DOING BUSINESS IN BAHRAIN
Bahrain is ranked the most economically free country in the Middle East and is the fourth most free economy in the world as ranked by The Heritage Foundation/Wall Street Journal.
Simplified administrative and legal systems and procedures, along with rapid industrialization, have assured excellent opportunities for the foreign investor considering Bahrain as a Middle Eastern base for business activity. Investment incentives include:-Business in Bahrain
-100 per cent foreign ownership allowed for certain categories of business.
-No personal, corporate or withholding tax.
-No VAT nor any form of sales tax on goods or service.
-Duty-[spam word detected] to the GCC States (subject to conditions).
-Sustained low inflation
-No exchange controls.
-Strategic geographical position in a market of 100-million people
- ‘Fast-track’ seven-day commercial registration procedure for new companies.
-A liberal and high standard of living.
-King Fahad Causeway between Bahrain and Saudi Arabia offers easy access to the largest single market in the region.
-A well-developed multi-lingual Labour force at one third the cost of those in industrialized countries.
-No customs duties on imports of raw materials, semi-finished commodities brought for further processing, imports required for development projects, machinery for manufacturing, or on goods imported for re-export.
Requirements for Foreign Companies wishing to work in Bahrain:
- Company should be a joint stock company listed in the country of its incorporation or a closed company established at least three years before application for listing.
-Minimum paid-up capital = BD 3,770,000 (US$10,000,000).
-Net profit realized from principal operations for last three years preceding application for listing.
-Articles of Association and the laws of the country incorporation should contain no restriction on the transfer of the ownership of the company's shares.
-Minimum number of shareholders = 100.
- Must publish annual audited financial statements and un-audited (reviewed) semi-annual financial statements.
-Must assign a representative office in Bahrain to undertake the transfer of share ownership, distribution of dividends, financial reports
Listing Requirements for Domestic Companies
-Compliance with the New Commercial Companies Law.
-Minimum paid-up capital = BD500,000, 50 percent paid.
-Net profit realized in the previous two fiscal years.
-Minimum total annual turnover = BD500,000.
-Company assets should exceed paid-up capital by at least 20 percent.
-Minimum number of shareholders = 100.
-Must publish annual audited financial statements (within 3 months of the close of its financial year) and un-audited (reviewed) semi-annual financial statements.
-Must publish annual financial statements in at least one local newspaper.
-Must have transfer and representative offices in Bahrain.
-Post-listing value per share must not be less than paid-up value per share.
Commercial and industrial land rates
Industrial Land US $2.70 per meter square per year
Industrial building cost (hangar type structure) US $333 per meter square
Average Office rents
High-end office blocks in downtown Manama and the Diplomatic Area US$550 to US$1000 per month
Medium range unit space (80 to 120 square meters) US$10 to $25 per meter square per month plus services
Long-term land leases
Long term land leases for the purpose of establishing approved industrial projects are administered by the Industrial Areas Directorate of the Ministry of Commerce and Industry. Land is available on a long-term basis for a maximum lease of 50 years. These arrangements are governed by Legislative Decree Number 28 of 1999, with respect to the Establishment and Organizing of Industrial Areas, which sets out the rights and obligations of contracting parties.
Financing
In addition to the various credit and commercial loan arrangements available to the international investor through the various banks and financial institutions in Bahrain, two other financing options are available:
-The Bahrain Stock Exchange, which offers equity financing.
-The Bahrain Development Bank (BDB). BDB is Bahrain's primary financial development institution and was established in 1992 to promote and foster investment in the industrial, commercial and business service sectors.
The BDB provides a range of financing arrangements to promoters of small and medium size projects, including:
-Short and long-term composite loans for financing capital assets and a core portion of working capital.
-Venture capital in the form of equity participation in start-ups as well as existing projects.
-Arrangement of equipment leases.
-Financing of working capital needs for the purchase of raw materials.
-Arranging of export financing for goods manufactured in Bahrain.
The Bank maintains a maximum loan exposure of BD 500,000 per project. Given the Bank's objective of facilitating investment in Bahrain, it is able to offer:
-Excellent interest rates
-Flexible grace periods (of up to 3 years)
-Flexible repayment terms
-Highly competitive fee arrangements.
Financing for small and medium size projects.
Eligible projects must be registered and licensed in accordance with the laws of Bahrain. They should be economically viable and be supported by an independent feasibility study produced by one of the recognized consulting houses. The BDB provides services to investors of any nationality, but demands that they have a good credit standing to provide further contribution to the project.
In addition, an appropriate management structure must be in place, proper accounting records should be maintained and the assets of the project should be adequately insured, with the Bank named as beneficiary.
Project promoters will be required to execute security documentation in accordance with the laws of Bahrain, and to maintain timely monthly or quarterly management accounts, as well as to submit audited annual accounts on time.
Commercial activities that are not eligible for BDB financing in accordance with its statutes are the purchase of real estate, the repayment or refinancing of debt obligations, the purchase of consumer goods and the financing of wholesale and/or retail operations.
100% ownership is permitted for international companies in the following areas of business:
Technology
-Highly specialized technical services, such as centralized services for computer companies and the preparation and marketing of their programs.
-Information technology and telecommunications.
-Cable and telecommunications services