1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government’s top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding, or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors. As a reflection of the Kingdom’s openness to FDI, the EDB won the 2018 United Nations Investment Promotion Award for its role in attracting large-scale investments.
To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.
Limits on Foreign Control and Right to Private Ownership and Establishment
The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement outlines all activities in which the two countries restrict foreign ownership.
U.S. citizens may own and operate companies in Bahrain, though many choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are related to bureaucratic government processes, lack of market information, and customs clearance.
Other Investment Policy Reviews
The World Trade Organization (WTO) has conducted a formal Trade Policy Review of Bahrain every seven years. Its last formal review was in 2014 (see link below).
The Central Bank of Bahrain’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.
The Ministry of Industry, Commerce and Tourism (MoICT) operates an online commercial registration portal, “Sijilat” ( ) to facilitate the commercial registration process. Through Sijilat, investors can obtain a business license and requisite approvals from relevant ministries. The registration process normally takes two to three weeks, but can take longer if a business requires specialized approvals. In practice, some business people retain an attorney or clearing agent to assist them through the commercial registration process.
In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:
- Ministry of Electricity and Water
- The Municipality in which their business will be located
- Labour Market Regulatory Authority
- General Organization for Social Insurance
The GOB provides industrial lands at reduced rental rates for short periods of time to incentivize foreign investment in Bahrain’s targeted investment zones.
The Government of Bahrain (GOB) neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.