Bahrain Taxes for Individuals and Businesses
Understand the structure of Bahrain's tax system. This guide details the specific financial obligations and indirect levies for residents and companies.
Bahrain has cultivated an international reputation as a low-tax country, making it an attractive destination for expatriates and businesses. This is largely accurate, as the nation does not impose many of the direct taxes common elsewhere. While individuals do not face income taxes, a structured system of indirect taxes, mandatory contributions, and specific levies is in place for both individuals and corporate entities.
Personal Taxation in Bahrain
Bahrain does not levy any form of personal income tax on wages or salaries. Individuals are also not subject to taxes on capital gains from the sale of assets, nor are there any wealth, inheritance, or gift taxes. This absence of direct personal taxation simplifies financial planning for residents.
The primary mandatory cost for individuals is social security contributions paid to the Social Insurance Organization (SIO), with rates differing based on nationality. Bahraini nationals contribute 7% of their salary, and their employers contribute an additional 17%; this employer contribution will increase annually to reach 20% in 2028. For expatriate employees, the employer contributes 3% for employment-related injuries, while the employee contributes 1% toward unemployment insurance. All contributions are calculated on a salary up to BHD 4,000 per month.
Another direct levy is the municipal tax, which is applied to properties rented by expatriates. This tax is set at 10% of the monthly rental value and is often collected alongside utility payments.
Corporate and Consumption Taxes
Value Added Tax (VAT) is a consumption tax applied to most goods and services in Bahrain at a standard rate of 10%. Administered by the National Bureau of Revenue (NBR), businesses with an annual turnover exceeding BHD 37,500 must register for VAT, while those with revenues over BHD 18,750 may register voluntarily. Certain goods and services are zero-rated, such as basic foodstuffs and educational services, while others like financial services and bare land are exempt.
Corporate income tax in Bahrain has a narrow application. It is levied exclusively on companies engaged in the exploration, production, or refining of oil and gas, which are subject to a 46% tax rate on their net profits. Beginning in 2025, Bahrain also introduced a 15% tax on the profits of large multinational groups with annual revenues over €750 million.
A selective tax, known as excise tax, is applied to specific goods. This tax imposes high rates on products such as tobacco and energy drinks, which are both taxed at 100%. Soft drinks are subject to a 50% excise tax.
Other Key Levies and Duties
Stamp duty is levied on the transfer and registration of real estate, calculated on the property’s value. The standard rate for this duty is 2% of the property’s value, though a reduced rate of 1.7% is available if the duty is paid within 60 days of the transaction.
Customs duties are applied to most goods imported into Bahrain from outside the Gulf Cooperation Council (GCC). The standard rate for most imported goods is 5%. Certain products, however, face significantly higher import duties; for instance, alcoholic beverages are subject to a 225% duty, and tobacco products face a 200% duty.
Bahrain does not apply withholding taxes on payments of dividends, interest, or royalties made from a Bahraini entity to non-residents. This simplifies international transactions and enhances the country’s appeal for multinational corporations. The only exception exists within the oil and gas sector, but this does not affect the vast majority of businesses.