Bahrain

There are no general corporate income taxes in Bahrain on income, sales, capital gains, or estates, with the exception, in limited circumstances, to businesses (local and foreign) that operate in the oil and gas sector or derive profits from the extraction or refinement of fossil fuels (defined as hydrocarbons) in Bahrain. For such companies, a tax rate of 46% is levied on net profits for each tax accounting period, irrespective of the residence of the taxpayer.

Domestic Minimum Top-up Tax (DMTT)

The DMTT Law introduces a jurisdictional level top-up tax aimed at large multinational enterprise (MNE) groups, ensuring that a minimum effective tax rate (ETR) of 15% is met. Under the DMTT Law, if the aggregated results of Bahraini Constituent Entities (CEs) of an MNE group do not result in a 15% ETR, Bahrain will impose an additional tax to meet the 15% minimum ETR.

 The DMTT Law will only apply to MNEs with global consolidated revenues (in at least two of the preceding four fiscal years) of at least 750 million euros (EUR). This includes MNEs headquartered in Bahrain, as well as any other MNEs (headquartered in other countries) with operations in Bahrain. The DMTT Law will not apply to local businesses with no operations outside Bahrain.

 To simplify administration, the following safe harbour rules are provided in the DMTT Law:

• Transitional Country-by-Country Reporting Safe Harbour (de minimistest, ETR test, routine profits test).
• Simplified Computation Safe Harbour (which incorporates similar tests as above, albeit under an alternative simplified income calculation methodology). Detailed rules and conditions for applying this safe harbor will be issued in due course.

The DMTT Law also provides for the following exclusions:

• De Minimis Exclusion: The DMTT due is expected to be ‘nil’ if the following conditions are met:
  • Average CE revenue (for the current and two preceding fiscal years) of all the CEs in Bahrain of an MNE group is less than EUR 10 million.
  • Average CE income or loss (for the current and two preceding fiscal years) of all the CEs in Bahrain of an MNE group is a loss or less than EUR 1 million.
• Initial Phase of International Activity Exclusion: The DMTT will be reduced to nil, for a maximum period of five years, if the MNE group meets the following conditions:
  • CEs are located in no more than six jurisdictions.
  • The net book value of tangible assets across all jurisdictions does not exceed EUR 50 million, excluding the jurisdiction where the MNE group has the highest value of tangible assets when the global minimum tax rules first apply to that MNE group.
  • No ownership interests in the CEs are held by a parent applying the Income Inclusion Rule.

 The DMTT Law is effective for financial years starting on or after 1 January 2025.