5 Simple steps for company formation in Bahrain

21 Apr 2022

Bahrain is a country located in the Arab gulf. The population in Bahrain is 1.58 million, and there are 800.000 non-nationals (53%), and it is a popular destination for investment. The Bahrain government agreed on a new law where a foreign investor with 100% possession in a varied range of business sectors. The most common sectors in Bahrain are:


  • Manufacturing industry: Bahrain has offered manufacturing industries a favorable business environment without imposing restrictions on operations, expansions, and custom-duty exclusions.
  • Tourism and hospitality industry: The Kingdom of Bahrain is recognized for its multicultural population, calm way of life, rich culture and history, and variety of traditional gastronomies.
  • Information, Communications, and Technology: Bahrain’s market hosts various small to large information technology entities with areas of operation ranging from IT services, distribution, consultancy, data management, software development, and customer support centers.
  • Financial services industry: Bahrain is the GCC’s most recognized financial center providing banking & financial services in all significant scopes of finance, from banking, asset management, FinTech, insurance, and Islamic finance.

This country is considered as a large Free-Zone with tax-exemption. It has three principal Free Trades Zones: Bahrain Logistic Zone (BLZ), Bahrain International Airport (BIP), and Bahrain International Investment Park (BIIP). Bahrain is recognized as a country with incredible investment opportunities, and there are advantages such as low operational cost, competitive market, and global reach; it is a country that offers stability with transparent rules and regulations, investors have contact to the modern financial services, lower fees on imports and exports for companies operating from Bahrain. To establish a Company in Bahrain, it is essential to follow different steps that we will explain in this article:


1. Choice of the legal structure

It is essential to choose the correct legal structure because this affects the operations of the business in Bahrain. According to the Commercial Companies Law of 2001, some of the legal systems are Commandite by shares, Individual establishment, simple commandite, partnership company, Bahrain Shareholding Company (public or closed), Single Person Company.


2. Selection of Company name

Guidelines for choosing the name of the Entity are provided by the Ministry of Industry and Commerce (MOIC). Investors could propose four Company names, and these names must be under the Guideline. Some of the rules are: the designated names should stay away from any abuses of public morals, customs, traditions, or religious beliefs, the title should be reliable with the Company’s activity, the name must not have any political meanings, and in the case of foreign company branch, the name shall be identical to the original Company.


3. Drawing up the company documents and making the capital deposit

It is necessary to prepare the Association’s articles and the By-laws of the Company for the registration file. After making the capital deposit, a certificate will be issued. To do so it will be easy for you if you have an incorporation team beside you for every guidance. 


4. Commercial registration documents

If the registration is an individual establishment, the commercial registration documents are available at the Bahrain Investors Center (BIC). But if the registration is a Company, the commercial registration documents are available at the Ministry of Industry and Commerce Registration Directorate (MOIC).

SIJILAT is the Commercial Register System in Bahrain. It is a single integrated platform for business that offers complete facilities to company owners.


5. Licensing and approval

For the licensing service, SIJILAT provides a direct link to the pertinent licensing authorities and, therefore, streamlines the entire process. For example, entities offering financial services shall also get a license from the Central Bank of Bahrain. Depending on the time of businesses, the license could be developed by entities such as the Labour Market Regulatory Authority, General Organization for Social Insurance, the National Bureau for Revenue, etc.

Companies in Bahrain are free of taxation, but companies in the oil, gas, and refining sectors taxed 46 %. In the case of VAT (Value-Added Tax), it is imposed on goods and services at a uniform rate of 5%. Nevertheless, financial and insurance services and real estate businesses are exempt from VAT. All entities are obligated to submit audited financial statements inside six (6) months of financial year-end and file quarterly tax returns. Additionally, Bahrain has a Double Taxation Avoidance Agreement (DTAA) with more than 40 countries inspiring foreign businesspersons for company creation in Bahrain.