Free Zones vs. Mainland: Where Should You Set Up in Bahrain?

Setting up a business in Bahrain comes with several advantages for investors and entrepreneurs. One major decision, however, is whether to set the business up in a free zone or in the mainland. The two have different advantages and some disadvantages, depending on the business line and priorities of the entrepreneur. This article will thus highlight the differences to help you make a decision.

What Are Free Zones?

There are free zones within Bahrain, which are designated areas for the attraction of foreign investment. They offer such incentives as exemption from taxes, 100 percent foreign ownership, and easy licensing procedures. Ideal for export-oriented businesses, manufacturing, or logistics companies, popular free zones in Bahrain include Bahrain International Investment Park (BIIP) and Bahrain Logistics Zone. Get details about Company Incorporation Service in Bahrain.

Free zones thus permit enterprises to enjoy international class of infrastructure, duty-free imports and exports, and minimal government interference. In addition to that, free zone businesses can repatriate their profits and capital without restrictions. This makes it even more alluring to international investors.

What Is Mainland?

Bahrain mainland comprises parts other than free commercial zones, areas of direct operation under Bahrain’s laws of trade business. Companies that operate on the mainland would primarily want to conduct trade directly within the Bahraini market even service a local clientele. Thus a local partner or sponsor is needed to establish a mainland company since foreign full ownership is prohibited in some cells as per law.

However, instead of these, the mainland firms are given access to a wider market to operate freely in Bahrain, free from the confines of the Gulf Cooperation Council (GCC) countries. Apart from being unconfined by zones, companies can now have all the more flexibility in site selection. Know about Company Registration Service in Bahrain.

Key Differences Between Free Zones and Mainland

Ownership Structure

Under free zone regulations, 100% foreign ownership is permitted. Generally, a local partner is required to hold at least 51% of ownership in mainland companies. This makes free zones much more favorable to foreign investors who want full control over their businesses.

Market Access

While it is possible for mainland businesses to operate freely within Bahrain’s domestic market, companies that are situated in free zones are generally restricted in that they export their goods and services to outside markets, allowing only limited participation in the local market. Get details about Company Formation Service in Bahrain.

Costs and Taxes

Free zones often provide tax incentives and reduced fees like exemption from customs duties and corporate taxes. However, businesses on the mainland would still be subjected to Bahrain’s regular tax regime, which is presently still quite low when compared to many other countries.

Business Activities

The core manufacturing industries most suited to free zones are logistics, manufacturing, and trade. On the other hand, mainland is mostly suited to retail, hospitality, and professional services targeting local populations. Know about Business Opportunities in Bahrain.

Choosing the Right Option

When deciding between free zones and non-free zones, keep the following in mind:

• Target Market: The best choice for the local Bahraini market is mainland. Free zones are ideal when it comes to international trade or exports.
• Ownership Preferences: Maintaining full ownership-always brings more flexibilities with Free Zones.
• Industry Type: Certain sectors like logistics and manufacturing are better off with infrastructure and other benefits provided by free zones.

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Whether to set up a business in a free zone or on the mainland in Bahrain depends on your business model, objectives, and market strategy. The free zones give excellent incentives for international operations, while the mainland offers free market access and local opportunities. Consider your priorities so as to arrive at the best decision for your business.