Main taxes in Bahrain

Most companies in Bahrain are exempt from income tax. 

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However, there is a trend towards its introduction into more and more sectors of the economy. 

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• Since 2019, a profit tax of up to 46% has been introduced for enterprises engaged in the exploration, production or processing of oil and gas. 
• From 2025, Bahrain will introduce a 15% Domestic Minimum Top-up Tax (DMTT) for multinational corporations. The tax will only be levied if the business's consolidated income for the last two out of four years exceeds €750 million.

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"The introduction of the tax is due to the strategy of reducing economic dependence on the oil and gas sector, but 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 will significantly change the financial planning of companies. For enterprises that have been operating for decades in the absence of such fees, even a moderate rate may become a challenge that requires a revision of budgets and optimization of the tax burden." Sergey Kovalkov, Head of International Practice инкорпораций

Bahrain imposes no withholding tax on dividend, interest or royalty payments to non-residents. This compares favourably with many jurisdictions where such payments are taxed at rates of 5-30%.

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‍Double Taxation Agreements

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Bahrain has concluded more than 40 DTAs with key countries, including Russia, China, the UK, France and the GCC states. These agreements fix withholding tax rates for the rare cases where it may arise, such as DMTT.

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To access reduced DTA rates, you must:

• Confirm the tax resident status of the partner country.
• Provide the Bahraini tax authorities with a residency certificate and documents substantiating the right to the benefit.

There is no personal income tax in Bahrain.

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However, it is necessary to take into account that when hiring employees, the employer has an obligation to pay social contributions for the employees.

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Contributions are payable for all employees, including foreigners and GCC citizens. Exceptions: temporary workers (with a contract of less than 3 months) and employees of special economic zones (may have special conditions).

Social contributions are divided into two types

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For Bahraini citizens, the contribution amount is:

• The employer's social security contribution is 15% of the total salary;
• Employee contribution - 8% of total salary.

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‍For foreign employees, the contribution is:

• The employer's social security contribution is 3% of the total salary;
• Employee contribution - 1% of total salary.

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"Social contributions in Bahrain are a compromise between the absence of income tax and the need to finance social guarantees. It is important for businesses to include them in their financial planning in order to avoid fines and maintain the attractiveness of the location for employees." Alexey Romanov, юрист