Offshore Jurisdiction Review: Bahrain

Offshore Jurisdiction Review: Bahrain

Lacking any significant oil reserves, the Kingdom of Bahrain has been forced to find other sources of income. It has built up a sturdy financial services sector.

When the Persian Empire rose, Bahrain became an important trading hub—particularly in pearls—owing to its strategic position halfway through the Persian Gulf.

In 1913, Bahrain became a protectorate of the United Kingdom following an agreement between the Ottomans and the British. The British recognized Al-Khalifa as the ruler of Bahrain but offered military protection as a part of its strong presence in the Gulf region.

Bahrain’s move toward a financial center started in 1961. It was known then that the country’s oil reserves weren’t as great as its neighbors’, and Sheikh Isa Bin-Salman Al-Khalifa set the foundation for forming the nation into a diversified economy with a strong financial services industry.

In 1971, Bahrain was granted independence under amicable terms with the British. Bahrain has since been an ally of the West.

Bahrain Companies

Bahrain has zero corporate tax, except for companies engaged in the oil industry. There are virtually no other taxes on companies.

Forming a company in Bahrain is expensive and can take upwards of two to three weeks, but is nonetheless the best alternative to the United Arab Emirates (UAE) in the region.

There are a number of different business types available to companies in Bahrain, with the three most interesting being as follows:

  • WLL—With Limited Liability: comparable to SàRL and GmbH
  • BSC—Bahrain Shareholding Company: comparable to Private Limited
  • SPC—Single Person Company: a limited-liability sole proprietorship.

These three allow for 100% foreign ownership, including corporate shareholding. An office must be maintained in Bahrain, but it’s usually enough to use the office of a reputable law or accountancy firm. Local sponsorship is not required. Trading domestically is permitted.

Names and nationalities of shareholders and directors appear on public record.

Banking in Bahrain

The modern Bahrain banking sector started in 1973 with the launch of offshore banking units. The Lebanese civil war lead to capital flight from Beirut to Bahrain, much of which remained in Bahrain even after Lebanon stabilized. During the Arab Spring protests in 2011—when Bahrain strongly cracked down on the protests—Bahrain lost significant ground to the then seen as more stable nation of the UAE.

Bahrain presently has over 100 licensed banks (including branches of foreign banks). Several major international banks are present in Bahrain, as well as a large number of regional banks.

Services provided and customer care are of a generally high level, but there is significant variance between the large banks and the smaller ones, more so than in, for example, Europe, where even smaller banks are catching up to larger banks. Bahraini banks often have strong ties to UAE (Dubai) and Kuwait.

Personal banking is almost unheard of for nonresidents, unless you can convince a bank to open savings or investment accounts for low amounts. Don’t expect to be able to open a personal current account in Bahrain without being a resident or for some reason convincing the bank that it’s worthwhile.

Private banking in Bahrain is not quite up to snuff with Lebanon or some of the better private banks in UAE. What may set Bahraini private banking apart from Lebanese private banking is the Bahrain’s greater reach into regional oil-producing countries, as well as strong trading relations with India and Pakistan. This may lead to greater investment opportunities and ways for traders to grow their portfolios.

Corporate banking is a mixed bag. It’s easy to find banks in Bahrain that are willing to open accounts for local companies owned by foreigners and nonresidents. Nonresident but regional companies (essentially meaning UAE, Dubai, and Ras al-Khaimah companies) will also have a relatively easy time finding a banking partner in Bahrain.

Non-regional businesses will find it much more difficult to open a bank account in Bahrain. It certainly does happen, but it’s not a normal activity. One bank is a notable exception here: BMI Bank. It opened a subsidiary in the Seychelles a few years ago, in part a collaboration with Nouvobanq. It is quite easy to open an account with BMI Seychelles both for traditional nonresident companies as well as IBCs and IBC-like companies.

Noteworthy banks include:

Bahrain has loosened its banking secrecy enough to comply with OECD requirements. The kingdom has signed 43 treaties and is able to exchange bank account information.

Living in Bahrain

Just like there is no corporate tax in Bahrain, there is no personal income tax. The only taxes an individual may be subject to are social security (1% for foreigners) or a nominal stamp duty on transfer of real estate. Bahrain is possibly one of the lowest-taxed jurisdictions in the world.

So pack your bags and head for Bahrain, right? No; it’s not that simple.

Bahrain has made great efforts to become attractive for tourism, which is a strong and growing sector for the little island nation. Many nationalities, including Westerners, are welcome for shorter stays, with many being given a tourist visa upon arrival.

But permanent residence is a different thing entirely. Special provisions exist for nationals of GCC (Gulf Cooperation Council) member countries: Kuwait, Saudi Arabia, Qatar, UAE, and Oman. For non-GCC nationals, it is only in the last 10 or so years that it has even been possible to become a permanent resident in Bahrain.

There are different programs available with different conditions to be met, which generally require investments in real estate, several years of previous gainful employment in Bahrain, or forming a local company. Nearly all non-GCC nationals in Bahrain live in the country on a work permit.

Culturally, Bahrain is a fairly conservative Muslim country. It is not as conservative as neighboring Saudi Arabia, but not as liberal as UAE. While many foreigners get accustomed to life in Dubai or other parts of UAE easily, acclimatizing to Bahrain can be a bit more challenging.

English is widely spoken, owing to the country’s history. It’s entirely possible to live comfortably in Bahrain without speaking Arabic, but learning Arabic is required to get fully integrated into society.

The weather can be excruciating, with summer temperatures sometimes reaching close to 50°C (122°F).

Human rights in Bahrain are generally poor. Critics of the government are jailed, and anti-government protests are suppressed.


Bahrain’s role in the international finance sector is mostly as a lesser-known banking center. Banking is of high quality and can rival UAE and Lebanon.

While incorporating may appear attractive, it is very far behind UAE in number of registrations.

The country’s poor track record for human rights and societal issues may pose a problem to would-be expats, fueled by cultural differences by immigrants from other regions. Again, UAE is far ahead.

Editor’s Note: Things can change quickly. New options emerge, while others disappear. This is why it’s so important to have the most up-to-date and accurate information possible. That’s where International Man comes in. Be sure to get the free IM Communiqué to keep up with the latest on the best international diversification options to maximize your personal freedom and financial opportunity.

The information in this article is based on Streber’s personal experiences and has not been independently verified. As always, do your own due diligence.

Streber works as a consultant and director for a wide range of companies and has broad experience in offshore banking, offshore incorporation (formation and maintenance of offshore companies), taxation, privacy, ecommerce, merchant accounts, online payments, and all other things the privacy-minded entrepreneur might find interesting. You can read Streber’s blog here.

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