Taxes as a necessary tool
Governments of nations from across the world rely on various forms of taxes.
The degree to which a country relies on taxes for its national wealth varies from country to country. But by and large, most of the world’s most successful nations have complex tax structures that bring in revenue from all trade and business in their jurisdiction.
And businesses in all of these countries are used to paying significant portions of their profits in the form of tax to the governing bodies. This is a rather common and successful model and is widely accepted to be the norm in much of the world’s economically successful nations.
If you’re running a business in any of these countries, which may be from Europe, the Americas or Asia or anywhere else in the world, you will have contributed to your country in the form of significant taxes. And you will be used to managing your finances with the implications of taxes in mind. Taxes are simply an inevitable, or rather, a necessary cost for a business that wants to operate in a developed or developing market.
But what if you didn’t have to spend large portions of your income on meeting your tax obligations? What if you could function your business from a country that is in a developed market, but without the high taxes that usually come with it? No, this article is not about tax havens whose sole purpose is to help businesses avoid taxes.
Rather, we are interested only in legitimate markets for your business to operate in, without worrying about steep taxes. A country that lies in the Arabian/Persian Gulf and is surrounded by several other large economies.
Bahrain.
We have written extensively on Bahrain, it’s economy and the business environment in the country. We have discussed the country’s unique location-based advantages. We have analysed how its economy is going to change in the next decade. What benefits it brings to businesses that are set up there. How it encourages foreign investment. Why certain industries are poised for success in the country.
Bahrain presents a rare cocktail of real, tangible benefits that businesses can gain as a result of the country’s business environment, and incredibly low taxes.
And you would be smart to use the country’s unique set of benefits to your advantage by setting up your business in Bahrain.
But how exactly are the taxes in Bahrain beneficial to your business? We try to answer this question based on information from the Doing Business 2020 report on Bahrain.
Paying taxes in Bahrain
Bahrain scored impressively in the report, ranking number 1 among countries in the Middle East and North Africa (MENA) region.
Score for Taxes in Bahrain
It scored a perfect score of 100 in the doing business report, with incredibly easy procedures for businesses to pay their taxes.
Hours of effort to pay taxes in Bahrain
It is reported to require only 23 hours of effort per year to pay taxes. This is an unusually low amount for any country, let alone in MENA, where the average is a much more substantial 202.6 hours. This means your business is likely to put in much less effort in calculating your taxes and managing the tax related procedures than your competitors in other countries.
Percentage of profits required as taxes by Bahrain
The country requires a mere 13.8% of the profits of a business to be paid as taxes. This is an impressively low amount, especially considering all the other benefits it presents to businesses such as being a low-cost point of entry to the large middle east market. The average figure in MENA is significantly higher, at 32.5% of profits.
This further strengthens the country’s viability as the perfect point of entry for any business that wants to do business in the region.
Make up of the taxes in Bahrain
A large portion (10.15%) of the taxes your business will pay is related to social security contributions to be paid by the employer. This means your business will likely be paying even lower than the aforementioned figure of 13.8% of profits as taxes if it has fewer employees than the average business.
What should you do next?
If all of these benefits have not convinced you that Bahrain is the perfect location for your business in Bahrain, then perhaps a call with Al Wasel will.
Al Wasel makes business happen in Bahrain.
We help businesses in and around Bahrain do business in the country. And we do that with our diverse set of services, from sponsoring to import & export, all designed to help your business in Bahrain.
Connect with us today, and work with the most trusted commercial services firm in Bahrain.