Bahrain – Implementation of Tax on MNEs
As a member of the OECD Inclusive Framework and a signatory to the Pillar 2 Solutions, the Kingdom of Bahrain issued Decree Law No.11 – Regarding implementation of tax on multinational enterprises (“The Law”), on September 01, 2024, introducing the Domestic Top Up Tax for Multinational Enterprises (“ MNE’s”). This was followed by an Executive Regulation issued by the Ministry of Finance and National Economy, through Decision No.(172) of 2024 (“Regulation”), which contains the detailed by-laws relating to the Decree Law No.11.
The Law shall come into force from January 01, 2025 and shall be applicable to Constituent Entities of MNE Groups, within the Kingdom of Bahrain provided the MNE Group’s global consolidated annual revenue exceeds EUR 750 million in 2 out of 4 fiscal years immediately preceding the current Fiscal Year. Where the Revenue threshold is met, a minimum effective tax rate of 15% shall be complied with by such Bahraini Constituent Entities.
With this introduction of DMTT, all constituent entities of MNE Group operating in the Kingdom are subject to the transfer pricing provisions and are expected to maintain Local file and Masterfile. The features of the TP regime are on similar lines to the OECD guidelines
Given that the Law comes into force from January 01, 2025, the onus is on the MNEs who have constituent entities within the Kingdom to assess and evaluate the applicability and impact of the said Law to ensure seamless transition to the new regime!
VSTN’s attached Newsletter captures the key parts of DMTT law with emphasis on the TP rules which are to be implemented.