Bahrain Free Zones Tax Guide

Bahrain Logistics Zone

Khalifa Bin Salman Port

0% customs duty on imports
100% foreign ownership
No minimum capital requirement
24/7 customs clearance
Direct port access

Best for: Logistics, warehousing, light manufacturing, re-export

Bahrain International Investment Park

Hidd Industrial Area

10-year customs duty exemption
100% foreign ownership
No corporate tax
Subsidized land leases
Ready-built factory units

Best for: Manufacturing, food processing, industrial operations

Bahrain FinTech Bay

Arcapita Building, Bahrain Bay

CBB regulatory sandbox access
Streamlined licensing
No corporate tax
Shared infrastructure
Accelerator programs

Best for: Fintech, insurtech, regtech startups

⚠️ Free Zones ≠ VAT-Free

Unlike the UAE's designated zones, Bahrain's free zones do not receive special VAT treatment. All businesses in free zones are subject to standard VAT rules:

10% VAT applies on sales to Bahrain customers
Export of goods/services may qualify for 0% rate
VAT registration required if turnover exceeds BHD 37,500
Input VAT recoverable on business expenses

💰 Where the Savings Are

The real tax benefits of free zones are in customs duty (5% saved on imports), not VAT. Combined with 0% corporate tax, free zones offer a compelling total cost package — but VAT compliance is still mandatory.

Factor	Free Zone	Mainland
Corporate Tax	0%	0%
VAT	10%	10%
Customs Duty	0%	5%
Foreign Ownership	100%	100%
Sell to Local Market	Restricted*	Unrestricted
Setup Speed	2-5 days	2-3 days

* Free zone entities may need an agent or dual license to sell domestically.

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Free Zones Tax Guide

Bahrain's Free Zone Ecosystem