Main taxes and fees in Bahrain

The absence of personal income taxes, minimal fiscal burden on corporations, and well-designed mechanisms for integration into global markets make Bahrain a full-fledged business ecosystem for companies seeking to optimize costs without reputation risks. The focus is on zero rates, transparent regulation, and unique tools for working with the MENA region.

VAT

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

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)

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

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

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.

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).

Corporate Income Tax (CIT)

Most companies in Bahrain are exempt from corporate income tax.

However, that is changing. On December 29, 2025 the Cabinet approved a general corporate income tax of 10% for companies with annual revenue above BHD 1 million or net profit above BHD 200,000, with only profit above BHD 200,000 taxed. It is expected to apply from January 2027, which will make Bahrain the last Gulf state to adopt a corporate income tax.

• A tax of up to 46% has applied to companies engaged in oil and gas exploration, extraction, or processing since 1979.
• A 15% minimum corporate tax (Domestic Minimum Top-up Tax, DMTT) for multinational corporations is already in force, for fiscal years starting on or after January 1, 2025.
• The tax will only apply if the consolidated business income for two of the last four years exceeds 750 million euros.

“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 Kurdiumova Co-founder

Withholding Tax (WHT)

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%.

Double Tax Treaties (DTT)

Bahrain has signed 50 DTTs with key countries, including Russia, China, the UK, France, and GCC states.

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

To access reduced rates under DTTs, one must:

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

Personal Income Tax (PIT) and Social Contributions

There is no personal income tax in Bahrain.

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

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

Social contributions are divided into two categories:

For Bahraini citizens

• Employer’s contribution: 18% of gross salary in 2026 — the 2022 reform raises it by one percentage point a year
• Employee’s contribution: 8% of gross salary

For foreign employees

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

“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.” Gennady Kurdiumov Co-founder

Sources: the 15% top-up tax and the EUR 750 million threshold — Decree-Law No. 11 of 2024; oil and gas taxation — Amiri Decree No. 22 of 1979; the corporate income tax approved for 2027 — Cabinet decision of December 29, 2025.