Inheritance tax and inheritance law in Bahrain
Taxation Researcher | July 30, 2021
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Bahrain: what restrictions there are and whether making a will is advisable.
There are no inheritance taxes in Bahrain.
Thanks to Charles Russel Bahrain
What inheritance laws apply in Bahrain?
The inheritance law of Bahrain depends
on whether an expatriate is Muslim or non-Muslim.
Muslim testators. The Bahrain Constitution sets out in Article 5(d) that "Inheritance is a guaranteed right governed by Islamic Shariah". In addition, Article 909 of the Civil Code, which addresses the issue of inheritance, specifically states that "the determination of the heirs, their hereditary shares and devolution of the property of the estate are governed by the provisions of Islamic Shariah." Consequently, the inheritance issues of Muslims in the Kingdom of Bahrain are governed by the principles of Islamic Shariah law.
The courts treat Muslim expatriates the same as Bahraini nationals and apply the principles of Islamic Shariah law to their estate, regardless of the laws of their country of nationality.
Non-Muslim testators. Article 21 (6) of the Civil Procedures Act, states that in the case of non-Muslims "in respect of nomination of heirs and assignment of their portions of the inheritance, and the transfer to them of the bequeathed property, the provisions of the law of the country of the deceased shall apply."
If the law of a deceased expatriate´s country of nationality states the law of the country where the property is located applies, then the Bahrain courts apply Islamic Shariah law to their property located in Bahrain.
If a Bahraini nationals owns property overseas, typically the law of the country where the property is located applies. The majority of Bahraini nationals ensure that a will is drafted and executed in the foreign country to deal with inheritance issues after their death. This will may or may not incorporate Shariah principals, depending on the preferences of the deceased.
The Civil Court in Bahrain hear cases involving property inheritance issues. How long a case will take is uncertain, and depends on the complexity of the issues. There is no way to determine this ahead of time.
The reserved portion depends on the law of the deceased.
In the case of non-Muslim expatriates, the courts apply whatever the law of their country of nationality states in regards to reserved portions. In the case of Muslim expatriates, the courts apply Shariah law principles, which are silent on reserved portions.
The courts deduct the deceased´s funeral expenses and outstanding debts from the estate before carrying out the provisions of the will (if one exists) or before applying Shariah inheritance principles in the absence of a will.
It is advisable for any property owner in Bahrain,
whether Muslim or non-Muslim, to have a will drafted and executed.
If non-Muslim expatriates have a will drafted by a lawyer in Bahrain, or in their country of nationality, then the courts in Bahrain will ensure the provisions of the will are carried out. A local Bahraini lawyer can draft a will for Muslim expatriates, in accordance with the principles of Islamic Shariah.
Property can be transferred or gifted to anyone during the owner´s lifetime.
Owners of property in Bahrain, whether by gift, inheritance, or purchase, should ascertain whether a provision in the Sale and Purchase Agreement states that the property developer´s consent is needed before selling or transferring the property to a third party. This is not an uncommon condition, and often goes unnoticed by the owner, who in most cases will not have instructed a lawyer to review and negotiate the terms of the Sale and Purchase Agreement. The developer has an advantage in this case, which is unreasonable, and could cause potential difficulties should the owner decide to sell the property at a later stage.