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The Bahrain Minister of Industry, Commerce and Tourism, HE Zayed bin Rashid Al Zayani (“Minister”) has recently issued Resolution No. (106) of 2018 regarding the requirements of validating the actual economic substance of traders’ activities in the Kingdom of Bahrain (“Resolution”). The Resolution has been issued in accordance with Decree-Law No. (27) of 2015 regarding the Commercial Register and its amendment No. (52) of 2018 (“Law”). The Ministry of Industry, Commerce and Tourism (“MOICT”) has confirmed that this is a national obligation and that the MOICT’s internal portal will be updated in the near future so that any company that is not complying with the Resolution and the Law will have a violation placed against its commercial registration (“CR”). The MOICT will carry out annual reviews to ensure compliance with the Resolution.
The Resolution places certain obligations on various types of entities incorporated or registered in Bahrain, requiring that such entities have an actual economic presence in Bahrain. The Resolution currently only applies to companies that undertake distribution activities, service centres, activities of head offices, activities of holding companies, shipping activities, intellectual property activities, and leasing activities (“Relevant Companies”).
All such Relevant Companies will fall within the ambit of the Resolution and should comply with the following requirements:
Failure to adhere to the requirements of the Resolution may result in a variety of sanctions being imposed by the MOICT with reference to the Law. These include:
It is important for your Bahrain based businesses to (i) understand the economic substance requirements and the obligations to be adhered to ensure that your business is compliant; and (ii) undertake a “health check” on your existing level of economic substance in Bahrain.
As the largest law firm in the Middle East 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 recently introduced Resolution on your organisation and assist you in complying with the Resolution.
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.
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