Bahrain tax system - taxation of Bahrain's companies and individuals: VAT, income tax and capital gains. Tax treaties of Bahrain
Basic taxes (briefly)
|Corporate tax (in detail)||No income tax|
|Capital gains tax. Details||No capital gains tax|
|VAT. Details||Applies only to domestic transactions|
|Other taxes||Social Security Contributions, Excise Taxes, Municipal Tax|
|Stamp duty||charged upon transfer and/or registration of real estate - 2% of the value of the real estate|
International tax agreement
|Algeria, Austria, Bangladesh, Barbados, Belarus, Belgium, Bermuda, Bulgaria, Brunei, China, Czech Republic, Cyprus, Egypt, Estonia, France, Georgia, Hungary, Iran, Ireland, Isle of Man, Jordan, Lebanon, Luxembourg, Malaysia, Malta, Mexico, Morocco, Netherlands, Pakistan, Philippines, Portugal, Republic of Korea, Seychelles, Singapore, Sri Lanka, Sudan, Switzerland, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, United Kingdom, Uzbekistan, Yemen|
Taxation of Individuals
There is no personal income tax in Bahrain. However, employed individuals must pay social contributions in accordance with the rules of the Social Insurance Organization (SIO) in Bahrain.
Capital gains and income of residents or non-residents not paid in Bahrain are not taxable.
There is no income tax in Bahrain, nor is there any sales tax, capital gains tax or property tax.
The exceptions are companies (local and foreign) that operate in the oil and gas sector or profit from the extraction or processing of fossil fuels in Bahrain. For such companies, the income tax rate is set at 46% for each tax reporting period, regardless of the residence of the taxpayer.
Value Added Tax (VAT)
VAT was first introduced in Bahrain on January 1, 2019.
From January 1, 2019 to December 31, 2021, the total VAT rate was 5%. From January 1, 2022, the rate was increased to 10%, but under certain circumstances there are transitional provisions in which the 5% rate can be applied to certain shipments made after January 1, 2021, from January 1, 2022 to December 31, 2022.
The standard rate applies to most goods and services, with a few exceptions where certain goods and services may be subject to the 0% rate or exempt from VAT.
The mandatory registration threshold is 37,500 BHD (Bahraini dinars) for Bahraini resident companies and the voluntary registration threshold is 18,750 BHD. Non-resident companies will have to register on the first shipment subject to VAT in Bahrain.
The National Bureau of Revenue is the regulatory authority responsible for supervising and enforcing the provisions of Bahrain's VAT Law and Rules.
On February 1, 2017, Bahrain signed the Gulf Cooperation Council Common Excise Tax Agreement. Bahrain's Cabinet ratified the Excise Tax Law, which came into force on December 30, 2017. Tobacco products and energy drinks are subject to an excise tax at a rate of 100%, while non-alcoholic (carbonated) drinks are subject to an excise tax at a rate of 50%. In the future, other goods may also become excisable.
Withholding tax on income
There is no withholding tax on dividends, interest or royalties in Bahrain.
Bahrain has no CFC rules.
Currently, there is no specific legislation relating to transfer pricing or undercapitalization in Bahrain.
A municipal tax of 10% is levied when renting commercial and residential property to foreigners.
The employer's social security contribution is 12% for Bahraini workers and 3% for non-Bahraini workers, calculated on their monthly salary and capped at an income ceiling of 4,000 BHD.
International tax treaties
Bahrain has 45 Double Tax Treaties (DTC) with the following jurisdictions:
45 DTCS: Algeria, Austria, Bangladesh, Barbados, Belarus, Belgium, Bermuda, Bulgaria, Brunei, China, Czech Republic, Cyprus, Egypt, Estonia, France, Georgia, Hungary, Iran, Ireland, Isle of Man, Jordan, Lebanon, Luxembourg, Malaysia, Malta, Mexico, Morocco, Netherlands, Pakistan, Philippines, Portugal, Republic of Korea, Seychelles, Singapore, Sri Lanka, Sudan, Switzerland, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, United Kingdom, Uzbekistan, Yemen.
Bahrain has also signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI entered into force for Bahrain on June 1, 2022.
Bahrain has a free market economy with no restrictions on capital flows, foreign exchange, foreign trade, or foreign investment. Bahrain maintains a fixed exchange rate regime between the Bahraini dinar (BHD) and the U.S. dollar (USD).
Taxes of Bahrein
|Min. rate for corporate tax||No|
|Capital gains tax||No|