Setting Up a Foreign Branch Company in Bahrain

Foreign Branch Company in Bahrain

Opening a foreign branch in Bahrain offers direct access to the Bahraini market without the need to create a separate legal entity. This is beneficial to companies that are looking to engage with the country’s strategic location and business-friendly environment to broaden their Middle Eastern reach.

Establishing a Foreign Branch Company in Bahrain

As one of the first countries in the Gulf to diversify its economy away from oil and gas, it has successfully developed thriving sectors in finance, manufacturing, and technology. When coupled with its progressive business policies, an absence of corporate tax and low operational costs compared to many of its neighbouring countries, it provides an ideal setting for companies looking to establish or expand their presence in the Gulf region.

What is a foreign branch company in Bahrain?

A foreign branch is an extension of its parent company, with the parent company being outside of Bahrain. It operates under the same corporate identity and gives the parent company full control of operations and liabilities. This is different from a subsidiary, which is a separate legal entity with financial independence and limited liability protection from the parent company.

A foreign branch in Bahrain can be registered as operational offices, representative offices, or regional offices. Generally, a local sponsor from the same industry is required, except when the branch is established as a regional centre for distributing goods or services. The parent company bears full financial responsibility for any debts or legal actions against the branch, contrasting with the limited liability features of a subsidiary. This setup is ideal for companies seeking rapid market entry without the complexities of establishing a new legal entity but requires careful consideration of the associated risks and obligations.

What are the key features of a foreign branch in Bahrain?

Some of the key aspects of a branch office in Bahrain include:

Management and representation: Each branch must appoint at least one local manager and have a legal representative in Bahrain to handle operations and compliance.

Financial dependence: The branch is fully dependent financially on the parent company, which is also responsible for all liabilities and debts incurred by the branch.

Operational status: A branch can conduct business operations locally and requires a physical office within Bahrain to do so. Unlike rep offices, which are restricted to promotional activities.

Regulatory requirements: The branch must fulfil annual regulatory requirements including the filing of tax returns and audited financial statements, despite the corporate tax rate being 0%.

Local integration: Branches are permitted to hire local staff and do not necessarily require the travel of foreign company representatives for incorporation, as a local agent can handle these responsibilities.

International double taxation: Bahrain's network of approximately 45 double tax treaties offers potential relief from double taxation.

Capital and banking: No minimum share capital is required to establish a branch. However, the parent company must provide a bank guarantee to the Ministry of Finance and National Economy, reflecting its commitment to support the branch.

In terms of operational scope, a branch functions much like an LLC in that it can rent or purchase business premises, bill local customers, sign sales contracts within Bahrain, and generate revenue from both local and international clients. However, for certain operational licences and visa sponsorships, appointing a local agent or distributor is necessary.

How to register a foreign branch in Bahrain?

Registering a branch is a relatively streamlined process which usually takes two to four weeks, if all the required documentation is submitted correctly. Here is an overview of the necessary steps:

1. Application: Begin by submitting a commercial registration application, providing all necessary details of the branch, including selecting a unique name.

2. Documentation: Submit the Memorandum of Association (MOA) and Articles of Association (AOA) to the Ministry of Commerce for approval.

3. Approvals: Necessary approvals for the office space from local municipal authorities.

4. Notarisation: Notarise the MOA and other relevant documents, then submit these online to the Ministry of Industry, Commerce and Tourism (MoICT).

5. Banking: Open a corporate bank account in Bahrain and secure a capital deposit certificate. Additionally, deposit a financial guarantee in the name of the branch with the bank, under the directive of the Ministry of Commerce.

6. Registration: After securing all approvals and fulfilling banking requirements, receive the Certificate of Registration (CR) from the Ministry.

7. Public notice: Announce the incorporation of the branch in the Official Gazette to ensure public transparency.

8. Social insurance: Register the branch for social insurance to comply with local employment regulations.

This organised approach ensures that the branch office not only ensures legal compliance but also sets a solid foundation for its operational activities in the region.

What are the required documents for a branch office in Bahrain?

Application form for company registration.
Relevant external approval documents.
Sponsorship agreement, if applicable.
Copies of the CR, MOA, and AOA.
Board of Directors' resolution.
Guarantee certificate from the parent company, affirming full responsibility for the operations of the Bahrain branch.
Authenticated Power of Attorney, necessary for engaging outsourced consultancy services.
Recent financial reports / statements from the parent company to prove economic stability.
Passport copies of the parent company’s directors and the branch manager (if already appointed).
Local office lease agreement for the physical business address in Bahrain.

How can Sovereign PPG help?

Establishing a foreign branch in Bahrain offers significant advantages, including strategic market access, operational flexibility, and financial incentives such as tax exemptions. It is crucial to navigate the registration process and local regulations effectively. If you’re looking to expand your business presence into the Kingdom of Bahrain, it’s advisable to consult with a reputable corporate services provider to ensure a smooth setup and compliance with Bahraini laws.

At Sovereign PPG, we can assist you with this, guiding you through every step of the process, from gathering documentation and initial registration with the relevant authority to obtaining your branch office registration 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 Qatar, Abu Dhabi, Dubai, the wider UAE, Saudi Arabia, Bahrain, or Oman, then please do get in touch with us on +974 (0)44 788 765 for Qatar or +971 (0)4 456 1761 for Dubai, email us at SovPPG@SovereignGroup.com or complete the contact form below and we will be delighted to assist you.