Bahrain Proposes Landmark Corporate Tax Reform with 10% Levy from 2027

Manama: Bahrain is set to introduce one of the most significant fiscal reforms in its history, as a new draft corporate tax law moves toward parliamentary debate. The proposed legislation introduces a 10% corporate income tax on local businesses, applying to the portion of profits exceeding BD200,000 annually, with implementation expected from January 1, 2027, subject to legislative approval.

The 61-article draft law establishes a comprehensive tax framework aimed at diversifying government revenues beyond hydrocarbons and aligning Bahrain with evolving international tax standards.

Under the proposal, the 10% tax rate will apply to local companies with annual revenues above BD1 million or net profits exceeding BD200,000, and only on profits above that threshold. Smaller businesses below these limits would remain outside the scope of the tax, easing the burden on SMEs.

Large multinational enterprises (MNEs) are already covered under a separate regime. Companies with consolidated global revenues exceeding €750 million are subject to a 15% Domestic Minimum Top-Up Tax (DMTT), which came into effect on January 1, 2025, in line with the OECD’s global minimum tax initiative to address base erosion and profit shifting (BEPS).

The draft law also introduces targeted exemptions, including the exclusion of salaries and allowances paid to Bahraini employees from taxable revenue. This measure is designed to incentivise local employment and support national workforce development.

In terms of scope, the tax is expected to apply to most commercial activities, while oil and gas operations are likely to remain under their existing, separate taxation framework.

From an implementation perspective, businesses are being urged to begin preparations early. Companies may need to review financial systems, assess potential tax exposure, and prepare for new compliance obligations such as tax registration, filing annual returns, and making advance payments.

Overall, the proposed corporate tax reform reflects Bahrain’s broader strategy to strengthen fiscal sustainability, modernise its tax system, and align more closely with international best practices, while maintaining competitiveness and supporting long-term economic diversification.