Payroll in Bahrain
What tax considerations are there?
Personal Income Tax
In Bahrain, individual income derived from salaries/wages is not taxed.
Individuals are asked to pay Social Security contributions, however. For residents this is at a rate of 19% (7% from the employee and 12% from the employer), and 4% for non-resident employees (1% from employee and 3% from employer). The contributions should be withheld by employers at the time of salary/wage payment.
Corporate Income Tax (CIT)
Apart from businesses dealing in the fuel and gas sector, which are taxed at a rate of 46%, all companies operating in Bahrain are exempt from tax.
All companies are required to keep accurate financial records, and submit an estimated income tax statement by the 15th of the third month of the taxable year. Tax returns must be certified by an approved accountant.
Businesses that are required to pay tax can do so across the year in 12 monthly instalments. These are due from the 15th of the fourth month of the taxable year, using the calculations of the estimated income tax statement. Any overpayment will be credited and used against future tax.
HR in Bahrain
What are the regular working hours in Bahrain?
Office hours in Bahrain are usually between 8.30am and 6pm, and the average working week is between 40 and 48 hours. Most people work a five day week, and because Bahrain is a predominantly Muslim country (70% of inhabitants) – the official day of rest is Friday. The additional day will usually be Thursday or Saturday – the former of which applies for schools. Many companies choose Saturday as the additional rest day, however, so as to avoid any loss of international business communication.
During Ramadan, the working day is reduced to six hours. This should legally apply to all employees, however a number of companies only extend this to Muslim employees.
Vacation, maternity and sickness
There are nine public holidays in Bahrain, during which employees are not expected to work. As well as this, employees are entitled to 30 days of annual leave. In the first year this is accrued at a rate of 2½ days each month. At least six days of the leave must be taken consecutively, and in the case of expat employees, employers conventionally pay for their airfare to travel home.
Additional paid leave includes three days in the event of marriage, as long as they present a marriage certificate. Muslim employees who have given at least five years service can also take 14 days of paid leave to pilgrimage to Mecca.
Female employees in Bahrain are entitled to 75 days of maternity leave. 60 days of this is paid and 15 unpaid. The law states that women are not allowed to work during the 40 days following the birth of a child. In order to qualify for maternity leave before the birth, a pregnant employee must provide a medical certificate detailing her due date. In addition to maternity leave, women are entitled to two periods of an hour each during the working day, to breastfeed her child until the child is six months old, and two periods of 30 minutes per day after this until the child is one year old.
As long as they provide a certificate from a medical professional, employees are entitled to up to 55 days of sick leave annually. 15 days are fully paid, 20 days at half pay, and 20 days with no pay.
Employees in Bahrain must provide at least 30 days notice before terminating their contract. Apart from in cases where an employee has broken the law, they are entitled to three written warnings before being dismissed, and at least 30 days of notice. With regards to severance pay, employees on an indefinite contract are entitled to two days of wages for every month they have worked – with a minimum of one and maximum of twelve months worth of salary.