HSBC Treasury Management Profiles 2018 -

Current section, Introduction


Bahrain’s liberal tax regime, 100 per cent foreign ownership of businesses, highly skilled workforce and excellent infrastructure have proven attractive to companies looking for a gateway to the Middle East; in 2017 the country attracted a record 71 companies with investments of USD733 million. However, it is oil on which its economy almost exclusively relies (oil accounts for approximately 86 per cent of the country’s budget revenues), which given the prolonged period of weak oil prices has placed it under significant strain. The country’s fiscal deficit is forecast at 11.9 per cent of GDP in 2017. Real GDP grew 3.4 per cent in Q4 2017 (a fall of 2.8 per cent on Q3), with the oil sector expanding 1.3 per cent year on year. The IMF forecasts GDP growth of 2.3 per cent for 2017, compared to 3 per cent in 2016, and 1.6 per cent in 2018. More robust figures of 3.1 per cent in 2017 and above 3 per cent for 2018 and 2019 have been released by the Bahrain Economic Development Board. Growth in non-oil sectors (particularly in sectors such as hotels and restaurants and the financial services) has remained resilient however. The pace of growth for the non-oil sector reached 4.8 per cent in the first nine months of 2017, and is expected to exceed the 4 per cent growth recorded in 2016 (the non-oil sector grew 3.8 per cent in Q4). The government has taken steps to address its public finances, increasing fuel and utility prices, for example, but has postponed implementing fresh austerity measures, including the introduction of a 5 per cent VAT, to cut its budget deficit until a system to compensate citizens for a higher cost of living has been agreed upon. The discovery in April 2018, of an offshore field estimated to hold more than 80 billion barrels of shale oil and between ten and 20 trillion cubic feet of deep gas reserves, has the potential to substantially changes in the country’s financial fortunes.

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Legal and regulatory

  • Foreign exchange accounts can be held by residents both domestically and abroad. Resident domestic currency (BHD) accounts cannot be held abroad, but are freely convertible
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are freely convertible

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  • Bahrain does not operate a general corporation tax system, electing only to tax the income of oil companies
  • There is no corporate tax for most companies
  • A tax rate of 46 per cent applies to the profits of oil companies
  • VAT is expected to come into force as from 1 October 2018 at a standard rate of 5 per cent and a registration threshold of approximately USD100,000

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Payment instruments and systems

  • Cash is used for low-value retail transactions. Cheques are commonly used for both commercial and retail payments, although electronic credit transfers are increasingly used for high-value and low-value corporate transactions. Payment card use is rising. A National Mobile Electronic Wallet (BenefitPay) was launched in July 2017. The wallet enables instant payments via smartphone
  • Bahrain operates three national payment systems: an RTGS system, the BCTS for cheque payments, and the EFTS for low-value electronic transactions. The EFTS comprises three subsystems: Fawri+, Fawri and Fawateer, an EBPP system

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Cash management

  • Domestic and cross-border notional pooling and cash concentration is permitted between resident and non-resident companies
  • Cash and cheque collection services are available

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Electronic banking

  • Electronic banking is commonplace in Bahrain. There is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes. BENEFIT provides a shared internet banking platform for banks
  • The Bahrain e-Government portal facilitates the payment of government fees and services online via debit and credit cards

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  • International Monetary Fund
  • The World Bank
  • Bahrain Economic Development Board

The materials contained on this page were assembled in May 2017 (unless otherwise dated).



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