Our guide to Payroll in Bahrain

Doing Business in Bahrain

Investing in Bahrain

• Bahrain offers 100% foreign ownership across most sectors, no personal income tax, and a strongly diversified economy led by finance, ICT, logistics, tourism, and manufacturing.

It has a high HDI, strategic GCC location, advanced infrastructure, and government‑backed incentives for investors.

Basic Facts about Bahrain

General Information

Currency: Bahraini Dinar (BHD)

Population: ~1.5–1.6 million

Capital: Manama

Major Language(s): Arabic

How to Say

Hello: مرحبًا

Good Morning: صباح الخير

Good Evening: مساء الخير

Do you speak English? هل تتحدث الإنجليزية؟

Goodbye: وداعًا

Thank you: شكرًا

See You Later: لاحقًا

Public Holidays

Key national holidays include:

• Jan 1: New Year’s Day
• Mar 20–22: Eid Al Fitr (multi-day)
• May 1: Labour Day
• May 26–29: Arafat Day & Eid Al Adha (tentative)
• Jun 17: Islamic New Year
• Jun 26–27: Ashoora
• Aug 26: Prophet’s Birthday
• Dec 16–17: National Day holidays

Registrations and Establishing an Entity

• Company registration is digital through the Sijilat portal and can be completed remotely.
• Most commercial activities allow 100% foreign ownership, with registration timelines typically 11–21 working days for foreign investors.

Setting up a Legal Structure

• Common legal structures include WLL (LLC equivalent), sole proprietorship, partnership, branch office, and public shareholding company. WLL is the most common for foreign investors.

Banking

• Bahrain has a highly regulated and sophisticated financial sector with multi-currency corporate banking, advanced payments, and international banking capabilities.

Working Week

• Standard working week is 48 hours, typically 8 hours/day, 6 days/week.

Employment Law

Holiday Accrual / Calculations

• Employees entitled to 30 days annual leave.

Maternity/Paternal Leave

• Maternity and family leave rights are protected under Bahraini Labour Law.

Sickness

• Employees entitled to 55 days sick leave:
• 15 days full pay
• 20 days half pay
• 20 days unpaid

National Service

• No mandatory military conscription; obligations relate primarily to employer compliance with national employment regulations (e.g., WPS, Bahrainisation).

Labour Law

• Employment contracts must be written in Arabic, with employee rights protected regardless of nationality.
• Stricter redundancy rules proposed for 2026 requiring 60-day notice and audited financials

Tax & Social Security

Tax Rates

• Personal Income Tax: 0% (no PIT for all individuals).
• Corporate Tax: 0% for most businesses, except oil & gas (≈46%).
• VAT: 10%.
• Withholding, Capital Gains, Inheritance Taxes: 0%.

Social Security

• Bahraini employees: 25% total (17% employer, 8% employee) rising to 18% employer from Jan 1, 2026 as part of reforms.
• Expatriates: 4% total (3% employer, 1% employee) for injury insurance; no pension.
• New End-of-Service Benefit (EOSB) scheme for expatriates administered via SIO with monthly contributions (4.2%/8.4%).

Reporting

• Social insurance contributions must be withheld and remitted monthly.
• Wage reporting must comply with the Wages Protection System (WPS) by Q1 2026.

Minimum wage in 2026

Public sector Bahraini nationals:

• High school: BHD 300/month
• Diploma: BHD 350/month
• Degree: BHD 400–500/month
• Postgraduate: BHD 500+

Private sector: No statutory minimum wage for locals or expatriates.

Payroll

Reports

Monthly payroll must reflect:

• 0% income tax with GOSI deductions (Bahrainis and GCC nationals).
• WPS-compliant salary payment filings via approved banks/PSPs.

WPS becomes fully enforced from February 2026, with strict penalties for non-compliance.

New Employees

• Employers must register employees with SIO and ensure WPS compliance, including appointment of a Wages Responsible Person by Feb 1, 2026.

Leavers

• EOSB for expatriates is no longer paid directly by employers; workers claim from SIO based on accumulated contributions.

Employee Benefits

• End-of-service benefits structured through SIO for expatriates (fund-based system).
• Bahraini nationals receive pension benefits under SIO.
• Many employers offer allowances (housing, transport) and bonuses—common in Bahrain’s market norms.

Visas & Work Permits

Bahrain operates a liberal work visa system managed by LMRA.

Requirements include passport, medical exam, attested qualifications, employment contract, and LMRA permit approval.

Processing time is typically 2–4 weeks.

Major 2026 updates:

• Suspension of sponsor-less visitor visa conversions
• Increased conversion fees (BHD 250)
• Enhanced worker protections

Work permit fees and monthly employer contributions increase from Jan 1, 2026.

Key changes for 2026

In 2026, Key changes include:

• Employer social insurance contributions for Bahrainis increase to 18% from Jan 1, 2026.
• WPS full enforcement by February 2026; mandatory WRP appointment; non-compliance impacts work permits.
• Redundancy laws expected to tighten (60-day notice, audited financials).
• Work visa fees and monthly contributions rise from Jan 1, 2026 through 2029.