Bahrain Income Tax

There is no personal income tax in Bahrain.

Stamp duty - Stamp duty is levied on property transfers on the basis of the property value as follows: 1.5% up to BHD; 70,000; 2% from BHD 70,001 to BHD 120,000; and 3% for amounts exceeding BHD 120,001.

Social security - For Bahraini employees, the employee's contribution is 7%, which covers old age, disability, death and unemployment.

For expatriate employees, the employee's contribution is 1%, which covers unemployment.

Tax Year: Tax year is the calendar year.

Bahrain Corporate Tax Rate

There is no corporate tax in Bahrain. Bahrain corporation tax system taxes only income of oil companies at a flat tax rate of 46%.

Oil companies are subject to tax on any profits generated from exploring for, producing, or refining oil in Bahrain regardless of the company's place of incorporation. The tax rate is 46% of net profits for each tax accounting period. An estimated income tax declaration must be filed on or before the fifteenth day of the third month of the tax year. Tax is payable in twelve equal instalments starting on the fifteenth day of the month after the declaration has been filed.

In the absence of taxation in Bahrain, the taxability of corporate profits of subsidiaries or branches of foreign banks operating in Bahrain would depend on whether there are bilateral treaties for the avoidance of double taxation with the country in which the branch's head office state is incorporated.

In all other Gulf Corporation Council (GCC) countries, there is some form of taxation on business profits (personal income taxes are still very rare). The taxability of the profits of a Bahrain bank derived from any of the other GCC countries would depend on whether the underlying banking activity was 'offshore' or 'onshore' in relation to this country. As a general rule offshore activity is exempt from tax, whereas onshore activity is taxable.

Residence - There is no corporate tax for most companies in Bahrain, but income tax is levied on the profits of oil companies. Corporate income tax is only levied on oil, gas and petroleum companies engaged in exploration, production and refining, regardless of where the company is incorporated.

Basis - The tax basis for oil and gas companies is net profits generated in Bahrain.

Taxable income - Taxable income for oil and gas companies is net profits, which consist of business income less business expenses.

Taxation of dividends - No

Capital gains - No

Losses - Trading losses may be carried forward indefinitely. Carryback is not permitted (oil companies only).

Rate - The rate is 46% on oil companies.

Surtax - No

Alternative minimum tax - No

Foreign tax credit - No

Participation exemption - No

Holding company regime - No

Incentives - No

Withholding tax:

Dividends - No

Interest - No

Royalties - No

Branch remittance tax - No

Other taxes on corporations:

Capital duty - No

Payroll tax - No

Real property tax - No

Social security - For Bahraini employees, the employer's social insurance contribution is 12%, which covers old age, disability, death and unemployment. For expatriate employees, the employer's social insurance contribution is 3%, which covers employment injuries.

Stamp duty - Stamp duty is levied on property transfers on the basis of the property value as follows: 1.5% up to BHD; 70,000; 2% from BHD 70,001 to BHD 120,000; and 3% for amounts exceeding BHD 120,001.

Transfer tax - No

Other - A training levy (1% of Bahraini employees' salaries and 3% on the salaries of expatriate employees) is imposed on companies with more than 50 employees not providing training to their employees. A 10% municipality tax is levied on the rental of commercial property and residential property occupied by expatriates.

Anti-avoidance rules:

Transfer pricing - No

Thin capitalisation - No

Controlled foreign companies - No

Disclosure requirements - No

Administration and compliance:

Tax year - Calendar year

Consolidated returns - No

Filing requirements - Companies are required to file an estimated income tax declaration on or before the 15th day of the third month of the tax year. Tax must be paid in 12 monthly instalments.

Tax Penalties - A 1% monthly penalty is imposed for failure to file and pay tax.