BAHRAIN MAY INTRODUCE CORPORATE TAX AS EARLY AS 2027

Bahrain Plans to Introduce Corporate Tax in 2027

From next year, the Gulf region will likely no longer have jurisdictions considered tax havens for businesses. This will happen once Bahrain introduces corporate tax, in addition to the existing 10% VAT.

Rate and thresholds:

A base rate of 10% is proposed, applicable where either:

1. revenue exceeds BHD 1 million (approx. USD 2.6 million), OR
2. net profit exceeds BHD 200,000 (approx. USD 530,000).

Withholding tax:

A 5% withholding tax is expected to apply to certain payments to non-residents, including services, interest, and royalties.

Corporate tax and Pillar Two:

Since 2025, Bahrain has implemented Pillar Two rules in the form of a Domestic Minimum Top-up Tax (DMTT) at a 15% rate. In 2026, Bahrain’s DMTT was granted qualified status, meaning full alignment with OECD model rules and eliminating the need for duplicate top-up tax calculations under both local and model rules. In this context, the introduction of corporate tax is a logical next step.

Status:

In December 2025, the corporate tax draft law was approved by the Cabinet and submitted to Bahrain’s National Assembly. The law is expected to be adopted by the end of 2026, with the tax effective from 2027.

Key observations:

The proposed 10% rate appears aimed at maintaining Bahrain’s competitiveness in the region, where standard corporate tax rates are: Saudi Arabia — 20%, Oman — 15%, Qatar — 10%, UAE — 9%.

Relatively high revenue and profit thresholds may serve as a mechanism to protect small and medium-sized businesses.