Short answer: Both allow full foreign ownership in many activities. VAT currently applies in both: 10% in Bahrain and 5% in the UAE, and it must be factored into your pricing. The UAE also charges 9% corporate tax on profits above AED 375,000. The right choice depends on where you sell and what you do.

Foreign ownership

• Bahrain: Prime Minister's Decision No. 40 of 2021 sorts activities into schedules: some are reserved for Bahrainis, some need a GCC share, and a long list is open to 100% foreign ownership. Decision No. 71 of 2025 (Official Gazette No. 3847, 27 November 2025) expanded that list, and the schedules were amended again by Decision No. 36 of 2026.

• Dubai (mainland): since 2021, 100% foreign ownership is available for most commercial activities under Federal Decree-Law No. 26 of 2020, except activities of strategic impact.

• UAE free zones: full ownership has always been allowed, but selling directly into the local market outside the zone is restricted.

Tax

• Bahrain: 10% VAT since 2022, with mandatory registration once turnover reaches BHD 37,500 over the last 12 months.

• UAE: 5% VAT, with mandatory registration once taxable supplies exceed AED 375,000. Since June 2023 the UAE has also charged 9% corporate tax on profits above AED 375,000; free zone companies may get 0% on qualifying income if conditions are met.

When is Bahrain the better fit?

• When your main market is Bahrain itself, or Saudi Arabia's Eastern Province given the proximity.

• When your activity is on the list open to 100% foreign ownership.

Note: This is a general comparison. We are a Bahraini law firm; please verify the UAE side with a UAE-licensed adviser.

Frequently asked questions

Can a foreigner own 100% of a company in Bahrain? Yes, for activities on the 100% foreign ownership list, which is extensive.

How does VAT in Bahrain compare with Dubai? 10% in Bahrain against 5% in the UAE, and registration is mandatory in both once the set threshold is reached.

Why Clinic Law?

A specialist company formation office in Bahrain, registered with the Ministry of Industry and Commerce. We handle the formation from choosing the activity until the CR is issued. Read also: how much it costs to set up a company in Bahrain.

Get in touch: if you are weighing Bahrain against another location, send us your activity and target market on WhatsApp at +973 17004114 and we will set out the Bahrain requirements.

Last updated: 5 November 2026. This article is general information and is not legal advice.