Bahrain’s corporate tax just the first in GCC, say experts

• 15% levy on multinationals from 2025
• For companies with $830m revenues
• Aligns with OECD global minimum

Bahrain could be the first “domino to fall” in the GCC after announcing a tax targeting large multinational companies, analysts have told AGBI.

The domestic minimum top-up tax (DMTT) will impose a 15 percent levy on the Bahraini profits of multinational enterprises whose revenues exceed €750 million ($830 million). It comes into force next January. 

The move aligns with Bahrain’s commitment to the Organisation for Economic Co-operation and Development’s global minimum tax rules, which aim to ensure that large companies pay taxes in every jurisdiction in which they operate.

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While the UAE and Qatar have amended their corporate income tax law to potentially accommodate a global minimum tax, Bahrain is the first country in the region to announce concrete plans.

“The expectation across the Middle East is that this will be the first domino to fall, with the UAE, Qatar and Saudi Arabia due to release statements of intent in the coming months,” says Vishal Sharma, managing director and UAE tax practice leader at Alvarez & Marsal.

“We anticipate that there will be consistency of approach from the majority of the GCC countries.”

More than 140 jurisdictions have signed up for the OECD tax framework, according to the state-run Bahrain news agency.

The World Economic Forum has described the policy as a move to prevent multinational corporations from shifting billion of dollars in profits to tax havens. 

Even if other GCC countries follow Bahrain’s lead, it is unlikely to dent their competitiveness, according to Sharma.

“Both the UAE and Saudi Arabia have already implemented corporate tax and VAT regimes but remain competitive due to their larger markets, diverse economies and significant government investments in business friendly initiatives,” he says. 

However, the tax may have limited immediate impact.

Thomas Vanhee, managing partner at Aurifer and affiliate professor at Sorbonne Abu Dhabi, says that, given the threshold of €750 million in revenues, “most businesses operating in the kingdom will not be affected”.

He describes the measure as a “defensive move” to prevent other jurisdictions from taxing profits that are generated in Bahrain.

"Whether Bahrain taxes the profit or not, they would be taxed elsewhere,” he says. "This is what is currently happening in 2024, where Bahraini companies have a parent in a jurisdiction which implements the income inclusion rule, another taxing rule under the global minimum tax."

Anas Al Adawi, sales director at Sovereign PPG Bahrain, says the introduction “might encourage more double-tax treaties for the kingdom, where countries seek to minimise the tax effects of multinational businesses”.

Despite the tax, Bahrain remains an attractive destination for foreign investment. The kingdom drew a record $6.8 billion in FDI in 2023, raising its cumulative inward FDI stocks from $36.2 billion in 2022 to $43.1 billion. With an FDI-to-GDP ratio of 99.7 percent, Bahrain far exceeds the global average of 46.9 percent.

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Bahrain’s nominal GDP has grown from around $11 billion in 2003 to more than $43 billion in 2023, with average annual growth of 7 percent. 

The financial services sector has surpassed oil as the highest contributor to real GDP, accounting for 17.8 percent in 2023.

Scott Cairns, managing director of Creation Business Consultants in Dubai, says multinational companies are likely to weigh the tax implications alongside factors such as market access, logistics and infrastructure, as well as the overall business environment. These may encourage them to operate in Bahrain despite the new tax. 

“At present, the cost to enter the market in Bahrain is lower than Saudi Arabia and on a par with other GCC countries on an annualised basis,” he says.

However, some experts believe Bahrain could eventually introduce a broader corporate tax regime. 

Nils Vanhassel, a senior associate in the Middle East tax team at DLA Piper, says: “While this move helps retain tax revenues, it is less about attracting foreign investment and more about safeguarding Bahrain’s own economic interests.”

He says it could be followed with a broader corporate income tax regime in the kingdom: “There are indications that this might happen, as members of parliament have previously proposed such measures.”

At more than $120 per barrel, Bahrain has the highest fiscal breakeven oil price in the Gulf. Its GDP is expected to reach $47 billion this year according to the International Monetary Fund, by far the smallest in the GCC.

“This allows Bahrain to capture tax revenue that would otherwise be lost, supporting its fiscal stability,” says Vanhassel.