Bahrain’s King has approved Bahrain Law No. 1/2019 amending Article 14 of Bahrain Decree-Law No. 21/2015 on private health establishments. Article 14A(2) of Bahrain Law No. 21/2015 now states, ‘Priority must be given in a private health establishment to recruitment of Bahraini physicians, technicians and nursing staff who are in possession of the requisite qualification and experience, with the exception of positions that require unavailable rare specialised expertise’. Private health establishments have to comply with this law once their contracts with non-Bahraini physicians, technicians and nursing staff have expired. The Law has been published in the Official Gazette and came into effect on its publication date.
Bahrain’s Central Bank has issued the final rules on various activities related to Crypto-Assets, including licensing, governance, minimum capital, control environment and risk management. The Rules are the first of their kind in the region and are aimed at ensuring Crypto-Asset activities are regulated effectively. They also cover anti-money laundering and anti-terrorist financing, business conduct standards, avoiding conflicts of interest, reporting and cyber security for these activities.
In addition, there are provisions on supervision and enforcement standards including those provided by a platform operator as a principal, agent, portfolio manager, adviser and a custodian in or outside Bahrain.
Those licensed by the Central Bank as crypto-asset exchanges will have additional regulatory requirements to comply with. These additional requirements relate to order matching, pre and post-trade transparency, measures to avoid market manipulation and market abuse and conflicts of interest. They also state there is a need for enhanced due diligence when onboarding new clients, requirements to ensure no encrypted safe custody accounts or ‘wallets’ are maintained which cannot be retrieved, a mandate to ensure keyman risks are adequately managed including by having the necessary insurance covers and clients are educated and given clear instructions on using safe custody wallets.
Bahrain’s Central Bank has launched a consultation on draft Digital Financial Advice directives. The consultation ends on 20 February 2019. The draft directives state the rights and responsibilities of licensees who want to use digital financial advice tools. They also stipulate the prudential and conduct requirements associated with this digital advice to safeguard client interests. In addition, the draft directives will allow FinTech firms who focus solely on robo-advice to get a license from the Bank. If approved, they will enable licensees to use technology to offer financial advice to their clients.
The Legislative and Legal Affairs Committee of Bahrain’s Parliament has recommended implementing a draft law limiting the property ownership rights of foreigners. If approved, it will only allow foreigners to own properties in tourism and investment areas. It will replace Article 1 of Bahrain Decree-Law No. 2/2001 on the ownership of land by non-Bahrainis. It is intended to limit the rise in real estate prices in some areas by concentrating non-Bahraini ownership in others. The Government had requested the Committee review the draft law, which will also require adjustments to other Government policies.
This week the spotlight is on tax and finance developments in Bahrain, where VAT came into force on 1 January 2019. Elsewhere, a Bahraini lawyer brought a claim against the Electricity and Water Authority before the High Civil Court requesting the annulment of a VAT decision issued by the Authority.
The lawyer benefits from water and power services for non-commercial purposes who sent a utility bill requesting payment of 5% VAT on these services. He cited Article 9 of Bahrain Decree Law No. 48/2018 on VAT which says the Authority cannot charge VAT if it was offering the service as a sovereign body. They can only charge VAT if it is offering commercial activities like those offered by the private sector.
The court accepted the lawyer’s arguments and said the Authority didn’t have the right to charge nationals VAT for power and water if it is for non-commercial activities. The court requested the Authority cancel the decision and pay legal costs.
Bahrain’s Central Bank has launched a consultation on draft crypto-asset platform operator rules. The consultation ends on 31 December 2018. The proposed framework will cover licensing requirements, financial resources and measures to safeguard client or customer interests, technology standards and cyber security risk management measures, reporting and other requirements. The aim is to provide a regulatory framework for licensing and supervising crypto-asset services including those provided by a platform operator as a principal, agent and as a custodian, in or from the Kingdom.
Bahrain’s Real Estate Regulatory Authority has urged property managers and owner association managers to apply for a license from the Authority ahead of the 4 January 2019 deadline. Real estate brokers, sales agent and developers have already had to apply for licenses. Property managers and owner association managers are the latest categories to be regulated by the Authority. From 5 January 2019, property managers and owner association managers who operate without a license will be breaking the regulatory regime and will have the penalties outlined in Bahrain Law No. 27/2017 imposed on them.
This week the spotlight is on tax developments in Bahrain, where the Kingdom’s Parliament has voted to approve a Decree-Law to impose 5% VAT on goods and services in a special joint session. They will become the third GCC member to join the GCC-wide VAT agreement. It will potentially come into effect on 1 January 2019, according to a schedule laid out by the Finance Minister in February. However, the Finance and Economic Committee of Bahrain’s Parliament had reportedly recommended the law be rejected.
In addition, a Bahraini newspaper has published the list of products to be zero-rated for VAT. Customers will not be charged VAT on the goods although they will still be VAT taxable for accounting purposes. The list includes 34 types of meat and fish, including tuna, lamb, camel and chicken. It includes 37 types of fruit and vegetables, including potatoes, onions, garlic, lettuce, carrots, cucumbers, peas, zucchini, okra, parsley, apples, oranges, pomegranates and apricots. Eight types of coffee and tea are also included as well as grains, sugars, dairy products, water, oil and other foodstuffs. The Implementing Regulations for the VAT Law are expected to be published next week.
Bahrain’s King has issued four new laws aimed at improving the country’s investment environment including the Competition Law. The Competition Law is aimed at tackling monopolies and anti-competitive behaviour. In addition, a new Health Insurance Law granting the Supreme Council of Health responsibility to implement the system and establishing a national health insurance fund was approved. The King also approved the Bankruptcy Law which will introduce reorganisation procedures, allow management to stay in place and business operations to continue. It also covers cross-border insolvency and insolvencies of SMEs. Finally the King approved the Personal Data Protection Law which covers big data for commercial use and includes guidelines on cross-border data transfers.
Bahrain’s Cabinet has approved amendments to allow some foreign companies to open branches without needing a Bahraini partner. The moves would be based on Article 345 of Bahrain Decree-Law No. 28/2015 which amended some of the provisions of the Commercial Companies Law promulgated by Bahrain Decree-Law No. 21/2001. The Industry, Trade and Tourism Ministry has submitted a memorandum to facilitate this. The exemptions would apply to industries with strategic economic importance to the Kingdom.