Bahrain

Value-added tax (VAT), excise tax and customs duty

Bahrain is a signatory to the Common VAT Agreement of the States of the GCC VAT Framework, and implemented VAT on 1 January 2019. The current standard rate of VAT is 10%; Bahrain has a similar set of VAT registration parameters to the other countries in the GCC that have implemented the tax (BHD37,500 of annual taxable revenue for mandatory registration of Bahrain-resident businesses; BHD18,750 for voluntary registration; Most non-resident businesses have to register for VAT upon making a first taxable supply in Bahrain). Note that at the time of writing (27 February 2025) the market expects that e-Invoicing, similar to the framework introduced in Saudi Arabia, is coming soon to Bahrain.

Bahrain signed the Common Excise Tax Agreement of the States of the GCC on 1 February 2017, implementing Excise Tax on 30 December 2017. In overview, Excise Tax at present applies at 100% on tobacco and energy drinks, 50% on soft drinks.

The general rate of Customs Duty of goods entering Bahrain is now 5% of the cost, insurance, and freight value, except for alcoholic beverages, which is 225%, and cigarettes, which is 200%. Certain categories of goods, such as paper and aluminium products, are subject to a 20% rate.

Stamp duty

Stamp duty applies to the transfer and/or registration of real estate only and is levied at a rate of 2%. In case of payment of the stamp duty within the two months following the transaction date, the rate of the stamp duty is reduced to 1.7%.

Registration and licence fees

Companies are subject to registration and licence fees ranging from BHD 25 to BHD 1,000, which vary depending on the nature of their activity.

Payroll taxes

There are no payroll taxes other than social insurance contributions (see below).

Social insurance contributions

Employer's social insurance contribution is 17% (effective January 1, 2025) for Bahraini workers and 3% for expatriate workers, calculated on their monthly salaries and capped at an income ceiling of BHD 4,000.

Social insurance is also paid for nationals of other GCC countries working in Bahrain. Contributions are calculated according to the rates of the GCC employee’s home country regulations.

Municipality taxes

There is a 10% municipality tax levied on the rental of commercial and residential property to expatriates that is payable by the owner of the property.