Corporate tax bill sets 10% rate above BD200,000

Ten per cent corporate tax would apply to profits above BD200,000 under a draft law sent to Parliament, with the Financial and Economic Affairs Committee taking the lead on scrutiny.

The bill was referred to the Council of Representatives under Royal Decree No. 79 of 2025, with the Legislative and Legal Affairs Committee also asked to provide remarks.   The decree instructs the Prime Minister to submit the draft law to Parliament and states it was issued at Riffa Palace on 31 December 2025.    

Under the draft text, the core charging rules would apply to a resident person or a non-resident’s permanent establishment where revenue exceeds BD1 million in a tax period, or where taxable income exceeds BD200,000 in a tax period regardless of revenue.   The rate schedule sets tax at 0 per cent on the slice of taxable income up to BD200,000 in a tax period, and 10 per cent on the slice above that.  

The bill also creates a withholding tax on Bahrain-sourced income, with 0 per cent on dividends, 5 per cent on interest (or 0 per cent where the interest is paid by a government entity), 5 per cent on royalties and 5 per cent on services.  

Tax residence is defined to include legal persons formed under Bahraini law, legal persons formed abroad whose ‘effective management’ is in Bahrain, and individuals physically present in the kingdom for more than 183 days in a calendar year.  

The draft states that employment income and personal real estate investment income are not treated as taxable income under the main charging provisions in this framework.  

It lists exempt persons including government entities, non-profit organisations, government investment funds (excluding entities they own), licensed pension funds and international organisations, with further conditions where an exempt body carries on business activity outside its core purpose.  

The draft leaves the start date blank in the published text, stating the law would apply from a date to be inserted, and says the minister responsible for financial affairs would issue the executive regulations and decisions needed after Cabinet approval.   It also provides for phased registration for withholding tax purposes, to be set by ministerial decision following Cabinet approval.