Single tax for Bahrain, UAE

TDT | Manama

Email: mail@newsofbahrain.com

Now, just a few more steps remain. Businesses based in Bahrain will not face additional taxation in the UAE unless they have a permanent establishment there. This assurance comes from an agreement signed in Dubai on 11 February this year.

The deal has already been approved by the Parliament’s Financial and Economic Affairs Committee and awaits a final parliamentary discussion before being enacted.

Once approved, this will mark a historic milestone as Bahrain’s first double taxation avoidance agreement with a Gulf Cooperation Council partner.

The Ministry of Finance and National Economy expressed optimism about the treaty, stating that it will simplify tax matters while ensuring adherence to international standards.

It is worth noting that Bahrain already has 45 similar agreements with countries worldwide.

Officials highlight that the treaty will streamline the tax system for businesses and entrepreneurs operating in both kingdoms, ensuring their income is not taxed twice. This measure aims to facilitate business operations, attract investment, and enhance transparency in cross-border transactions.

Key Provisions of the Draft Law

The agreement covers 31 articles addressing various forms of income, such as profits, dividends, capital gains, and salaries, along with mechanisms to resolve disputes and prevent tax avoidance.

The draft law, submitted to the committee on 27 March 2024, includes a preamble and two articles:

The first ratifies the treaty. The second stipulates its implementation upon publication in the Official Gazette.

How It Works

The deal ensures that businesses are taxed only in their home country unless they have a permanent establishment in another. For instance:

Income from oil and other natural resources will be taxed in the country of origin.

Dividends, royalties, and interest will be taxed in the recipient’s home country.

Addressing Tax Evasion

The agreement also tackles tax evasion by guaranteeing equal treatment for citizens of both nations while preserving exemptions for diplomats. Moreover, both countries will exchange tax information to enhance oversight and transparency.

A Practical Step Forward

Ahmed Sabah Al Salloom, Chair of the Financial and Economic Affairs Committee, hailed the treaty as a practical step forward, praising its potential to facilitate trade and investment.