Tax Bahrain’s expat tax move ‘likely to be replicated GCC-wide’ By Gavin Gibbon January 30, 2025, 4:47 PM Bahrain Financing Company Expat remittances from Bahrain could soon face a two percent tax Levy on remittances backed by MPs Other Gulf countries watching Fear move will boost black market Bahrain is proposing to levy a tax on expatriate remittances, a move an industry expert believes is likely to be replicated in other neighbouring Gulf countries. Members of parliament in the kingdom this week supported a revised proposal which would mean expat remittances face a two percent tax. “It would not surprise me if other GCC economies will watch closely as they look to diversify their tax bases and reduce leakages from their growth and diversification agendas,” said Scott Livermore, chief economist at Oxford Economics and an AGBI columnist. Any decision would need to be ratified by the Shura Council, the upper house of the National Assembly, before being given royal approval, or not, from King Hamad Bin Isa Al Khalifa. The proposal was first raised in 2023, but has faced strong opposition, which has resulted in several amendments. The original plan was for a tiered system, with a one percent levy on transfers below BD200 ($535), two percent on amounts between BD201 and BD400 and three percent on sums more than BD400. Transfers tied to investment agreements, capital movements and certain cases under Bahrain’s tax framework were to be exempt. But it was felt that the flat two percent rate was less complicated and simpler to enforce. Bahrain has a population of just over 1.4 million, with expats making up 55 percent of the total. Official data revealed a slight decrease in remittances sent by foreign workers in Bahrain during the first nine months of 2024, compared to the same period in 2023. A total of BD727 million was remitted, down 1.1 percent from the BD735 million reported in 2023. UAE remittance fee to rise 15% for first time in five years Mena remittances fall as Egyptians swerve official channels Expat remittances from Saudi rise 12% to $3.4bn The remittance tax proposal was dismissed by the Shura Council in January last year over fears that implementing the tax could force people into the black market or to use cryptocurrencies, potentially damaging Bahrain’s financial system. Khalid Al Maskati, chairman of the financial and economic affairs committee of the Shura Council, said around three quarters of expats working in Bahrain earned less than BD200 a month. “This legislation will only reduce remittances made through official channels in favour of illegal money transfer systems, he said. Livermore said the move could also deter expat workers and lead to higher wage demands. Should the Shura Council reject the proposal for a second time then a joint session of the National Assembly will vote on it. It is understood the tax would bring in less than 0.1 percent of Bahrain’s GDP, which stands at $47.8 billion. Bahrain, the smallest country in the GCC bloc of six, with a population of almost 1.5 million people, has dwindling reserves of oil and gas. It is partially reliant on revenues from the Abu Safah field it shares with Saudi Arabia and requires an oil price of about $125 per barrel to achieve budgetary equilibrium. Its public debt has increased to almost BHD18 billion ($48 billion), its ministry of finance revealed earlier this month. At the start of this month, Bahrain introduced the domestic minimum top-up tax (DMTT), imposing a 15 percent levy on the Bahraini profits of multinational enterprises whose revenues exceed €750 million ($830 million). Livermore said: “The motivation behind this move is no doubt to diversify government revenues.”