Tax
What is corporate tax imposed on and what is the rate?Currently, there is no corporate income tax in Bahrain on businesses except for businesses which operate in oil and gas sectors. Businesses that derive profits from the extraction or refinement of hydrocarbons in Bahrain are subject to tax at 46% on net profits for each tax accounting period, regardless of the residence of the taxpayer.
Are cross-border payments subject to any withholding or retention?There is no withholding tax in Bahrain.
Are individuals subject to personal income tax?There is no personal income tax in Bahrain.
Does Bahrain have transfer pricing requirements?There is currently no specific legislation regarding transfer pricing in Bahrain. However, Bahrain recognizes the arm’s length principle for transactions between related parties.
What are the transfer pricing requirements in Bahrain?Where a taxpayer belongs to multinational groups headquarted in Bahrain and have a total consolidated group revenue of BHD 342 million or above, a Country-by Country (CbC) Report is required to be submitted. The CbC Report should be submitted within the 12-month period immediately following the end of the reporting year of its multinational group. Taxpayers with annual consolidated group revenue of equal to or exceeding BHD 342 million are required to file the CbCR notification. The CbCR notification should be filed no later than the last day of the taxpayer’s reporting year.
What is VAT/sales tax imposed on and what are the rate(s)?
VAT is imposed on the import and supply of goods and services in Bahrain, including deemed supplies. VAT is applicable at the standard rate of 10% in Bahrain unless the specific supply is zero-rated or exempt from VAT.
When are VAT/sales tax return filings and payment due?VAT returns and VAT payments are due by the last day of the month following the end of the tax period.
Is there any real estate transfer tax imposed on the transfer or sale of real estate?There is no real estate transfer tax in Bahrain.
However, there is a 2% (of the property value) stamp duty imposed on the transfer of the real estate. If the stamp duty is paid within 60 days of the transaction date the duty is reduced to 1.7%. The responsibility to pay the real estate registration fees is on the buyer of the property.
Is there any excise tax imposed? What are the rate(s)?Yes, excise tax is imposed on:
production of excise goods in the state, where such production was in the course of doing business;
import of excise goods;
release of excise goods from a designated zone; and
stockpiling of excise goods in the UAE, where such stockpiling was in the course of doing business.
Excise tax is imposed at 100% on tobacco / tobacco products and energy drinks and at 50% on carbonated drinks.
What is subject to custom duties and what are the rate(s)?Customs duty applies to most imported goods at 5% based on the cost, insurance and freight (CIF) invoice value.
The custom rates for most items is 5%. However, some items are subject to a different rate. Alcoholic drinks are subject to customs duty at 125% and tobacco is subject to 100%. Other duty rates include 20% on certain categories of goods such as paper and aluminum products.
Are there any payroll taxes or social security contributions required in Bahrain? There are no payroll taxes in Bahrain. However, there is a social security regime in Bahrain.
The employers are required to make social insurance contributions of 12% for Bahraini national employees and 3% for non-Bahraini workers based on the basic salary and fixed recurring allowances. In addition, employers are required to withhold and remit their employees’ social security contributions, of 7% for Bahraini national employees, and 1% for non-Bahraini employees. The maximum monthly earnings subject to social insurance contributions are capped at BD 4,000 per month.
Are there any other taxes or reporting regimes that businesses should be aware of in Bahrain?
In Bahrain, the Economic Substance Regulations (“ESR”) introduces a requirement for Bahraini entities to maintain an economic presence in relation to certain “relevant activities” that they undertake in Bahrain.
Entities that are subject to the economic substance regime are required to submit the economic substance returns within 3 months from the end of the financial year.
There is a 10% municipality tax levied on the rental of commercial and residential property to expatriates.
