Over the past decade, the Kingdom of Bahrain has become the most important and financial center of the Gulf. It is the 10th freest economy in the world and is 23rd in the World Bank’s 2020 Ease of Doing Business report. Plus, almost half of the population here are expatriates, which makes it a diverse and multicultural country. Knowing all this, it’s no wonder you’re considering doing business in Bahrain. However, before conducting business in Arab countries, it’s important to understand their economy and cultural protocols. Your success largely depends on this, so buckle up and let’s have a look at what you need to know.
Know the business etiquette
The first step to understanding a different cultural environment is, of course, understanding their personal relationships. You won’t get far if you don’t learn how to behave during business meetings, especially if you plan to move your business to Bahrain. The first thing to know is that business in Bahrain moves slowly, so don’t rush the other party into making a decision. The personal relationship between business partners is the backbone of the Arab business culture. Yes, that includes small talk, so feel free to share your travel stories, personal anecdotes, and family talk. When meeting for the first time, a letter of introduction from a mutual acquaintance might help you start things off on the right foot. Don’t expect to reach any major decision during the first or second meeting, as you must first earn their trust.
The second thing you need to pay attention to is business attire, which should be strictly formal. No matter how hot it is, a suit and tie are a must. Women should cover their arms and legs, as well as wear closed-toed shoes. Don’t be surprised to see local businessmen wearing a so-called thobe, an ankle-length garment which is traditional clothes for every type of occasion.
The tax system in Bahrain
Bahrain is a famous business and investment hub for many reason, and one of them is a favorable tax. Indeed, the generous taxation laws make up a business-friendly framework, as there are very few taxes to be aware of. First off, there is no income tax, which why is such a desirable country to seek work opportunities in. However, citizens are obliged to pay 7% of their income to the Social Insurance Organization (SIO) while ex-pats need to pay 1%. Business in Bahrain offers 0% on sales tax, value-added tax, and capital gains too. The only exception is if the company deals with the oil and gas sector since this industry is taxed at a rate of 46%. The same stands for profits from branch income when derived from activities in these two sectors, while other activities are not subject to corporate taxation.
All in all, this virtually tax-free system can save you a substantial amount of money. Plus, if you decide to move, you can save some bucks on a reputable yet affordable moving company. They will easily prepare your items to be shipped to Bahrain from the USA without you even lifting a finger.
Learn about the restrictions
But let’s not jump the gun with the moving before you acquaint yourself with possible risks too. It’s quite important to know that not all business activities are allowed in the Kingdom of Bahrain. Also, some of the business activities, like fishing, cinematic filming, cargo cleaning or press publication are allowed only for Bahraini and GCC nationals. Let’s take a look at a list of prohibited business activities:
- Gambling business
- Alcoholic drinks, cigarette and narcotics manufacturing
- Mail distribution
- Import and storage of waste or other toxic or harmful materials
In trade and retail, it is important that the business is at least 51% in Bahraini ownership. Also, you need to have a Bahraini partner if you’re dealing with tourism and travel offices, while for medical jobs a license is only available to Bahraini citizens as well.
Be aware of the challenges before doing business in Bahrain
Overall, Bahrain is a relatively easy place to do business. After all, the tax benefits and multinational culture is drawing investors to this Arab country. However, before heading out into the Bahrain business world yourself, it’s crucial you inform yourself on possible challenges you might face on your way. Possible delays in payment might occur, so you’ll need to work on your patience. Also, obtaining licenses can sometimes be tricky due to bureaucracy within government agencies. Another complication might be issuing documentation in Arabic, but at least you won’t have to worry about communicating with your partners. Most people know English, so at least you’ve saved in the language department.
Keep in mind, also, that Bahrainis are trying to improve local employment prospects which means reducing reliance on imported labor. How your business is welcomed in Bahrain will largely be determined by what the business actually is. For example, restaurants, interior design, and cleaning services are in high demand.
Be aware of legal requirements
Of course, if you want to do business in Bahrain, you’ll need to have a legal presence in the country. This means having a representative office, in order words forming a company.
It possible for a foreign company to be registered outside Bahrain and only have a branch, office or agency within the country. Usually, non-Bahrainis establish a limited liability company (WLL), but other types are also possible. For this, you’ll need to submit various documents and certificates to the Ministry of Industry and Commerce. In case this is the first time you’re doing business in the Middle East, it might be best to hire a business support specialist to assist you while you can stand on your own feet. Not only can they help you with work or project visas, but they will also set up your business according to Bahraini rules so you don’t miss out on any detail.
