Free Zones in Bahrain: Tax Exemptions, Costs, and Activities

Free Zones in Bahrain: Tax Exemptions, Costs, and Activities

- Jonathan Kelly

Bahrain is one of the most open investment destinations in the Middle East. Renowned for its liberal economic policies that actively encourage foreign investment and trade, it offers a unique business environment with full exemption from taxes, zero customs duties, and the possibility of 100% foreign ownership across most sectors without the need for a local partner.

The country boasts three Free Trade Zones (FTZs), each tailored to cater specifically to different sectors of the global market with unique infrastructural advantages and strategic positioning.

Bahrain Logistics Zone (BLZ)

Located near Khalifa bin Salman Port, BLZ is ideal for re-exporting and logistics operations. It offers no annual rental costs and a 50% reduction on utility bills, alongside exemptions from national labour hiring requirements. 

This zone is particularly advantageous for logistics companies due to its 24-hour operation and proximity to significant shipping routes. Companies in BLZ can access plots starting from 2,000 square metres, with the cost averaging US$10 per square metre annually.

Bahrain International Investment Park (BIIP)

BIIP is significantly larger than BLZ, covering 247 hectares, making it well-suited for large manufacturing and export-led services.

The park offers incredibly low land rental rates at just US$1.33 per square metre, appealing to substantial manufacturing operations including food processing, medical technology, and electronics. 

Like BLZ, BIIP operates 24 hours a day, providing seamless access to facilities and is positioned advantageously between Bahrain International Airport and the new Shaikh Khalifa Sea Port.

Bahrain International Airport (BIA)

While not a traditional free zone, BIA offers unique advantages such as 100% foreign ownership and the use of a bonded cargo terminal that allows for the delayed payment of duties. 

It specialises in cargo sales, trans-shipments, break-bulk cargo handling, and customs clearance within a 19,000 square meter terminal.

Comparative Overview

All three zones share similar incorporation and operational advantages:

  • Standard incorporation time of 6 weeks
  • Licensing costs of $230 (excluding BIA)
  • BLZ and BIA both require a share capital of US$53,000, while BIIP requires US$12,500.
  • All zones operate 24 hours a day, ensuring continuous business operations.

Additional Considerations

Despite the myriad of benefits, companies operating within these zones should be aware that they are typically confined to doing business solely within their boundaries unless they partner with a local sponsor to conduct operations throughout the broader domestic market. 

The entry process is also very competitive, with stringent requirements to demonstrate sufficient economic benefits to the Bahrain economy.

How to register a business in Bahrain

  1. Preparation of Incorporation Documents: Begin by preparing the necessary incorporation documents which outline the structure and nature of the business. This will typically include a detailed business plan and articles of association.
  2. Company Name Reservation: Reserve a company name through the Bahrain Commercial Registration Portal. This name should be unique and indicative of the business activities.
  3. Document Notarisation: Have the incorporation documents notarised at the public courts to verify their authenticity and legality.
  4. Corporate Bank Account Opening: Open a corporate bank account in Bahrain. This is a prerequisite for handling business transactions and is often required before you can complete other registration steps.
  5. Business Licence Application: Apply for the necessary business licence(s) that correspond to your company's activities. This is crucial for legal operation in the free zone.
  6. Tax Registration: Register the company with the Bahraini tax authorities to ensure compliance with local tax regulations, even if the company will benefit from tax exemptions.
  7. Work Visas: If you intend to hire foreign employees, including yourself, apply for the necessary work visas. This involves providing proof of employment and fulfilling other immigration criteria.

Key Requirements

  • Directors: At least two directors are required for the registration of a free zone company in Bahrain. This helps in ensuring proper governance and management of the company.
  • Shareholders: A minimum of one shareholder is needed to form a free zone company in Bahrain. This can be an individual or a corporate entity.

How can PRO Partner Group help?

Establishing in Bahrain involves a thorough understanding of local regulations and jurisdictions. This is where the expertise of a professional corporate services provider becomes invaluable.

PRO Partner Group offers unrivalled expertise in Bahrain’s legal and regulatory landscape and direct access to government bodies and regulatory authorities. We can guide you through every step of setting up your business in Bahrain, from initial registration with the relevant authority to obtaining your trade licence, as well as providing business incubator services, and ensuring compliance with all local and international regulations.

If you need assistance with this or with any other related company setup, restructuring, local partner or PRO support matter in Bahrain, Abu Dhabi, Dubai, the wider UAE, Saudi Arabia, Oman or Qatar, then please do get in touch with us on +973 1777 2011 for Bahrain or +971 (0)4 456 1761 for Dubai, email us at info@propartnergroup.com or complete the contact form below and we will be delighted to assist you.

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