Bahrain provides a free, open and transparent environment for businesses. Access to the oil & gas sector is, however, difficult, and can eliminate juniors. Our Neutral outlook is dominated by the oft turbulent relationship with Saudi Arabia, which recently limited access to the mainland
June 14, 2021
There are no corporate taxes in Bahrain except for the levy of income tax on the profits of companies engaged in the exploration, production or refining of crude oil and other natural hydrocarbons in Bahrain, which is levied at a rate of 46%. Taxable income for oil companies is net profits, consisting of business income less business expenses.
Although Bahrain’s economy is one of the most diversified in the Gulf, the Bahrain government remains heavily reliant on the hydrocarbons sector for its financing, which contributes around 80% to government revenue. Bahrain also boasts strong economic ties to the wider GCC, especially Saudi Arabia, which is also a key source of tourism. Key macro-level challenges going forward will be reducing government expenditure and diversifying revenue streams to insulate the state budget’s vulnerability to oil price fluctuations. The budget deficit for 2016 is estimated to have been around 13.7% of GDP a figure which is set to decrease to 9.6% in 2017. In early 2016, Standard and Poor’s and Moody’s decided to strip Bahrain of its investment grade rating, making Bahrain the first of the Gulf countries to be subjected to this. The key drivers behind the downgrades were revisions to the long-term outlook for oil prices and their impact on Bahrain’s government finances and balance of payments.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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