How to Register a Sole Proprietorship (مِلكيّة فَرديّة) in Bahrain

Becoming an independent contractor under a مِلكيّة فَرديّة in Bahrain is attractive because of the country’s straightforward registration process, low setup costs, and strong infrastructure for small businesses. One of the biggest advantages is that profits are completely tax-free—Bahrain does not levy personal or business income tax on sole proprietors.

The main challenges include securing approvals for regulated activities, keeping up with VAT rules if your turnover is high enough, and complying with social insurance obligations when hiring employees. But the benefits, such as full control, independence, fast setup, and keeping 100% of your profits, often outweigh these hurdles.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Bahrain?

In Bahrain, a sole proprietorship is officially called مِلكيّة فَرديّة. Depending on context, it may also be referred to in English as:

• Sole trader
• Self-employed worker
• Independent contractor

These terms all describe one person legally running a business without forming a separate company.

How does a مِلكيّة فَرديّة work in Bahrain?

مِلكيّة فَرديّة vs. other business structures in Bahrain

Besides registering as a مِلكيّة فَرديّة, another common way to set up a business in Bahrain is through a Limited Liability Company (شَركة ذات مَسؤولية مَحدودة / WLL). The table below highlights the main differences between the two options.

Step-by-step guide: How to register a مِلكيّة فَرديّة in Bahrain

Step 1: Check your eligibility

You must be at least 18 years old, mentally competent, and not have disqualifying criminal convictions. Bahraini citizens and Gulf Cooperation Council (GCC) nationals are eligible. Foreign nationals may also register, provided they have a valid residence permit and meet any sector licensing requirements.

Step 2: Choose your business name

Your trade name must be unique, not misleading, and compliant with Bahrain’s Trade Names Law. You can check name availability by searching existing companies via the government portal.

Step 3: Gather required documents

You’ll commonly need:

• Valid national ID (or passport)
• Residence permit (if non-citizen)
• Police clearance or a clean criminal record certificate
• Business address or lease agreement
• Details of your business activity and whether it requires special licensing or approvals

Step 4: Register with MOICT

You will need to submit your application for a (sole proprietorship) portal via the government's e-Service. You can reserve or register it via the government's Business Licensing System (SIJILAT) portal. If your business activity is regulated, obtain approvals from the relevant authorities.

Step 5: Pay registration fees and contributions

You’ll pay a license fee of BHD 20. Processing time is typically 3 working days if documents are complete. If employing staff, you’ll need to register with the Social Insurance Organization and pay applicable contributions. If annual taxable turnover exceeds BHD 37,500, register for VAT and file returns.

Step 6: Post-registration obligations

After registration, you must keep your business compliant with Bahraini regulations. This means renewing your Commercial Registration each year through the SIJILAT system, issuing proper invoices that meet legal requirements, and keeping accurate financial records such as contracts and receipts. If your business is registered for VAT, you are required to file returns on schedule and ensure that all invoices include the correct VAT details. If you hire employees, you must also register them with the Social Insurance Organization and make the necessary monthly contributions. In addition, certain business activities require sector-specific licenses, which must be maintained and renewed as needed.

Financial and tax obligations for مِلكيّة فَرديّة in Bahrain

You are responsible for:

• Income tax: Bahrain does not levy personal income tax on individuals, and ordinary sole proprietors (مِلكيّة فَرديّة) are not subject to business income tax. The only exception is companies engaged in the oil, gas, or hydrocarbons sector, which pay a 46% income tax on profits.
• VAT: The standard VAT rate in Bahrain is 10%, administered by the National Bureau for Revenue (NBR). VAT registration is mandatory if your annual taxable supplies exceed BHD 37,500, and voluntary registration is possible from BHD 18,750. Returns are usually filed quarterly through the NBR’s online portal.
• Social insurance contributions: Sole proprietors do not contribute on their own profit. However, if you hire employees, you must register with the SIO and pay monthly contributions. For Bahraini employees, the combined rate is about 25% (17% employer, 8% employee), 4% for expats, according to Decree Law No. (24) of 1976.
• Record-keeping: You must maintain accurate records of contracts, receipts, and accounts, along with all issued invoices. These records must be kept for at least five years and be available for inspection if requested by the MOICT or NBR.
• Invoicing: All invoices must comply with Bahrain’s VAT invoicing rules. This means including your Commercial Registration (CR) number, business and client details, the date, a description of goods or services, the invoice value, and the VAT amount if applicable. Invoices must be numbered sequentially and stored in your records.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a مِلكيّة فَرديّة in Bahrain?
None for most activities; regulated sectors may require capital.

Do مِلكيّة فَرديّة need to register for VAT?
Yes, if annual taxable supplies exceed BHD 37,500. Voluntary registration is allowed above BHD 18,750.

How much are the standard contributions for social insurance?
Only applies if employees are hired. For Bahraini employees: ~17–20% employer and ~7–8% employee. For expatriates: ~4% split between employer and employee.

Can a مِلكيّة فَرديّة hire employees?
Yes. You must register with the Social Insurance Organization and comply with labor regulations.

How long does it take to register a مِلكيّة فَرديّة in Bahrain?
About 3 working days if documents are in order.

Can foreign nationals register as a مِلكيّة فَرديّة in Bahrain?
Yes, if they have a valid residence permit and the activity is permitted. Some sectors have additional restrictions.

Do مِلكيّة فَرديّة need a separate business bank account?
Not mandatory, but strongly recommended for financial clarity and banking compliance.

What happens if I stop operating as a مِلكيّة فَرديّة?
You must cancel your Commercial Registration via SIJILAT, settle any VAT or social insurance obligations, and notify authorities.

Are there incentives or reduced rates for new مِلكيّة فَرديّة?
Bahrain generally offers low registration fees and a favorable tax environment. Some sector-specific grants or programs may apply.

Can I use Deel as a مِلكيّة فَرديّة to get paid by international clients?
Yes. Deel supports receiving payments from global clients in multiple currencies, with transparent fees and exchange rates.

Does Deel generate compliant invoices for مِلكيّة فَرديّة?
Yes. Deel generates legally compliant invoices that meet Bahrain’s VAT and accounting requirements.

Can Deel help me with taxes as a مِلكيّة فَرديّة?
Yes. Deel provides downloadable payment records and tax reports to help with VAT filings and compliance, though it does not replace a professional accountant.

Does Deel offer contracts for freelancers and مِلكيّة فَرديّة?
Yes. Deel provides contract templates that comply with Bahraini law.

Can I access benefits through Deel as a مِلكيّة فَرديّة?
Yes. Deel offers optional benefits like health insurance and retirement plans, usually reserved for employees.