Do you have an online business or are you a freelance professional looking to relocate your company and legally reduce your taxes while increasing your lifestyle?
There is a hidden gem of a setup for your business in Bahrain, a safe, developed country where you can run your company and have a good lifestyle.
Why Choose Bahrain for Your Business Residence
There are two big points to make which you may not be aware of:
The first is which country to setup your residence and how to do it.
The second is which country to setup your company and how/why it differs from your new country of residence.
First, the location of your residence should be in the Kingdom of Bahrain, a country in the Middle East and GCC member. This is a small country near Saudi Arabia which is relatively unknown but is quietly the Middle East’s most liberal country and also ranked #1 in economic freedom in the Middle East. Many people believe Dubai (UAE) will take these titles but surprisingly they do not. Bahrain is ranked in the global top 10 in personal safety. There are additional benefits in openness to business in Bahrain and tax-free status.
Property Investment in Bahrain
It is common in many GCC countries for foreign citizens to earn a salary and send that money back to their home country due to uncertainty about their long-term plans in the Gulf. We are encouraging you to do the opposite, make money outside of Bahrain and bring back at least enough to live on. Let’s explain more about Bahrain and why to do this. Bahrain is a Muslim majority monarchy, however there are many things available in Bahrain that are not available in neighboring countries. Some examples are alcohol, pork and a liberal policy toward women’s dress code. In Bahrain, foreign citizens can gain residence through employment, business ownership or property investment. We suggest the property investment option. In Bahrain you must invest a minimum of BHD 50,000 ($132,000 USD) to get residence in Bahrain. Prices are much lower than Dubai, this amount is enough to get you at least a nice one-bedroom apartment. See below for why you should setup your business elsewhere. The residence permit in Bahrain will have a cost of approx. $400 USD per year per person. One property can get residency for one whole family, immediate family members. With this residency in Bahrain, there is a side benefit to mention. You can open many different investment accounts from US and global firms where you can make capital gains tax free. This includes popular firms such as Interactive Brokers, Tastytrade, Tradeovate, Saxo and many others. You will have to check with your home country about gaining non-resident status in order to fully benefit from the tax-free status in Bahrain.
Tax-Free Business Opportunities
Now the second big point, the place to consider setting up your company and this will surprise many. It’s the good ol’ United States of America. When you are done laughing, please read on. The US has a reputation of being a high bureaucracy and high tax jurisdiction, but it has a business structure which will highly benefit an online entrepreneur. This is especially true if you are a non-US citizen and reside in Bahrain. Forming a single member LLC owned by you, a non-US citizen is a great option. You can setup a company and a business bank account without setting foot in US soil. The LLC structure if it is owned by a single member is called a “disregard entity” by the IRS (the US tax agency). This means that any profits generated from this LLC will be directly passed down to the owner’s individual US tax filing. Since you are a non-citizen and non-resident of the US, you will report Bahrain as your country of residence responsible for reporting to. Using this setup, you could essentially run your company tax free, and completely legal. Again, you will have to gain non-residence status in your home country. Many countries including EU and western countries will tax you on your worldwide income as long as your home country’s government still considers you a tax resident. The requirements vary for this depending on which country. If you are a US citizen you will face additional challenges because even non-residents still have certain taxation and reporting requirements. Bahrain does not have many reporting requirements for foreign citizens owning a foreign business. Additionally, there is no taxation in Bahrain on any foreign income. When you apply for residence in Bahrain, you must show the government your proof of income. This is where you will report your income but there are no filing requirements beyond that in Bahrain.
Why not setup a company in Bahrain instead of the US?
While it is true that Bahrain is considered as business friendly and tax friendly, there are certain advantages to setting up in US if your business is not active locally.
Setting Up a US LLC from Bahrain
Setting up a business in Bahrain has a few requirements which may not be ideal for a business running completely outside of Bahrain.
First is the startup costs are higher than in the US. You’ll be looking at about BHD 1,700 ($4,500 USD) per year in costs at a minimum. Bahrain requires a physical office space and depending on what type of business it is, you may need a Bahraini citizen partner.
Comparatively, the costs of the US LLC are approx. $400 for company formation. For maintaining the company, you will pay approximately $60 per year in state fees, depending on which state you choose. Also, you will pay approx. $200 per year to pay for a service to receive and scan your company mail. You will have for file a few forms annually to the IRS, among them is disclosing where your revenue came from and where your profits are being wired to (Bahrain). This can be done on your own or hire a professional. Business banking can be done for no fees with a bank called Mercury which specializes in online startups
If you will do this, the condition is that you must have no business done in Bahrain. The rules are fairly strict for doing any kind of local business in Bahrain with a company formation called a commercial registration (CR).
This means your company in the US must have no local office in Bahrain, no local employees, suppliers or warehouses. You must be completely based in another country. This is because Bahrain’s government does not want abuse of residence programs and avoiding the local 10% VAT tax.
Your customers or clients will be more comfortable and familiar with sending payment to the US. This will avoid any issues with payments to a Bahraini bank account or avoid fees through any 3rd party payment provider.
You may have some concerns about your legal rights owning property in a Middle East monarchy country. The truth is many properties are bought in Bahrain using far less paperwork and contracts than other countries. This is a concern for some foreign buyers. We can assist to you in having a more complete legal contract, one which you might be more familiar with seeing in your home country which covers any possible concerns.
Bahrain highly depends on foreign investment capital due to its small size. Bahrain is a destination in the region for many foreign buyers due to the tourism business in Bahrain and liberal policies. Because of Bahrain’s openness to non-Bahraini visitors, this should give you more peace of mind as a foreign citizen property owner in Bahrain
