Introduction and re-cap

In September 2019 and January 2020, Al Tamimi & Company published two news updates to highlight:

1. The issuance by the Ministry of Industry, Commerce and Tourism (“MOICT”) of Resolution No. (106) of 2018 regarding the requirements of validating the actual economic substance of entities’ activities in the Kingdom of Bahrain (“Resolution”), prescribing the requirements to be met by entities in Bahrain in terms of economic substance in Bahrain (the “Rules”).
2. The new detailed guidance notes that serve as a preliminary guide to relevant entities on the scope and application of the Rules (the “Guidance Notes”).

The Rules and Guidance Notes apply to commercial entities in Bahrain which engage in the following commercial activities (“Relevant Entities”):

• Distribution and service centre activities;
• Headquarters activities;
• Holding company activities;
• Leasing activities (other than those activities undertaken by licensees of the Central Bank of Bahrain);
• Shipping activities; and
• Intellectual property activities in Bahrain.

Annual Return Form

Amongst other obligations, as per the Guidance Notes all Relevant Entities are required to file an Economic Substance Rules Annual Return Form (“ESR Annual Return”) with the MOICT within three (3) months of the Relevant Entity’s financial year end. For Relevant Entities with a financial year that ended on 31 December 2019, the ESR Annual Return should be submitted to the MOICT by the 31 March 2020.

The form of the ESR Annual Return has been published by the MOICT, as an appendix to the Guidance Notes.

Whilst the MOICT Sijilat system is not currently accepting online submissions of the ESR Annual Return, the MOICT is currently accepting submissions by way of hard copy submissions in person at the MOICT, as well soft copy PDF submissions by way of email.

All Relevant Entities should aim to submit their completed ESR Annual Return (and all relevant accompanying documents) to the MOICT by the required deadline (i.e. 31 March 2020 for Relevant Entities with a financial year ending on 31 December annually).

What should you do next?

It is important for your Bahrain based businesses to:

• Adhere to the obligations imposed by the economic substance rules;
• Undertake a “health check” on your existing level of economic substance in Bahrain; and
• Ensure the required ESR Annual Return is completed and filed with the MOICT on time.

How can Al Tamimi & Company help?

As the largest law firm in the Middle East & North Africa Region and with strong corporate structuring experience across all industry sectors in the region, Al Tamimi & Company is well placed to assess the impact of the Rules on your organisation and assist you in complying with the Resolution, including working with you to complete and submit the required ESR Annual Return.

If you would like to further discuss the contents of this update, and find out what it means for your business, please contact Al Tamimi & Company in Bahrain.

Key Contacts:

Rad El Treki
Head of Corporate Structuring – Bahrain
r.eltreki@tamimi.com

Yara Frotan
Trainee Lawyer, Corporate Structuring
y.frotan@tamimi.com

Layla Alalawi
Trainee Lawyer, Corporate Structuring
l.alalawi@tamimi.com

The information appearing in update provides an overview of some of the relevant considerations in Bahrain and is not intended to be comprehensive or exhaustive. We recommend that if in doubt specific legal advice is sought.