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Basic facts
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Population
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677,886
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Inflation
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2.7% (2005)*
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Main languages
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Arabic, English, Farsi, Urdu
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GDP per head
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US$17,480
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Currency
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Dinar (BHD)
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GDP growth
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5.9% (2005)*
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Economic communities
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WTO, Gulf Co-operation Council (GCC)
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GDP sources
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0.6% agriculture, 42.5% industry, 56.9% services
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*Economist Intelligence Unit estimate.
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Political environment
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The Kingdom of Bahrain, previously an absolute monarchy, became a constitutional monarchy in February 2002. A parliament with powers to propose and ratify legislation was elected in October 2002. Next legislative elections are due in October 2006.
The current ruler, King Hamad bin Isa al-Khalifa, acceded to the throne in March 1999.
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Foreign trade and investment
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Exports
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US$11.0bn (2005)*
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Imports
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US$8.5bn (2005)*
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*Economist Intelligence Unit estimate.
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Major exports: Oil and mineral products, base metals and textiles.
Main export markets: India, Japan and Korea.
The kingdom's major exports are petroleum-related, consisting of petroleum products from the refinery at Sitra, and revenue from the sales of crude oil pumped at the Saudi Arabian-run Abu Saafa oilfield (although this was recently suspended and it is unclear whether Saudi Arabia will resume this arrangement in future). Energy exports are sold predominantly in India. Japan and Korea are also major destinations for exports—mostly oil-related and aluminium.
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Business and financing
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Business forms
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Limited-liability company, joint-stock company, single-person company
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A foreign investor may operate as a limited-liability company (WLL), single-person company, closed joint-stock company, branch office, regional office or holding company. The choice of legal vehicle is based on the size of the company and investors' requirements.
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Labour environment
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Unemployment rate
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N/A
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Minimum wage
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Under consideration
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The government is examining the difficulties currently facing the labour market, and is considering proposals to implement a minimum wage for private-sector workers. Bahrainisation—the policy of replacing foreign workers with local ones—has failed to stem growth in unemployment and the government is contemplating radical changes to labour laws to stimulate employment of locals, including the levying of fees from employers on foreign workers based upon a Labour Market Reform Study performed by McKinsey.
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Taxation
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Corporate tax
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Main rate
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46% applies to oil companies only
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There is no corporate tax for most companies in Bahrain, but an income tax is levied on the profits of oil companies. The tax is payable by any company engaged in exploring for, producing or refining oil in Bahrain.
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Individual tax
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There is no individual income tax in Bahrain. Social insurance is charged with respect to expatriate employees at 3% of salary, payable by the employer. For Bahraini employees, the social insurance rate is 15% (10% payable by the employer and 5% by the employee).
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Capital gains
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There is no taxation of capital gains.
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Indirect tax
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No value-added tax or general sales tax
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There is no VAT or general sales tax in Bahrain.
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Tax administration and compliance
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The tax year for those companies that must pay tax is the calendar year.
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Additional tax information
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Withholding taxes
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There are no withholding taxes.
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Tax treaties
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Bahrain has signed more than five double-tax treaties. There is no treaty with the US.
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Dividends
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There is no taxation of dividends.
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Revenue protection
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There is no transfer-pricing or anti-haven (CFC) legislation.
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Groups
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There is no provision for group taxation.
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Incentives
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There are no specific tax incentives.
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Other taxes
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Company registration fees, Customs duties, Sales tax on gasoline, Training levy, Municipal tax on commercial rented property.
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