Bahrain has taken a significant step toward reshaping its tax landscape by advancing a draft law that would introduce a broad-based corporate income tax. This development signals a major shift for businesses operating in Bahrain and reflects a wider regional move toward diversified government revenues and global tax alignment.
According to recent updates, Bahrain’s Cabinet has referred the proposed corporate tax law to the Legislative Branch for review and approval, marking a critical milestone in the country’s tax reform journey.
Key Highlights of the Proposed Bahrain Corporate Tax
If approved, the draft law would introduce the following framework:
- Corporate Tax Rate: 10% on taxable profits
- Applicability Thresholds:
- Annual revenue exceeding BHD 1 million
- Annual net profit exceeding BHD 200,000
- Expected Implementation: From 2027, subject to legislative approvals
This means that smaller businesses below the thresholds may remain outside the scope, while medium to large local companies will be directly affected.
How This Fits into Bahrain’s Broader Tax Strategy
Bahrain has already demonstrated its intent to align with international tax standards. One major step was the introduction of a Domestic Minimum Top-Up Tax (DMTT) for large multinational enterprise (MNE) groups, effective for fiscal years starting on or after 1 January 2025.
As a result, businesses—particularly large groups—may now need to consider two layers of taxation:
- Pillar Two-style minimum tax for in-scope multinational groups
- Domestic corporate income tax for the broader local market
This layered approach mirrors global trends driven by the OECD’s Base Erosion and Profit Shifting (BEPS) framework and signals Bahrain’s increasing integration into the global tax system.
What This Means for Businesses in Bahrain
The introduction of corporate income tax would represent a fundamental change for a jurisdiction traditionally known for a low-tax environment. Businesses should begin preparing early by:
- Reviewing their profitability and revenue structures
- Strengthening accounting and financial reporting systems
- Assessing group structures and cross-border transactions
- Understanding how domestic tax may interact with global minimum tax rules
Early planning will be essential to avoid compliance risks and unexpected tax exposures once the law is enacted.
Regional Context: A GCC-Wide Shift
Bahrain’s move follows similar developments across the Gulf region. The UAE has already implemented Corporate Tax, and other GCC countries are actively reforming their tax frameworks. This reflects a broader regional transition toward sustainable fiscal policies while maintaining competitiveness and investor confidence.
How Capital Zone Can Support Businesses
At Capital Zone Accounting & Bookkeeping, we help businesses across the GCC navigate evolving tax regulations with confidence. Our services include:
- Corporate Tax impact assessments
- Accounting system readiness and compliance support
- Tax planning and structuring advisory
- Ongoing regulatory monitoring across GCC jurisdictions
Whether you operate in Bahrain, the UAE, or across multiple markets, our experts can help you prepare for upcoming changes and stay compliant.
📞 Concerned about upcoming corporate tax changes in Bahrain or the GCC?
Get in touch with The Capital Zone today for strategic tax guidance and future-ready compliance support.
