Bahrain tax reform in 2024 - YB Case 2024

Bahrain tax reform in 2024

Bahrain tax reform in 2024

Registration of a company in Bahrain opens up opportunities for entrepreneurs to develop their business and invest in a stable economic environment. If you are interested in starting a business in this country, then the following information will be very useful for you.

The Kingdom of Bahrain is moving towards introducing its first comprehensive corporate income tax regime in 2024. This represents a major step in the government's long-standing efforts to diversify state revenues away from hydrocarbons and build a sustainable economy for the future.

Background on Bahrain's taxation system

Currently, Bahrain has one of the most business-friendly taxation systems in the Gulf region.

  • The CIT imposed is a 46% levy on the profits of oil and gas companies.
  • The VAT rate is 10%. Certain goods and services may be subject to a 0% rate or exempt from VAT.

Faced with the demands of transitioning towards a diversified economy in line with national priorities, the government views widening the tax net as crucial. Officials aim to ensure tax reform safeguards macroeconomic stability whilst retaining Bahrain’s attractiveness for inward investment into non-oil sectors.

Proposed corporate tax framework

As corporate tax legislation develops, two main CIT rate options are under consideration:

  • A 5% rate applying to medium and large companies
  • A rate around 30% for international enterprises

The government remains cautious about aggressive hikes that could undermine national competitiveness. Final tax brackets and thresholds will be finalised soon. It is expected that corporate income tax will apply to all business activities, except organizations engaged in hydrocarbon production and individuals receiving passive investment income.

Next steps

The draft income tax law (revised) is expected to be presented to the legislature in March 2024. The proposed changes mark a new chapter for taxation in Bahrain. With prudent planning, Bahrain looks set to retain core strengths around ease of doing business — even as it transitions to a broader tax base.

Those looking to establish a commercial presence in Bahrain should monitor developments closely, and obtain specialist legal advice, to ensure they remain compliant amidst the evolving fiscal landscape.

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