MP Seeks VAT-Free Free Zone Near Khalifa Port

MP Hassan Ebrahim is pushing for a free zone near Khalifa Port where companies would be able to store and re-export goods without paying value added tax (VAT) in advance, with VAT only charged on consignments released into the Bahraini market after sale.

The text asks for the zone to be created close to Khalifa Port so that firms can bring in cargo, keep it in storage and ship it on to other countries without VAT being collected, so long as the goods do not enter Bahrain.

Under the scheme, VAT would be linked to actual sales rather than to the arrival of shipments. Tax would fall due when goods leave the free zone for domestic buyers, instead of being charged at the border. According to the explanatory memorandum, this is aimed in particular at easing cash-flow strain for small and medium-sized businesses that struggle when taxes are paid up front.

The memorandum roots the plan in Article 10(a) of the Constitution, which states that the national economy is based on social justice and fair co-operation between public and private activity, with economic development and prosperity for citizens pursued within the law. Mr Ebrahim presents the proposed zone as one way to support that framework while keeping pace with changing trade patterns.

Choosing a location near Khalifa Port is described as an attempt to make better use of the port’s existing infrastructure and its role as a busy trade route. The free zone is pitched as a hub for supply chains and transit trade, giving Bahrain extra weight on the Gulf logistics map at a time when international companies are looking for storage centres with flexible terms, lower costs and smooth cargo handling.

Goods brought into the zone for onward shipment would be exempt from VAT, which, the memorandum argues, would make Bahrain more attractive to companies whose business models depend on re-export. Linking tax to realised income, rather than to warehouse stock, is presented as a way to help firms expand imports and keep goods moving without early tax demands acting as a brake.

Mr Ebrahim says the zone would also open the door to new services in the logistics field. Companies specialising in smart warehousing, sorting, repacking and other value-added work could be drawn in, with knock-on effects for trade and industry. The document points to the prospect of extra logistical, technical and administrative jobs that match the skills of young Bahrainis, and to greater co-operation between the public and private sectors as local investors move into modern logistics projects.

The proposal stresses that small and medium-sized enterprises could use the zone as a low-cost storage and redistribution base, with simpler customs procedures and access to Bahrain’s position between Gulf and global markets. That, in turn, is linked to the growth of e-commerce and start-ups that depend on fast delivery and other digital-economy services.

According to the memorandum, attracting international firms that work on a re-export model would increase ship traffic and air freight movements, raise income from port and related services and lift the volume of trade passing through the kingdom. The plan is presented as part of efforts to support economic change, deepen Bahrain’s role as a regional centre for trade and logistics services, ease financial pressure on companies and back national plans to diversify income sources and sharpen Bahrain’s competitive edge.

To strengthen the case, the document points to regional experience, in particular Dubai’s free zones such as Jebel Ali and Dubai Logistics City. These areas have drawn thousands of international companies by offering clear incentives, including flexible storage terms, easy re-export procedures and the deferral or waiver of some taxes until sales actually take place. The memorandum argues that adapting the successful parts of that model to Bahrain’s circumstances could help raise growth rates and increase trade and investment flows.