Doing business in Bahrain is generally considered straightforward and favorable for foreign investors, due to its liberal economy, strategic location, and business-friendly regulations.
Here is a general guide on how to approach starting a business in Bahrain, particularly for a foreign entity:
1. Key Business Advantages in Bahrain
- Foreign Ownership: Bahrain allows 100% foreign ownership in most business sectors. Restrictions, where they exist (e.g., some trading, construction, or catering activities), are often limited to 49% foreign ownership, or in some cases, 99% foreign ownership with a required 1% local partner for certain commercial activities.
- Tax Benefits: There is no corporate income tax (except for companies in the oil and gas sector) and no personal income tax. A Value Added Tax (VAT) is applicable to most goods and services (currently 10%).
- Strategic Location: It serves as a gateway to the wider Gulf Cooperation Council (GCC) market (Saudi Arabia, UAE, etc.).
- Streamlined Process: The main system for Commercial Registration (CR) and licensing, called Sijilat, is an integrated online portal designed to simplify the setup process.
2. Steps to Start a Business
The general process for registering a company and obtaining a Commercial Registration (CR) usually follows these steps:
Phase 1: Planning and Initial Requirements
- Choose Your Business Activity: Determine your precise business activity. This will define your legal structure, capital requirements, and necessary licenses. You can check the eligibility and requirements on the Sijilat portal.
- Select a Legal Structure: Choose the appropriate legal entity, such as:
- With Limited Liability (W.L.L.) – Most common for foreign investment.
- Branch of a Foreign Company
- Single Person Company (SPC)
- Reserve a Company Name: Propose unique names to the Ministry of Industry and Commerce (MOIC) for approval through Sijilat.
- Obtain Security Clearance: Shareholders and directors must often undergo a security clearance from the Ministry of Interior.
- Secure a Commercial Address: You will need a registered office address, which could be a physical office, a business center, or sometimes a virtual office (depending on the activity). A lease agreement is a mandatory document for registration.
Phase 2: Registration and Licensing
- Draft Legal Documents: Prepare and notarize the necessary legal documents, such as the Memorandum of Association (MOA), at the Ministry of Justice.
- Submit Application for Commercial Registration (CR): Submit all documents and the application through the Sijilat portal to the MOIC.
- Deposit Share Capital (If Applicable): For some company types, you must open a corporate bank account and deposit the minimum required capital, then obtain a capital deposit certificate.
- Acquire Necessary Licenses: Depending on your business activity (e.g., financial services, education, healthcare), you may need specific approvals and licenses from relevant government ministries and regulatory bodies (e.g., the Central Bank of Bahrain for finance).
- Final Approval: Once approved, the MOIC will issue the Commercial Registration (CR) certificate, which is your official license to operate.
Phase 3: Post-Registration
- Apply for Investor/Residency Visa: Once the company is registered, foreign investors can apply for their residency permits and sponsor employees through the Labour Market Regulatory Authority (LMRA).
- Register for VAT (If Required): Obtain a Tax Identification Number (TIN) from the National Bureau for Revenue (NBR) if your revenue meets the VAT registration threshold.
3. Key Regulations and Considerations
- Intellectual Property: Bahrain is part of international agreements and has laws to protect intellectual property rights.
- Labor Laws: You must comply with Bahrain’s labor laws regarding employee contracts, working hours, and hiring practices.
- Commercial Concealment: Be aware that Bahraini laws strictly prohibit “Commercial Concealment”—the practice of a Bahraini acting as a ‘ghost’ partner or agent for a non-Bahraini to circumvent ownership restrictions.
Recommendation: Given the legal requirements and various steps involving different government entities, it is highly advisable to seek professional assistance from a qualified local legal firm or a business formation specialist in Bahrain. They can help navigate the Sijilat process, ensure compliance, and streamline the security clearance and documentation procedures. You can also consult the Bahrain Economic Development Board (EDB) for investor guidance.