Bahrain to Implement Multinational Corporation Tax Law Next Wednesday

TDT | Manama

Email: mail@newsofbahrain.com

Bahrain's new tax law targeting multinational corporations (MNCs) will come into effect on January 1st, 2025, following the issuance of its executive regulations.

The announcement was made after the Minister of Finance and National Economy, Shaikh Salman bin Khalifa Al Khalifa, issued a decision outlining the executive regulations governing the tax on multinational enterprises.

The law, as per Royal Decree Law No. (11) of 2024, will impose a 15% tax on the profits of large MNCs operating in Bahrain with global annual revenues exceeding €750 million ($830 million). This aligns with the requirements of Pillar Two of the Organisation for Economic Co-operation and Development (OECD) framework.

The National Bureau for Revenue (NBR) previously stated that the implementation of this tax demonstrates Bahrain's commitment to international tax standards and ensuring fair competition among companies. Companies covered by the law will pay a minimum tax rate of 15% on profits generated within Bahrain.

Ahmed Al Salloom, head of the Financial and Economic Affairs Committee in the Council of Representatives, stated that the annual revenue expected from the law is estimated to reach BD 100 million in its first year. He cited information provided by the Ministry of Finance to the Council's finance committee, indicating that the law will encompass approximately 300 foreign companies and seven national companies.

Details of the Executive Regulations:

A 93-page document outlining the executive regulations has been released. Key provisions include:

Tax Payments: The regulations mandate quarterly advance tax payments during the fiscal year, except for fiscal years shorter than three months. These payments are due within 60 days of the end of each quarter. Companies can choose between calculating advance payments based on the previous year's tax or the current year's projected tax. This choice must be made by the due date of the first advance payment and is irreversible for that fiscal year. The regulations detail the calculation methods, including formulas and considerations for transitional years.

Tax Refunds: The regulations outline procedures for tax refunds, including situations where advance payments exceed the tax due, adjustments are made following amended tax returns, or the revenue threshold is no longer met.

The National Bureau for Revenue has 90 days (extendable) to process refund requests, with the right to postpone decisions if audits are necessary. Approved refunds must be issued within 30 days and can be applied as credit for future years. The agency can offset overpaid taxes against other outstanding tax liabilities or penalties.

Currency for Calculation and Payment: The tax will be calculated in Bahraini dinars if all related entities within the MNC group use the Bahraini dinar as their reporting currency. Otherwise, the MNC can choose to calculate the tax in either Bahraini dinars or the reporting currency of the ultimate parent entity's consolidated financial statements.