interested in property investment. However, it is important to conduct thorough research and seek professional advice to navigate the legal complexities, especially for foreign buyers.

Frequently asked questions