Bahrain is set to introduce a significant tax reform aimed at multinational enterprises (MNEs), with the government implementing a domestic minimum top-up tax of 15% on large corporations beginning January 1, 2025. This new tax regulation will apply to multinational companies with global revenues exceeding $828.23 million (EUR750 million), as reported by the Bahrain News Agency.

Complying with Global Tax Standards

The move aligns Bahrain’s tax policies with the guidelines established by the Organisation for Economic Co-operation and Development (OECD), which seeks to ensure a more equitable global tax environment. The introduction of this minimum tax reinforces Bahrain’s commitment to economic transparency and global financial standards.

As part of the implementation process, Bahrain’s government has urged all eligible businesses to register with the National Bureau for Revenue (NBR) prior to the designated deadline. This proactive approach ensures compliance with the new regulations and allows companies ample time to prepare for the upcoming tax changes.

A Growing Global Trend

Bahrain’s introduction of a 15% minimum tax is part of a broader international trend, with over 140 jurisdictions already agreeing to implement a global minimum corporate tax. The initiative, spearheaded by the OECD, aims to prevent profit shifting and tax base erosion by large multinational corporations, ensuring that they contribute fairly to the economies in which they operate.

Regional Tax Developments

Elsewhere in the Gulf region, the UAE rolled out its own corporate tax of 9% on business earnings in June 2023. This shift marked a departure from the country’s previously tax-free environment, which had long attracted businesses from around the globe. However, the UAE continues to offer exemptions for companies operating within free zones.

Meanwhile, Saudi Arabia introduced a significant tax measure in 2020, tripling its value-added tax (VAT) rate to 15%. This increase was primarily intended to mitigate the financial impact of lower oil revenues on the Kingdom’s economy.

Conclusion

Bahrain’s new tax policy marks a critical step toward aligning the country with global tax standards while ensuring a fairer distribution of corporate tax revenues. Multinational enterprises operating in Bahrain and the region will need to stay informed about these developments and ensure compliance with the new regulations.

At Mindfield Resources, we specialize in helping businesses navigate complex tax landscapes and regulatory changes. To learn more about how we can assist your organization with these new developments, visit our homepage.

FAQs

  1. What is Bahrain’s new 15% minimum tax for multinational enterprises?

Bahrain will introduce a 15% minimum tax on multinational enterprises (MNEs) with global revenues exceeding $828.23 million, effective January 1, 2025. This aligns the country with international tax standards aimed at preventing tax base erosion.

  1. Why is Bahrain introducing a 15% minimum tax?

The 15% minimum tax aligns Bahrain with OECD guidelines to ensure fair global taxation and economic transparency. It aims to prevent profit shifting by large multinationals and ensure they contribute their fair share to the economies in which they operate.

  1. Who is required to register for the new tax in Bahrain?

Eligible businesses with global revenues over $828.23 million (EUR750 million) are required to register with Bahrain’s National Bureau for Revenue (NBR) before the imposed deadline to ensure compliance with the new tax regulations.

  1. How does this tax compare to other GCC countries?

The UAE introduced a 9% corporate tax in 2023 while offering exemptions for businesses in free zones. Saudi Arabia increased its VAT rate to 15% in 2020 to offset lower oil revenues. Bahrain’s 15% minimum tax further aligns the region with international tax practices.

  1. How does Bahrain’s new tax impact multinational businesses?

Multinational enterprises operating in Bahrain will need to comply with the new tax regulations by 2025, ensuring they meet the 15% minimum tax threshold on profits. Businesses must register with the National Bureau for Revenue and stay informed about compliance requirements.

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