Bahrain may introduce corporate income tax
For a long time, Bahrain was rightfully considered the most important offshore center not only of the Persian Gulf, but also of the entire Asian region. There are practically no taxes here – on the profits of legal entities, on capital gains. There is no currency control, CFC rules and the concept of transfer pricing. Only VAT is charged, but the rate is set at a fairly low level – only 10%.
Bahrain, like many other jurisdictions with offshore roots and a developed economy, has been attracting international business for many years, since registering a company here allows you to significantly save on taxes, and on completely legal grounds. International regulators are well aware of the existence of this loophole, but there were no effective means to combat it until recently.
But after the OECD started talking about the introduction of a global minimum income tax on multinational Enterprise (MNE), the emergence of legal tools to combat aggressive tax planning was a matter of time. Bahrain has not yet joined the OECD initiative. But at the very beginning of May 2023, it became known that the authorities of the kingdom were considering such a possibility.
If it is implemented, multinational corporations (enterprises) will pay income tax at the rate of 15%. The qualification condition is the amount of consolidated income. If this figure does not exceed 342 million BHD (at the exchange rate at the beginning of May – a little more than 914 million USD), then the business, according to formal criteria falling under the definition of a multinational corporation, still does not pay income tax.
It is planned that the minimum income tax of MNE will become a reality as early as January 1, 2024, but there is no complete clarity on the details of the innovation yet. The threshold of financial requirements may be adjusted, or additional qualification conditions may be introduced. Bahrain officials promise to provide detailed information on the minimum income tax for multinational corporations later, when internal expert consultations are held.
If you are planning to open a company in Bahrain, you need assistance in legal and tax support, leave a request in the form below and we will contact you as soon as possible.