Bermuda yesterday signed its first ever full double-taxation agreement (DTA) with the Kingdom of Bahrain.

The agreement is a reciprocal arrangement between the Middle Eastern country and Bermuda not to tax the repatriated income that a firm or a national of the parties domiciled in one country earned (and paid taxes on) in the other country.

The DTA also includes provisions for the full exchange of information on criminal and civil tax matters, the Island's 20th such agreement.

The deal will help to nurture ties with a part of the world that is proving to be a rapidly expanding market for financial services, particularly Takaful, insurance structured to fit with Islamic culture, and likewise Shari'iah investment funds.

The signing of the agreement with Bahrain took place at a ceremony in Washington, DC, and was attended by Senator David Burch, the Minister of Labour, Home Affairs and Housing, deputising for Finance Minister Paula Cox, and H.E. Shaikh Ahmed bin Mohammed Al-Khalifa, Minister of Finance, who signed the agreement for Bahrain.

Ms Cox, who remained in Bermuda as Acting Premier, said Bermuda was positioning itself as a key jurisdiction for Islamic financial product offerings.

"This agreement is a significant step forward in Bermuda and the Kingdom of Bahrain's mutual commitment to work to develop a multifaceted relationship that will benefit every Ministry of our respective governments and thereby the people of Bermuda as well," Ms Cox said.

"This DTA provides a framework for deepening economic and commercial relations between our two jurisdictions and the opportunities before us are numerous. Bermuda and Bahrain have pledged to establish a Joint Economic Committee that will meet annually to further develop economic ties between our countries. In addition, preliminary discussions are currently underway with a view to a conference being held in Bahrain later this year with Bermuda financial services sector involvement."

The DTA would enhance business ties and investment opportunities to other countries within the Gulf Cooperation Council (GCC), as well as Bahrain, she added.

"Currently, there are at least three Bermudian entities with a Bahrain interest, and we expect this number to grow significantly in the coming years," she said. "Indeed, we are seeing an increase in local service providers expanding their offerings to Middle East and North African markets utilising the Kingdom of Bahrain as a gateway jurisdiction, in addition to offering Middle Eastern clients convenient access to Bermuda.

"Many local service providers have extensive experience of Islamic structured finance, including both conventional and Shari'iah investment funds. Moreover, it is likely that the global market for Islamic insurance, or Takaful, will continue to grow, opening exciting possibilities for Bermuda reinsurers."

David Ezekiel, chairman of the Association of Bermuda Insurance Companies (ABIC), said: "Coming just after the conclusion of TIEA negotiations with India, this DTA with Bahrain is further good news for the Bermuda international business sector as Bahrain has a growing involvement in our market."