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Bahrain Financial Trust

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A Bahrain Financial Trust offers flexible trust options for foreigners.

The Bahrain Financial Trust Law 2006 governed trusts formation, activities, and termination for 10 years. Then, in November of 2016, a new law was enacted replacing the 2006 law. The Trust Funds Law of 2016 (hereinafter the “Law”) now governs the forming, activities, and dissolution of all trusts in Bahrain. This new law made many changes including allowing trusts established and governed by other countries laws. However, this is just an option and not mandatory. A new trust can choose to abide by the 2006 law and not the 2016 law.

Bahrain is an Islamic sovereign state located near the Persian Gulf between Saudi Arabia and Qatar. Oil production has been its main industry since 1932.

A United Kingdom protectorate from 1913 until the British granted independence in 971. However, British influence remains by providing military defense in return to maintaining a strong foothold in the Arabian Gulf region. As a result, English is one of the official second languages.

King Hamad bin Isa Al Khalifa rules this small but wealthy monarchy with an advisory parliament.

Bahrain Financial Trust Benefits

A Bahrain Financial Trust offers these benefits:

Total Foreign Participation: The settlor and all of the beneficiaries can be foreigners.

No Taxation: Bahrain does not impose any taxes whatsoever on their trusts. However, U.S. residents must report all income to their IRS just like everyone subject to global taxation must report all income to their governments.

Option to Choose Jurisdiction: The 2016 law gives settlors the option to choose which jurisdiction laws the trust will be under.

Asset Protection: All assets belong to the trustee where the settlor’s and beneficiaries’ creditors can’t touch.

Estate Planning: Trusts can exist up to 100 years providing many generations of a family’s beneficiaries estate planning benefits.

Fast Formation: A trust deed can be written in one day and registered the next day.

English: As a former UK protectorate, English is one of its secondary languages.

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Legal Information

Bahrain Financial Trust Name

A trust must select a unique name as to avoid confusion with another Bahrain legal entity.

Trusts must use a name ending with the word “Trust”.

Asset Protection
Some jurisdictions consider trusts to be separate legal entities. Bahrain considers the settlor’s assets to be held by the trustee and not the trust which is not a separate legal entity. However, as the assets are in the hands of the trustee, they no longer belong to the settlor and do not belong to the beneficiaries until specifically transferred to one or more of them or the trust dissolves.

Creditors will not be able to attach, impend, or seize the former assets of the creditor in order to satisfy foreign court judgments or orders. Such judicial actions are predicted on a settlor’s creditor seeking redress for unpaid debts by trying to seize former assets of the settlor now held in trust in Bahrain.

Foreign Trusts
In 2015, Bahrain enacted a new law addressing conflicts of interests in commercial and civil matters with laws of other countries. However, this law neglected to include conflicts relating to foreign trusts.

The 2016 Trust Funds Law introduced a principle allowing for the freedom of contract whereby the parties to a trust agreement can agree upon the law governing the trust. This “choice of law” may be explicit or implied (for this reason it is a best practice to explicitly declare which country’s laws govern the trust). Whichever country’s laws are chosen to govern a trust includes how trustees may be appointed, resigned and removed along with the rights and duties of trustees to exercise their powers or delegate those powers to third parties. Other countries laws determine how assets could be invested, managed, and distributed. Even the dissolution of the Bahrain trust will be determined by another country’s laws.

However, the trust deed can specify how all of the above-mentioned powers and duties can be performed without regard to what another country’s laws specify.

The settlor creates a financial trust with a written legal agreement called the “trust deed”. This agreement transfers ownership of the named assets of the settlor to a third party called a “trustee” to hold onto for the benefit of specific “beneficiaries”.

The trust deed specifies al of the powers, rights, and duties which the trustee may exercise on behalf of the beneficiaries and fulfilling the purpose of the trust.

Any type of property and financial rights related to intangible assets may be transferred to the trustee.

Bahrain financial trust building

Trust Deed
A Trust Deed must include the following information in order to be valid:

• Identify the settlor, beneficiaries (current ones as there may be more in the future), and the trustee;

• Define the purpose for the trust in a concise manner (nothing vague);

• Identification of the assets to become trust properties;

• Clearly define the powers and duties of the trustee;

• Describe the objectives of the trust in a clear, concise manner (the trust’s objectives must be achievable and feasible); and

• Duration (lifespan) of the trust not exceeding 100 years.

• Describe what happens to the trust property upon expiration as failure to specify reverts all of the trust property back to the settlor who if deceased creates a probate procedure.

Note: the purpose and objectives of the trust must not violate or be contrary to public morality or public policies.

The Bahrain Register of Financial Trusts which is a department of the Bahrain Monetary Agency and regulated by the Central Bank of Bahrain. Every trust must register with the Register of Financial Trusts.

After registration, the Bahrain Monetary Agency monitors and supervises all trusts and the performance of the trustees.

The person who creates the trust called a “settlor” can reside anywhere and be a citizen of any country. He or she has great flexibility with preparing a trust deed which governs the actions of the trustee and provides whatever rights the settlor wishes to convey upon the beneficiaries.

The trustee agrees to hold the settlor’s assets on behalf of the beneficiaries and must follow the terms and condition in the trust deed.

Beneficiaries are the ones benefitting from the trust as the trust deed dictates. They are not considered “owners” of the trust assets. The trust deed determines if and how and how much of the assets may be transferred to one or more beneficiaries in the future.

Beneficiaries can be citizens of any country and reside anywhere.

Bahrain does not tax the settlor, the trust, trustee, or the beneficiaries at all. There are no trust tax, income tax, corporate tax, gift tax, capital gains tax, inheritance tax, wealth tax, or estate taxes.

However, U.S. residents pay taxes on worldwide income and must report all income to the IRS. Similar to all others subject to taxes on their world income must disclose all income to their tax authorities.

Public Records
In spite of every trust registering with the government, the names of the settlor and beneficiaries are not part of the public records.

Time for Formation
Trusts can be formed quickly depending on the preparer of the trust deed. Trusts can be registered in one day.


A Bahrain Financial Trust has the following benefits: complete foreign participation, no taxes, fast formation, choice of jurisdiction, asset protection, estate planning, and English as a secondary official language.

Beach in Bahrain