Beruflich Dokumente
Kultur Dokumente
Business in
Bahrain
Financial Services
November 2014
Contents
1
Executive Summary
3.1
Bahrain
3.2
Dubai
3.3
Qatar
Occupancy costs
Manpower costs
Cost of Utilities
10
Communication Costs
11
7.1
Telephone Services
11
7.2
Internet Services
12
Corporate Taxes
13
Renting Residences
14
10
Education Costs
15
11
16
Appendix
17
Executive Summary
This report looks at the typical costs associated with operating a financial services firm in Bahrain,
Dubai and Qatar. The report analyses the cost of licensing and registration, commercial rental rates,
manpower costs, communication and utility expenses, as well as corporate taxes across these
jurisdictions.
In addition to analyzing the costs of operating a financial services firm in these jurisdictions, the study
also presents an overview of the average cost of living, focusing on the cost of education and the cost
of renting residential properties. Overall, the total cost of doing business in Dubai and Qatar is
1
significantly higher (35% and 46% respectively) than that of Bahrain.
Rental rates of commercial properties in Bahrain remain considerably lower than Qatar and Dubai,
where office rents are more than two times the rates in Bahrain. Commercial rental rates for Dubai
2
3
and Qatar are assessed for free zones only (DIFC and QFC respectively) as financial services firms
are restricted to these locations (in the case of Dubai) or are predominantly located in these free
zones (as in the case of Qatar). Bahrain, however, has no such restrictions and an investment
company would be permitted to setup operations in any commercial office location.
Although communication and utility expenses vary upon consumption, Dubai has the highest average
cost for utilities (water and electricity) and telecommunication.
From a cost of living perspective, residential rents in addition to the cost of schooling are higher in
Dubai and Qatar, making Bahrain the most affordable country to live in. On average, the rental rate of
2 bedroom apartments and 3 bedroom villas in Dubai and Qatar are twice that of Bahrain. Education
costs in Bahrain are lower than Dubai and Qatar which exceed the education cost of Bahrain by 80%
and 103% respectively.
Bahrain also has the lowest manpower costs when compared with Dubai and Qatar, with the average
salary in Bahrain for the year 2014 being 6-15% less than Dubai and Qatar, respectively.
DIFC : The Dubai International Financial Centre is a financial free zone located in Dubai which operates as an independent
jurisdiction within the UAE
QFC: The Qatar Financial Centre is a financial centre located in Doha which operates as an independent jurisdiction within
Qatar
The following tables outline the overall cost of setting up and operating a business, in addition to the
living costs across Bahrain, Qatar and Dubai:
Figure 1: Comparison of various cost heads
Telephone Services
Internet Services
Bahrain
Qatar
Dubai
75,930
221,340
222,160
69,810
86,510
77,170
1,670
2,260
3,510
3,500
5,270
3,750
310
280
660
149,790
313,720
304,240
KPMG analysis
10
Bahrain
Qatar
Dubai
2 Bedroom Apartment
17,280
33,840
37,440
3 Bedroom Villa
23,040
47,280
63,840
6,710
13,650
12,080
Education
Source:
KPMG analysis
Reflects the average annual cost of renting 300sqm of commercial office space
Reflects the telephone charges of 1 employee and includes monthly rental charges
10
Financial services institutions operating in banking and investment activities are regulated by the
Central Bank of Bahrain (CBB) in Bahrain, the Dubai Financial Services Authority (DFSA) in the DIFC,
11
and the Qatar Financial Centre Regulator Authority (QFCRA) in QFC. In particular, this study looks
12
at financial institutions that are permitted in dealing with investments (as principle) and dealing with
13
investments (as agent) .
Licensing and registration costs are presented in the form of non-refundable application fees, in
14
addition to annual fees charged to the licensees, depending on the type of license held, should the
application be successful.
Figure 3: Licensing and Registration Fees of Financial Services Institutions
Annual Fees & Application Fees (USD)
Regulator
CBB
15
DFSA
QFC
Source:
Category
Application Fees
Annual Fees
270
270
40,000
40,000
25,000
25,000
25,000
25,000
10,000
10,000
Central Bank of Bahrain Rulebook: A Guide to the CBBs Licensing Process, The DFSA Rulebook: Fees Module, Qatar Financial Centre Regulatory
Authority: A Guide to the Application Process
11
Qatar has a dual regulatory system whereby the QFCRA as well as the Qatar Central Bank (QCB) regulate entities under
their jurisdictions
12
Dealing in investments as principle refers to the buying, selling, subscribing for or underwriting of financial instruments on
own account, including the underwriting of public offerings and private placement of third parties
13
Dealing in investments as agent refers to the buying, selling, subscribing for or underwriting of financial instruments on behalf
of a client
14
Annual fees payable to the CBB are variable, and are based on a percentage of the institutions adjusted operating cost base
(subject to a minimum and maximum amount). Furthermore, the DFSA charges an annual fee of 0.1% for each USD 1 million
in turnover
15
The application and annual fees charged by the CBB are rounded off to the nearest 10
3.1
Bahrain
Rental rates for commercial office space have fallen by an estimated 7% between 2013 and 2014.
This is due to the current competitive market whereby supply of prime office space exceeds demand.
At these rates, Bahrain is the most competitive commercial office space market when compared with
Dubai and Qatar.
16
The table below reflects the rentals for the Net Internal Area (NIA) . Typically, an additional 15% of
the rent would be charged as maintenance charges for the common areas which include staircases
and lobbies.
Figure 4: Prime commercial asking rental rates in Bahrain
Asking rental rates in Bahrain by office locations (USD per sqm per month)
Location
17
2012
2013
2014
24
24
21
24
24
24
Seef Area
22
21
19
24
22
19
Source:
Both Bahrain World Trade Center and Bahrain Financial Harbor offer furnished and non-furnished
office space options.
Figure 5: Typical prime commercial asking rents
Bahrain asking rents in 2014 (USD per month)
Location
50 sqm
100 sqm
200 sqm
300 sqm
1,060
2,120
4,240
6,370
1,200
2,400
4,800
7,200
960
1,910
3,820
5,730
1,000
2,000
4,000
6,010
Seef Area
Diplomatic/Manama
Source:
16
Net Internal Area refers to the total floor area excluding area taken up by lobbies, stairs and escalators, lifts and other
maintenance areas.
17
3.2
Dubai
Rental rates for commercial properties in Dubai remain high when compared to Bahrain. On average,
prime office space rental rates in Dubai are 193% higher than Bahrain.
Figure 6: Prime commercial asking rental rates in Dubai
Asking rental rates in Dubai by major office locations (USD per sqm per month)
Location
18
2012
2013
2014
56
56
56
62
62
62
67
67
67
Source:
DIFC further charges USD 14.7 per square meter per month as service and utility charges.
Typical rents for occupying at the DIFC are as below:
Figure 7: Typical prime commercial asking rents
Dubai asking rents in 2014 (USD per month)
Location
50 sqm
100 sqm
200 sqm
300 sqm
2,810
5,620
11,230
16,850
3,090
6,180
12,360
18,540
3,360
6,720
13,430
20,150
Source:
18
3.3
Qatar
Rental rates in the Diplomatic District / West Bay have increased due to the development of the area
as having the greatest amount of A-Grade office space in Qatar. Rental rates at QFC reduced as
more prime office supply became available in Qatar. On average, prime office space rental rates in
Qatar are 192% higher than Bahrain.
19
2012
2013
2014
69
69
66
54
55
57
Source:
In addition to the base rent in Diplomatic District/West Bay, 15% of the monthly rate is charged as
service charge. QFC charges 10% of the asking rental rate as service charge.
50 sqm
100 sqm
200 sqm
300 sqm
3,300
6,610
13,220
19,830
2,840
5,690
11,370
17,060
Source:
19
Occupancy costs
Occupancy costs per employee are calculated based on the average workstation area per employee
20
and the rental rate of the location .
As illustrated below, the occupancy cost per workstation in Bahrain continues to be significantly lower
than QFC in Qatar and the DIFC in Dubai. On an average, the annual occupancy in QFC and DIFC
are around three times that of Bahrain.
Figure 10: Average annual occupancy costs per workstation
21
2012
2013
2014
Bahrain
4,780
4,780
4,370
QFC
13,662
13,662
13,090
13,680
14,040
12,750
14,580
14,940
13,760
15,480
15,840
14,730
Source:
DTZ Occupier Perspective Global Occupancy Costs Offices 2013 & 2012, KPMG analysis
20
DTZ Occupier Perspective Global Occupancy Costs Offices 2013 & 2012; average workstation area per employee adopted
as 15.0 sqm gross area (i.e. including staircase, lobbies and other common areas). Bahrains rate for utilities and service
charge of commercial properties is 15% of the rent per sqm, while the DIFCs utilities and maintenance charge is USD 15 per
sqm, and the QFCs rate for utilities and service charge is 10% of the rent per sqm
21
Please refer to the Appendix for a detailed explanation of the calculations and methodology adopted
Manpower costs
When comparing the average salary earned working in the financial sector, Bahrain continues to have
the lowest manpower cost in comparison to Dubai and Qatar. The salaries quoted below include the
22
basic and HRA components, but does not include the other expatriate benefits.
Figure 11: Average finance sector salaries
Average Annual Finance Sector Salary
23
(2014)
Country
Local Currency
USD
Bahrain
BHD 22,070
58,540
Dubai
AED 229,460
62,470
Qatar
QAR 251,480
69,070
Source:
Hay Group Compensation and Benefits Report 2014, Ministry of Development Planning & Statistics Qatar, KPMG analysis
The tables below outline the overall annual costs of hiring in Bahrain, Dubai and Qatar. Each table
provides past and future trends of the wages, housing rent allowance, and additional benefits of
expatriate employees working in the financial sector.
Figure 12: Overall costs of hiring in Bahrain
Average Annual Cost in the Financial Sector for Bahrain (USD)
Overall costs
2012
2013
2014
2015 (E)
2016 (E)
2017 (E)
Salary
35,240
37,070
38,360
39,890
41,490
43,150
HRA component
19,220
19,500
20,180
20,980
21,820
22,700
Expatriate Benefits
10,730
10,890
11,270
11,720
12,190
12,670
Total Cost
65,190
67,460
69,810
72,590
75,500
78,520
Source:
2012
2013
2014
2015 (E)
2016 (E)
2017 (E)
Salary
34,570
36,260
38,080
40,250
42,540
44,970
HRA component
22,890
23,230
24,390
25,780
27,250
28,810
Expatriate Benefits
13,800
14,000
14,700
15,540
16,430
17,370
Total Cost
71,260
73,490
77,170
81,570
86,220
91,150
Source:
22
HRA: Housing rental allowance is the allowance in the remuneration of an employee to meet rental expenses
23
Including only basic and HRA components, other expatriate benefits are not included
2012
2013
2014
2015 (E)
2016 (E)
2017 (E)
Salary
38,410
40,520
42,810
45,120
47,560
50,130
HRA component
23,080
23,420
26,260
27,680
29,170
30,750
Expatriate Benefits
15,330
15,560
17,440
18,390
19,380
20,420
Total Cost
76,820
79,500
86,510
91,190
96,110
101,300
Source:
The following graph illustrates the trends in employment costs between 2012 and 2017. Based on
24
projected inflation and salary growth , the overall cost of manpower in Bahrain is expected to remain
substantially lower than that of Dubai and Qatar.
120,000
100,000
80,000
60,000
76,820
71,260
65,190
86,510
79,500
73,490
67,460
96,110
91,190
86,220
81,570
72,590
77,170
69,810
75,500
101,300
91,150
78,520
40,000
20,000
Bahrain
Dubai
Qatar
0
2012
24
2013
2014
2015 (E)
2016 (E)
2017 (E)
Forecasted salary growth is projected as 4% for Bahrain and 5% for Dubai and Qatar - Hay Group Compensation and
Benefits report 2014
Cost of Utilities
Electricity and water tariffs for commercial consumption differ in accordance to the total number of
units utilized. When compared, Dubai charges the highest commercial tariffs for the utilization of both
electricity and water.
Figure 15: Electricity & Water Tariffs
Electricity & Water Tariffs for Commercial Consumption (USD)
3
Country
Bahrain
0.05
0.80
Dubai
0.10
2.10
Qatar
0.04
1.43
Source:
The charges quoted compare the commercial tariffs applied for utilizing more than 30,000 kilowatt3
hour (kWh) units of power against tariffs applied for utilizing less than 450 cubic meters (M ) of water.
The table below outlines indicative charges for electricity and water consumption for typical prime
commercial office sizes across Bahrain, Dubai, and Qatar:
Figure 16: Indicative Utility Charges
Electricity and Water Charges Scenarios (USD per month)
Location
Bahrain
Dubai
Qatar
Source:
50 sqm
100 sqm
200 sqm
300 sqm
Electricity
40
90
170
260
Water
10
10
30
50
Total
50
100
200
310
Electricity
90
180
360
540
Water
20
40
80
120
Total
110
220
440
660
Electricity
30
70
130
200
Water
10
30
50
80
Total
40
100
180
280
KPMG analysis
10
Communication Costs
7.1
Telephone Services
The cost of telephone services has been calculated based on the corporate rates offered from leading
telecommunication providers in Bahrain, Dubai and Qatar. The table below compares the call rates
applied for business telephone lines for both international calls and local calls:
Figure 17: Indicative Local vs. International Call Rates
Average Local vs. International Call Rates per Min (USD)
Country
25
26
Bahrain
0.03
0.64
Dubai
0.03
0.52
Qatar
0.04
0.54
Source:
Telephone charges are presented in the form of fixed rental fees and an estimate of call charges
27
(based on average employee utilization) . The costs quoted below compare the average charges for
28
business telephone packages .
Figure 18: Indicative Telephone Charges
Average Telephone Charges per Month (USD)
Country
Rental Charges
Call Charges
Total Charges
Bahrain
14
20
25
16
41
18
27
Dubai
Qatar
Source:
Bahrain has the lowest average telephone charges per employee when compared to Dubai and
Qatar.
25
Local call rates are calculated based on fixed line to fixed line and fixed line to mobile call rates with a utilization of 60% and
40% respectively
26
International call rates are shown as the average of Peak Rates and Off-Peak Rates
27
Call charges are presented per employee with an estimated utilization of 300 minutes (local calls) and 10 minutes
(international calls) per month
28
Please note that the features and added benefits vary between the packages offered by each telecommunication company
across Bahrain, Dubai and Qatar
11
7.2
Internet Services
Similar to calculating the cost of telephone services, the cost of internet services are based on
corporate rates offered by telecommunication companies across Bahrain, Dubai and Qatar. The costs
29
quoted below are for an 8Mbps Business package , suitable for moderate internet utilization of a
commercial office of 25-50 employees, and excludes set-up fees and installation charges (one-off).
As outlined in the table below Qatar has the highest cost for internet services when compared to
Bahrain and Dubai.
Figure 19: Average Cost for Internet Services
30
Rental Charges
31
290
32
310
Qatar
Source:
440
www.batelco.com, www.du.ae, www.ooredoo.qa, KPMG analysis
29
Please note that the features and added benefits vary between the packages offered by each telecommunication company
across Bahrain, Dubai and Qatar
30
The average cost for internet services has been rounded off to the nearest 10
31
32
As above
12
Corporate Taxes
In Bahrain, there is no corporate tax for most companies. Qatar, Dubai and Bahrain apply different
quantum of taxes on corporations operating in these locations, ranging from social security
contributions, training levies, and municipality taxes.
The following tables outline the corporate taxes applied in Bahrain, Qatar and Dubai.
Figure 20: Corporate Taxes in Bahrain
Overview of Corporate Tax
Category
Description
Municipality Tax
Training Levy
Source:
33
Description
Municipality Tax
Corporate Tax
Source:
Description
Corporate Tax
Income is taxed at 10% for QFC entities that are wholly owned by Qatari or
GCC nationals
Withholding Tax
Source:
33
Only applicable for companies with more than 50 employees that do not provide training to their employees
13
Renting Residences
A comparison of residential rents between Bahrain, Dubai and Qatar reveals substantially lower rents
for Bahrain. Residential rents in Bahrain stabilized in 2014 with the market witnessing an overall
increase of 0.8% in the year.
The tables below summarize the average monthly rentals across Bahrain, Dubai and Qatar.
Figure 23: Average monthly rents in Bahrain
Average Monthly Rents in Bahrain (USD)
34
2012
2013
2014
1,500
1,430
1,440
2,130
1,920
1,920
Source:
Dubais real estate market continued to grow as expected throughout the year. In Dubai, the year-onyear growth for apartment and villa rents amounted to 31% and 11% respectively. The increased
rentals rates are largely due to the fact that Dubai won the 2020 expo bid.
Figure 24: Average monthly rents in Dubai
35
2012
2013
2014
1,990
2,390
3,120
4,200
4,790
5,320
Source:
The residential market in Qatar has witnessed increased rental levels for both villas and apartments.
Qatar experienced a demand-supply gap in the previous year which indicated increased rental rates
for 2014 however; the introduction of new supply has resulted in rental rate rises of a lower magnitude
than anticipated particularly in the case of apartments. On average, rental rates grew by 1% and 4%
between 2013 and 2014 for 2 bedroom apartments and 3 bedroom villas respectively.
Figure 25: Average monthly rents in Qatar
Average Monthly Rents in Qatar (USD)
36
2012
2013
2014
2,510
2,780
2,820
3,640
3,780
3,940
Source:
34
35
As above
36
As above
14
10 Education Costs
An indicative analysis of the total cost of education across Bahrain, Dubai and Qatar are presented in
local currencies and USD in the table below. Overall, the annual cost of education in Bahrain is
substantially lower than in Dubai and Qatar, where education costs are higher by 80% and 103%
37
respectively.
Figure 26: Indicative Education Costs
Average Education Costs per Annum (2014)
Country
Local Currency
USD
Bahrain
BHD 2,530
6,710
Dubai
AED 44,350
12,080
Qatar
QAR 50,120
13,650
Source:
The cost of education in Bahrain is significantly lower than Dubai and Qatar across all three grade
levels and curriculums. The cost of education for Pre-School levels, Primary levels, and Secondary
levels in Bahrain, Dubai and Qatar are compared in the table below:
Figure 27: Average Cost of Education
Annual Costs per Grade Level
Country
Bahrain
Dubai
Qatar
Source:
38
Curriculum
(USD)
Pre-School Level
Primary Level
Secondary Level
American
6,370
8,180
9,990
British
5,710
8,390
12,050
Indian
2,510
3,160
4,070
American
11,870
16,840
18,920
British
10,130
11,690
16,640
Indian
5,920
7,560
9,110
American
12,360
18,460
18,460
British
10,040
13,880
15,600
Indian
8,580
12,040
13,410
37
38
The average education costs takes into account the fees of American, British, and Indian Curriculums for all three grade
levels.
15
Average Wages
HRA Benefits
Expatriate
Benefits
Total
360
3,200
1,680
940
6,180
QFC
1,090
3,570
2,190
1,450
8,300
DIFC
1,150
3,170
2,030
1,230
7,580
Location
Bahrain
Source:
KPMG analysis
Although HRA benefits and expatriate benefits are lower in Bahrain in comparison to Qatar and
Dubai, expatriate employees continue to relocate to Bahrain due to its low living costs.
To better compare the costs of doing business in Bahrain, QFC and the DIFC, a scenario highlighting
the costs associated in operating an office with 10 employees is presented in Figure 29. Overall, the
cost of doing business in Bahrain remains lower than DIFC and QFC. When compared to Bahrain, the
manpower cost associated with operating an office of 7 employees is 23%-34% higher in Dubai and
Qatar respectively.
Figure 29: Office mix scenario
Office mix scenario costs (USD per month)
Occupancy cost
Average Wages
HRA Benefits
Expatriate
Benefits
Total
3,600
32,000
16,800
9,400
61,800
QFC
10,900
35,700
21,900
14,500
83,000
DIFC
11,500
31,700
20,300
12,300
75,800
Location
Bahrain
Source:
KPMG analysis
16
Appendix
1. Calculations for Cost per workstation
Methodology of calculation cost per workstation: 15 sqm space utilization standard per worker in the Middle East.
Rental rate of the building (in sqm per month).
Utilities and maintenance charges per sqm (10% of rent for QFC, and USD 15 for DIFC)
Calculation for annual cost per workstation= 15.0 sqm x (Rent + Service Charge) x 12
For example:
Annual Occupancy Cost per Workstation for QFC in 2014 =
15.0 sqm x [USD 66.0 per sqm x (1+10%)] x 12
=13,662
2. Workforce benefits
Expatriate benefits calculated in the subject report assume educations benefit for two children, and
additional for medical insurance and once a year home travel for a family of four. This does not
include any end-of-service benefits.
Citizen benefits vary from country to country and can include marriage benefits, benefits upon birth
of children etc. These considerations have not been included in this study.
17
2013 KPMG Fakhro, a Bahrain partnership registered with Ministry of Commerce and
Industry (MOIC), Kingdom of Bahrain and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (KPMG
International), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavor to provide
accurate and timely information, there can be no guarantee that such information is
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one should act on such information without appropriate professional advice after a thorough
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