From October to April, the climate in the Kingdom of Bahrain is pleasant, with temperatures ranging from 10°C to 30°C and rainfall that is erratic but averages 7cm per year. In July, August, and September, humidity levels are high, with daytime temperatures averaging 39°C. The Kingdom has a number of natural springs, most of which are located along the northern coast. These are gradually depleting, but desalination plants are now producing significant amounts of water.

Bahrain is a constitutional monarchy ruled by King His Majesty Shaikh Hamad bin Isa Al Khalifa. He is the eldest son of the previous Amir, Shaikh Isa bin Salman Al Khalifa, and took over as Head of State after his father died in February 1999. He is the eleventh member of the Al Khalifa family to rule the Kingdom since Shaikh Ahmed Al-Fateh Al Khalifa took the throne in 1782. The Crown Prince, HH Shaikh Salman bin Hamad Al Khalifa, is the King’s eldest son and the Commander-in-Chief of the Bahrain Defence Force.

The Kingdom of Bahrain’s constitutional monarchy provides for a two-chamber parliament comprised of an appointed and an elected chamber. The King appoints the Cabinet, which is led by a Prime Minister. When British troops withdrew from Aden in 1967, Bahrain briefly became the center of Britain’s Middle East military command, but the British Government announced the following year that it planned to withdraw forces from East of Suez by 1971. All existing agreements with the United Kingdom were terminated upon independence, despite both countries’ pledges of continued friendship and goodwill. Independence Day is officially celebrated on December 16, the National Day.

As recorded in October 2020, the population of Bahrain is approximately 1.5 million. 47.4% are Bahraini nationals, with the remainder being expatriate workers. Bahrain’s native language is Arabic. English is widely understood and used by people of all nationalities, particularly in business and commerce. Farsi, Hindi, and Urdu are other widely spoken languages.

Bahrain’s currency is the Bahraini Dinar (BHD), which, while freely convertible, is effectively pegged to the US dollar at a rate of USD 2.6490 = BHD 1.

Bahrain has an independent legal system governed by the High Judicial Council, which oversees Bahraini courts. Laws in the Kingdom are constructed in a civil manner, drawing also from Egyptian laws and other European civil codes. When legislation is not applicable, a judge utilizes Shari’a Law and the legislation to which it is linked to deduce the rationale for his judgment. The principles of equity and good conscience are applied in the absence of custom Commercial transactions are governed by contracts and a large amount of legislation.
Personal affairs of Muslim citizens, such as marriage, divorce, and inheritance, are handled according to Shari’a law.
Legislation is proposed and approved by the Cabinet of Ministers and enacted by Royal Decree. Judges are appointed by royal decree The Court of Cassation, Bahrain’s highest court, refers cases to the Appellate Court via the Court of First Instance.

The Commercial Law of the Kingdom of Bahrain, like that of most other Middle Eastern countries, is largely based on the Napoleonic Code. There are several types of business organization, including some that are new to Anglo-Saxon legal systems.
The type of investment vehicle chosen by foreign investors depends on the industry or service that they wish to offer, the geographical market and whether goods or products are imported or manufactured.
Contracts are usually obtained through a tenders system from government and quasi-governmental organizations.

Joint-stock companies can be either closed stock companies or public stock companies. A closed stock company can be 100 percent foreign-owned, whereas a public stock company can only be 49 percent foreign-owned. Every company in Bahrain should have a local headquarters. A closed stock company must have a minimum share capital of BHD 250,000.

A limited-liability company is made up of one or more shareholders who are personally liable for the company’s debts to the extent of their individual stakes in the capital.
A limited-liability company, on the other hand, cannot have more than 50 shareholders, and share transfers are restricted.
It is possible to have 100 percent foreign ownership, Insurance, banking, and investment are all prohibited activities for a limited-liability company.

A general partnership is an association of two or more people who trade together for commercial purposes under a specific collective trade name, in which the partners assume joint liability for the partnership’s debts to the extent of their entire property. There are no provisions in the law requiring a partnership to have a minimum or maximum capital, or to have a maximum number of partners. However, the partnership must have at least two partners.

A partnership limited by shares combines certain characteristics of a limited partnership with others that are similar to those of a corporation. A partnership limited by shares is made up of one or more general partners who are personally liable for the partnership’s debts to the full extent of their capital investment, as well as other partners whose liability is limited to their investment in shares.

Foreign company branches and representative offices are permitted in Bahrain. However, unless the branch or office is being established in Bahrain to serve as a regional goods or services distribution center, a Bahraini in the same line of business must act as a sponsor.
Prior to registration, the Minister of Industry and Commerce must be satisfied that the parent company is a viable financial entity and that it will assume full responsibility for the liabilities, commitments, and obligations of business entities. Foreign banks that want to open branches in Bahrain must also get permission from the Central Bank of Bahrain (“CBB”).

The Commercial Code governs commercial transactions and activities in general, and it includes a detailed provision governing general bankruptcy procedures.

The Kingdom has a number of characteristics that encourage foreign investment. Its political stability, excellent communication facilities, easy access to the Saudi Arabian market, relatively skilled labor force with a good standard of spoken English, low cost of fuel and power, lack of personal and corporate taxation, and lack of exchange and profit-repatriation controls are all factors that make it an ideal location for many businesses to locate their manufacturing or service operations.
In summary, simplified administrative and legal systems and procedures, as well as rapid industrialization, ensure excellent opportunities for potential foreign investors considering Bahrain as a Middle Eastern business hub.

Most business categories allow for 100 percent foreign ownership.
Duty-free access to Gulf Cooperation Council member countries (subject to conditions).
Inflation has remained low.
In a market of 100 million people, a strategic geographical position is required.
A seven-day commercial registration procedure for new companies on a ‘fast track.’
A liberal and affluent way of life.
A well-developed multilingual labor force at one-third the cost of those in developed countries.
There are no customs duties on raw materials, semi-finished commodities brought in for further processing, imports required for development projects, manufacturing machinery, or goods imported for re-export.

The Kingdom of Bahrain does not have a general tax system; instead, it only taxes the profits of oil companies. Oil and natural gas companies, regardless of where they are incorporated, are subject to tax on any profits made from exploring, producing, processing, or refining oil and oil-related products in Bahrain.

There are no withholding taxes on profits or dividends, royalties, license fees, or group charges when they are repatriated. If the investor operates in other countries in the region, the withholding-tax rules in those countries must be considered in the regional business structure.

In Bahrain, there is no personal taxation system for income, capital gains, gifts, or inheritances, and there are no requirements to file any type of tax return.

Bahrain implemented value added tax (“VAT”) on January 1, 2019. The standard VAT rate is 10%, but some supplies are exempt or zero-rated. VAT is generally levied on both the supply of goods and services by domestic taxpayers and the importation of such goods and services. Foreign businesses with supplies in Bahrain may be subject to VAT in certain circumstances.

Customs duties are levied at a rate of 5% on imported goods, with the exception of tobacco products (100%) and liquor (125 percent).

The government collects a tourism levy of 5% of hotel revenue. Other government fees for work permits for foreigners, identity cards, driving licenses, vehicle registration and inspection amount to about BHD 250 (EUR 450; USD 650) per year, per person.

Local taxes, which appear on electricity bills, are imposed at a rate of 10% of the monthly rent paid for the occupied property.

Local taxes, which appear on electricity bills, are imposed at a rate of 10% of the monthly rent paid for the occupied property.

Bahrain has double taxation agreements with more than thirty countries.