Bahrain corporate tax - guide for international expansion

Are you planning to do business in Bahrain? Then it's essential to understand how corporate tax works and what it means for your company, particularly with recent significant changes to the tax landscape.

Bahrain has traditionally been known as a tax-free jurisdiction, but recent developments have introduced new tax obligations for certain businesses. Whether you're launching a new venture or expanding your business, understanding your tax obligations is key to running a successful operation. Wise Business can help simplify cross-border transactions and keep your finances running smoothly as you navigate Bahrain's evolving business environment.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Bahrain Corporate tax rate in 2025

Bahrain currently has no general corporate income tax for most businesses, maintaining its position as one of the few jurisdictions worldwide without a standard corporate tax regime.¹ However, this changed significantly in 2025 with the introduction of a Domestic Minimum Top-Up Tax (DMTT) for large multinational enterprises.²

The DMTT applies specifically to multinational enterprise (MNE) groups with consolidated annual revenue exceeding €750 million in at least two of the four fiscal years immediately preceding the current fiscal year.² For these qualifying MNE groups, Bahrain imposes an additional tax to ensure constituent entities pay a minimum effective tax rate of 15% on their profits.

This new tax regime came into effect on 1 January 2025, making Bahrain the first Gulf Cooperation Council (GCC) country to implement such legislation.²

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Bahrain

For most businesses in Bahrain, there are currently no corporate tax payment obligations due to the absence of a general corporate income tax. However, for multinational enterprises subject to the new Domestic Minimum Top-Up Tax (DMTT), specific procedures have been established.

DMTT Payment Procedures - Multinational enterprise groups meeting the revenue threshold must appoint one constituent entity as the Filing Constituent Entity (Filing CE) responsible for DMTT obligations. This Filing CE must register with Bahrain's National Bureau for Revenue (NBR) and handle all tax compliance matters for the group's Bahrain operations.³

The DMTT is payable in Bahraini dinars unless otherwise specified in executive regulations. Advance payments are made quarterly during the fiscal year based on estimated tax liability.⁴

Registration and Compliance - The Filing CE must register with the NBR within the prescribed deadlines, typically 120 days from the start of the fiscal year in which the DMTT law becomes applicable. Detailed executive regulations provide specific guidance on registration procedures, filing deadlines, and payment timing.³

Tax Calculation Example

Let's consider a hypothetical scenario: if your multinational enterprise group has constituent entities in Bahrain with a combined annual turnover of BHD 565,000 (approximately £1.5 million) and operates with a profit margin of 10%, giving taxable profits of BHD 56,500.

Under the DMTT regime, if the effective tax rate falls below 15%, additional tax would be imposed to reach the minimum rate. However, various exclusions and safe harbours may apply, including substance-based income exclusions and de minimis thresholds.

When expanding your business to Bahrain, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Bahrain

VAT Returns and Filing⁵

• A 10% Value Added Tax (VAT) has been in place since 1 January 2022, managed by the National Bureau for Revenue (NBR).
• Businesses with annual supplies above BHD 37,500 must register for VAT.
• Registered entities must submit VAT returns online via the NBR portal, summarizing sales, purchases, and net VAT payable.

Annual Corporate Tax Returns⁶

• Bahrain does not impose a universal corporate tax, but companies in oil, petroleum, and hydrocarbon sectors are required to file annual returns.
• Returns must be filed on the Sijilat portal within six months of the financial year-end.
• Filing requires a copy of the audited financial report, and the Bahrain corporate tax rate applies based on sector-specific rules.

Tax Registration⁷

• Register for taxes early to avoid penalties.
• Depending on business activities, obligations may include corporate tax, VAT, excise tax on harmful goods (e.g., tobacco, energy drinks), customs duties under the GCC Unified Customs Law, and social insurance contributions for Bahraini nationals (and in some cases, expatriates).

International Expansion to Bahrain

Bahrain is known for being one of the most business-friendly countries in the Gulf, with its favorable economic climate. Its strategic location at the heart of the Gulf Cooperation Council (GCC) gives companies easy access to a regional market worth over US$2 trillion.⁸ Just a short drive from Saudi Arabia via the King Fahad Causeway and well-connected to GCC airport hubs, Bahrain is a true gateway to the Middle East.⁹

The country has positioned itself as a forward-looking business hub. Investors benefit from 100% foreign ownership in most sectors, fast port clearance times, and digital services such as the Commercial Registration Portal (Sijilat), which links more than 60 government bodies.⁸ These steps make it easier and faster to set up and run a company in Bahrain.

Bahrain’s workforce is another strong advantage. The population has crossed one million, with a majority being young, tech-savvy, and multilingual. Over 90% of the workforce speaks English and Arabic,¹⁰ and Bahrain ranks among the top countries in the MENA region for digital skills and programming talent.⁹ This makes it easier for businesses to hire locally without worrying about language barriers.

The government’s Economic Vision 2030 focuses on sustainability, fairness, and competitiveness. To encourage international investment, initiatives like the Golden Licence Programme offer incentives for large-scale projects. In 2023, Bahrain attracted a record-breaking US$6.8 billion in foreign direct investment, proving its strength as a dynamic economy.¹¹

The steps to establish a business in Bahrain are as follows:

1. Start with market research to test your idea, study demand, and identify competitors.
2. Prepare a business plan outlining goals and financial needs; banks like the Bahrain Development Bank can offer funding.
3. Estimate startup costs, choose a business name and legal structure, and secure a commercial space.
4. Register your company online through Sijilat 3.0, which connects with over 50 government authorities.¹²
5. Open a local bank account to finalize the setup.

Businesses in Bahrain benefit from a tax-friendly system, but it’s still essential to fulfill obligations properly. Learning strategies for business growth globallycan also help. Know that specific support services can assist with returns, credits, penalties, and compliance with the new corporate tax rate.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Bahrain

To incorporate a company in Bahrain, entrepreneurs must obtain an electronic key through the e-Government Authority (ekey.bh). This step grants access to online services for registration and inclusion in the commercial and industrial registers. Applications are then submitted through the national business portal (business.gov.bh), where companies select their commercial activities, verify licensing requirements, and choose a business entity type. A unique commercial name must also be reserved in line with local regulations.¹³

The process continues on the Sijilat portal, which connects over 50 government authorities. Founders upload drafts of the Articles of Association and bylaws, tailored to their chosen entity, and have them notarised. Certain activities require prior approval from regulators, and companies may also need to provide a certificate of capital deposit and board resolutions. Foreign investors must secure additional clearances, after which the Ministry of Industry and Commerce issues the registration.¹³

Businesses in Bahrain need a solid corporate tax strategy. The Bahrain corporate tax rate is competitive, but compliance is still essential. Accurate systems for tracking revenue and expenses help calculate corporate tax correctly and avoid penalties. Professional services can support timely filings, meet the corporate tax payment deadline, and identify potential incentives, reducing risks in the long run.

Types of Businesses in Bahrain

Under Bahrain’s Commercial Companies Law, entrepreneurs can choose from several entity types:¹⁴

• Limited Liability Company (LLC): Requires 2–50 partners, each liable only for their contribution. No minimum capital is required, but audited financial statements are mandatory.
• Partnership Company: Involves two or more partners with unlimited joint liability.
• Company Limited by Shares: Combines silent partners (limited liability) with joint partners (unlimited liability). Requires at least four founders and a minimum capital of 20,000 BD.
• Closed Joint Stock Company: Shareholder liability is limited, with a minimum capital of 250,000 BD. At least two founders and three directors are required⁶

Choosing the right structure depends on business goals, sector requirements, and compliance considerations. Clear planning at this stage ensures smooth operations and easier compliance with both legal and tax obligations in Bahrain.

International corporate tax best practices

Here are essential strategies to ensure compliance with local tax laws, optimise costs, and reduce tax burdens across multiple jurisdictions.

Stay compliant with local and international tax laws by completing legal registration processes in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay current with local tax law changes to remain fully compliant.

Understanding and adhering to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD) is crucial. With frameworks like Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax, companies can ensure transparency, prevent tax avoidance, and avoid legal risks.

Leverage double taxation treaties (DTTs) to ensure you're not taxed on the same income twice. CFOs and directors need a clear understanding of these treaties between countries where your business operates and how they can potentially reduce your tax burden. Bahrain has signed numerous DTTs with countries worldwide to prevent double taxation.

Maintain clear and up-to-date financial records to help prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, organised financial records simplify the process during financial audits and support compliance with international reporting standards.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Bahrain efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Bahrain

Who is liable for corporate tax in Bahrain?

Currently, most businesses in Bahrain are not liable for corporate income tax as the country maintains no general corporate tax regime. However, the Domestic Minimum Top-Up Tax (DMTT) applies specifically to constituent entities of multinational enterprise groups with consolidated annual revenue exceeding €750 million in at least two of the four fiscal years immediately preceding the current fiscal year.

Are there any tax incentives for businesses in Bahrain?

The country provides incentives through its Economic Development Board, including 100% foreign ownership in most sectors, no personal income tax, and various sector-specific benefits. Under the DMTT regime, several exclusions and safe harbours are available, including substance-based income exclusions, de minimis exclusions for smaller operations, and special provisions for companies in the initial phases of international activities.

What is the tax treatment of dividends in Bahrain?

Bahrain generally does not impose taxes on dividends due to the absence of a general corporate income tax system. However, the treatment may vary for multinational enterprises subject to the DMTT, and specific provisions would need to be reviewed based on the group's structure and applicable double taxation treaties.

What is the process for registering for corporate tax in Bahrain?

For most businesses, there is no corporate tax registration requirement in Bahrain due to the absence of general corporate income tax. However, multinational enterprise groups subject to the DMTT must register with the National Bureau for Revenue (NBR).

The registration process involves appointing a filing entity from among the group's constituent entities in Bahrain. This filing entity must register with the NBR and can elect either five-year or annual registration periods. Detailed executive regulations are expected to provide specific guidance on registration procedures and requirements.

What are the common pitfalls to avoid regarding corporate tax in Bahrain?

The main pitfalls for businesses in Bahrain relate to the new DMTT regime for large multinational enterprises. These include:

Failing to properly assess whether your MNE group meets the €750 million revenue threshold and thus falls under DMTT obligations. Inadequate preparation for the complex calculations required under the DMTT, including effective tax rate computations and substance-based income exclusions.

Not appointing an appropriate filing entity or failing to register with the NBR within required timeframes. Insufficient record-keeping to support DMTT calculations and compliance requirements.

The NBR has implemented a general anti-avoidance rule that allows it to disregard transactions primarily designed to obtain tax advantages, so aggressive tax planning should be avoided.

Sources used in this article:

1. Tax Foundation: Corporate Tax Rates by Country 2024
2. BDO Global: Bahrain Domestic Minimum Top-Up Tax to Apply in 2025
3. National Bureau for Revenue (NBR): VAT Return Filing Guide (PDF)
4. KPMG: NBR Issues Guidance on DMMT Advance Payment Procedure (PDF)
5. Bahrain.bh: Value Added Tax (VAT) in Bahrain
6. Sijilat: Business Registration Portal
7. Wafeq Business Hub: Types of Taxes in Bahrain
8. Bahrain.bh: Business and Investment Overview
9. Bahrain Economic Development Board (EDB): Gateway to the Middle East
10. EDB: Empowered Workforce
11. Sovereign Group: Bahrain - The Small Island with Big Potential
12. Bahrain.bh: Sijilat 3 (Business Registration Information)
13. Ministry of Industry and Commerce: Procedures Guide for Establishments and Commercial Companies (PDF)
14. Bahrain Business Laws: Commercial Companies Law

Sources last checked 01/10/2025