Tax rates in Bahrain

Tax Rates

Consumption Taxes

Nature of the Tax: Value-added tax (introduced on 1 January 2019)
Tax Rate: The standard rate increased from 5% to 10% beginning 1 January 2022.
Reduced Tax Rate: Zero-rated items include export of goods to outside the GCC implementing states' territory (the supply of goods to other GCC implementing states shall be treated as an export until the full integration of the Electronic Services System across all the GCC implementing states); the supply of services from a resident taxable person in Bahrain to a customer residing outside the GCC implementing states and benefiting from such service outside the GCC implementing states; re-export of goods that were temporarily imported for repairs, renovation, modification or processing, and the service added to it; the supply of goods to, within or under a customs duty suspension scheme; transportation services of passengers and goods to or from Bahrain, other services included with such transportation services, and the related means of transport; local transportation sector; oil, oil derivatives and gas sector (The upstream, midstream and downstream activities are generally zero-rated. As an exception, zero-rating does not apply to specific downstream activities, such as import or supply of oil, oil derivatives and gas by-products, for example, plastic and fertilizers); the supply or import investment grade gold, silver and platinum with purity level of not less than 99% and can be traded on global bullion market, based on a certificate issued by the competent authority responsible for testing precious metals and gemstones in Bahrain; the first supply after extraction of gold, silver and platinum for trading purposes; supply or import of pearls and precious gemstones after obtaining the certificate issued by the competent authority responsible for testing the pearls and gemstones to determine their nature; the supply of preventive and basic health care services and related goods and services (the health care services must be qualifying medical services provided by qualified medical professionals or qualified medical institutions to a patient during the course of its treatment); the supply or import of specific medicines and medical equipment; the supply of educational services and related goods and services to nurseries, pre-elementary, elementary, secondary and higher education; the supply and importation of food items listed in the GCC list of basic food items; construction of new buildings.

The supply of bare land and buildings, specific financial services, and certain imported goods are exempt.
Other Consumption Taxes: Tobacco products and energy drinks are subject to excise tax at 100%, while carbonated drinks are subject to excise tax at 50%. Further goods may also become subject to excise tax in the future.

Corporate Taxes

Company Tax: None, except for oil companies, at a 46% rate of net profits
Tax Rate For Foreign Companies: Only entities that operate in the oil and gas sector or derive profits from the extraction or refinement of hydrocarbons are taxed in Bahrain.
Capital Gains Taxation: Capital gains are not taxed in Bahrain.
Main Allowable Deductions and Tax Credits: Bahraini laws provide for deductions for nearly all costs associated with taxable activities in the country, such as the cost of production, refinement, remuneration of employees associated with these taxable activities (including social insurance and pensions paid for the benefit of these employees), and other operational losses.

All reasonable and justifiable costs of production and exploration of products sold during the current taxable year are deductible for tax purposes, if these expenses have not been deducted elsewhere in calculating net taxable income.
All taxes and duties not imposed by the Bahrain income tax law - such as customs duties - can also be deducted from taxable income.
Unutilised losses may be carried forward indefinitely and deducted up to an amount equivalent to the net income. Carryback of losses is not permitted.
Other Corporate Taxes: Other taxes include:
- registration and licence fees: companies are subject to registration fees (from BHD 25 to 1,000) and licence fees that vary according to the nature of their activity
- stamp duty: applies to the transfer and/or registration of real estate only and is levied at a rate of 2%. If the duty is paid within 60 days following the transaction date, the rate of the stamp duty is reduced to 1.7%
- municipality tax: levied on the rental of commercial and residential property to expatriates at a rate of 10%
- social security contribution: employer's social security contribution is 12% for Bahraini workers and 3% for non-Bahraini workers, calculated on a maximum monthly earning capped at BHD 4,000. Penalties ranging from BHD 100 to BHD 500 apply for failure to provide income information and corresponding contributions, which may be doubled for repeated failures.
- a 10% levy is imposed on the gross turnover of hotels and first-grade restaurants.
Other Domestic Resources: Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Bahrain	Middle East & North Africa	United States	Germany
Number of Payments of Taxes per Year	3.0	20.8	10.6	9.0
Time Taken For Administrative Formalities (Hours)	22.5	195.1	175.0	218.0
Total Share of Taxes (% of Profit)	13.8	32.1	36.6	48.8

Source: Doing Business, Latest available data.

Individual Taxes

Tax Rate

Individual income tax	Bahrain does not apply any personal income tax
Social security contributions paid by employees	3% (1% for expat employees), calculated on a maximum monthly earning of BHD 4,000

Allowable Deductions and Tax Credits: No personal income tax is levied in Bahrain.
Special Expatriate Tax Regime: Income of residents or non-residents paid outside Bahrain are not subject to tax or social insurance rules.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: The list of tax treaties signed by Bahrain.
Withholding Taxes: No whitholding taxes (interests, dividends, royalties) are levied in Bahrain.
Bilateral Agreement: The United Kingdom and Bahrain are bound by a double taxation treaty.

Sources of Fiscal Information

Tax Authorities: Overview of Bahrain's tax measures in response to Covid-19
Ministry of Finance and National Economy
National Bureau for Revenue
Other Domestic Resources: Bahrain VAT guideline
Bahrain tax news

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