Main taxes and fees in Bahrain

VAT

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Bahrain applies VAT at a standard rate of 10%. A 0% rate applies to certain types of supplies and export operations outside the GCC countries.

Who pays

• Companies registered in Bahrain
• Foreign companies making VAT-taxable supplies

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Registration thresholds

1. Mandatory registration When a company’s taxable turnover reaches 37,500 BHD (~100,000 USD)
2. Voluntary registration When a company’s taxable turnover reaches 18,750 BHD (~50,000 USD)

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VAT GCC Agreement: How Bahrain Integrates the Regional Tax into Its Economy

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In 2016, the GCC countries signed the Unified VAT Agreement.

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The Agreement aims to diversify economies: GCC countries, where oil and gas account for up to 80% of the budget, seek to create alternative sources of income. VAT became a tool for financing infrastructure, healthcare, and education.

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Each GCC country retained the right to adapt the rules to its needs. For example, Saudi Arabia and the UAE introduced VAT in 2018, Bahrain in 2019, while Qatar and Oman joined later (2023).

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Corporate Income Tax (CIT)

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Most companies in Bahrain are exempt from corporate income tax.

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However, there is a trend towards introducing it in more sectors of the economy.

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• Since 2019, a tax of up to 46% has applied to companies engaged in oil and gas exploration, extraction, or processing.
• Starting from 2025, Bahrain will introduce a 15% minimum corporate tax (Domestic Minimum Top-up Tax, DMTT) for multinational corporations.
• The tax will only apply if the consolidated business income for two of the last four years exceeds 750 million euros.

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“The introduction of the tax is driven by the strategy to reduce economic dependence on the oil and gas sector; however, for businesses, this means an increase in operating costs. Despite the relatively low rate of 15%, the transition from zero taxation to a fixed percentage significantly changes companies’ financial planning. For businesses that have operated for decades with no such taxes, even a moderate rate can be a challenge requiring budget revisions and tax optimization.” Alexandra Kurdyumova Co-Founder, Senior Partner

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Withholding Tax (WHT)

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There is no withholding tax in Bahrain on payments of dividends, interest, or royalties to non-residents. This sets the country apart from many jurisdictions where such payments are taxed at rates of 5–30%.

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Double Tax Treaties (DTT)

Bahrain has signed 40+ DTTs with key countries, including Russia, China, the UK, France, and GCC states.

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These agreements fix WHT rates for rare cases where it may apply – for example, in the case of DMTT.

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To access reduced rates under DTTs, one must:

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• Confirm tax residency status in the partner country
• Provide Bahrain tax authorities with a residency certificate and documents proving eligibility for the benefit

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Personal Income Tax (PIT) and Social Contributions

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There is no personal income tax in Bahrain.

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However, when hiring employees, employers are required to pay social insurance contributions for all employees, including foreigners and GCC citizens.

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Exemptions: temporary workers (contracts under 3 months) and employees in special economic zones (may have special conditions).

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Social contributions are divided into two categories:

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For Bahraini citizens

• Employer’s contribution: 15% of gross salary
• Employee’s contribution: 8% of gross salary

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For foreign employees

• Employer’s contribution: 3% of gross salary
• Employee’s contribution: 1% of gross salary

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“Social contributions in Bahrain are a compromise between the absence of personal income tax and the need to finance social security. For businesses, it is essential to integrate them into financial planning to avoid penalties and maintain the location’s attractiveness for employees.” Alexey Romanov Associate