LATEST: What Bahrain's new tax means for the island nation and the Gulf
Bahrain will introduce a new tax on multinational corporations operating in the country starting from January, as part of plans to align with global taxation reforms.
Under the domestic minimum top-up tax (DMTT), multinational companies will pay a minimum 15 per cent tax on the profits generated in the country, the Bahrain News Agency reported Sunday.
The tax will apply exclusively to large multinationals operating in the kingdom, with global revenue exceeding €750 million ($830 million) for at least two of the previous four fiscal years, starting from January 1.
Eligible businesses will need to register with the National Bureau for Revenue, which also handles VAT and excise tax.
The new framework is "fully aligned with the Organisation for Economic Co-operation and Development (OECD) guidelines", the BNA said.
The OECD's two-pillar reform programme set up a global minimum corporate tax to ensure large multinational enterprises pay a minimum 15 per cent tax on profits in each country where they operate.
The initiative is aimed at addressing tax challenges arising from the digitalisation and globalisation of the economy and putting a floor on tax competition, according to the OECD.
So far, more than 140 jurisdictions have signed up for the reform programme, which was announced in October 2021.
The proposed global minimum tax is expected to result in annual global revenue gains of around $220 billion, or 9 per cent of global corporate income tax revenue, the OECD said last year.
With the introduction of the DMTT, "Bahrain demonstrates its international commitment to global co-operation and its dedication to fostering a fair and level playing field in international taxation", the BNA said.
Bahrain, the smallest economy in the six-member GCC economic bloc, has been focusing on diversifying away from oil and boosting its non-hydrocarbon sector.
To strengthen its economy, the country unveiled a major economic reform plan in 2021 that seeks to invest about $30 billion in strategic projects to drive post-coronavirus growth, boost employment for citizens and attract foreign direct investment.
The country's real gross domestic product is expected to grow by 3.6 per cent this year, according to the International Monetary Fund.
Countries in the Gulf have each individually introduced various taxes such as VAT and corporate tax as part of their economic reform strategies.
In July, Oman's Shura Council also revealed plans to forward a draft law on personal income tax to the State Council. Although the exact details are still being finalised, if passed, the sultanate’s personal income tax would be a GCC first and could affect high-earners, with citizens taxed on net global income above $1 million and foreign residents on Oman-sourced income above $100,000.
