Overview of Tax Compliance in Bahrain

One of the first countries to find crude oil in the Middle East was Bahrain. Bahrain's gross domestic product (GDP), which still heavily depends on oil revenue, is being diversified with a concentration on the manufacturing, real estate, construction, and financial services industries.For businesses and individuals working inside Bahrain's boundaries, tax compliance is an essential component. The National Bureau for Revenue (NBR), which oversees Bahrain's revenue system, upholds values that encourage justice and transparency. To prevent legal issues and monetary fines, it's essential to comprehend and abide by the tax requirements. Bahrain's capital city, Manama, has a population of around 1.41 million people. The Bahraini dinar (BHD) is the official currency, and Arabic is the official language. The Ministry of Finance & National Economy develops the two-year fiscal budget for the Kingdom of Bahrain. The budget is subsequently implemented after receiving approval from the Council of Representatives.

Table of Contents

Tax Period in Bahrain

A 12-month financial year is followed by Bahrain companies, which is from 1^st January to 31^st December.

Types of Taxes in Bahrain

• Corporate Income Tax

Most companies and businesses are not subject to corporate income tax in Bahrain. Companies intending to establish a presence in Bahrain are powerfully attracted by this tax-free environment. There are some exceptions to this general rule; the companies that deal with the extraction of oil and gas, whether domestic or international, are subject to a 46% tax on their taxable income.

• Value Added Tax

Value-added tax (VAT) is imposed on the value added to products and services at each step of production or delivery. The implementation of VAT in Bahrain was set for January 1, 2019. As part of its attempts to diversify revenue streams and lessen reliance on oil earnings, the Bahraini government imposed VAT. The standard VAT was fixed at 10 per cent as of 2023.

Certain foods, medical supplies, children's products, precious metals, and stones are tax-exempt and subject to a 0% tax rate. Non-residents who do business in Bahrain without having a permanent place of residence must register for VAT if they are liable to pay it.Businesses operating in Bahrain must voluntarily register for VAT if their taxable revenue exceeds BHD 18,750, but they are required to do so if it surpasses BHD 37,500. When a non-resident company makes its first taxable supply in Bahrain, it must register for VAT. The final day of the month after the conclusion of each VAT period is the due date for submitting a VAT return.

• Excise Duty

Excise Duty is an indirect tax that is applied on some products that are deemed damaging, luxurious, or non-essential. The tax is sometimes passed on to consumers as increased costs for the items because it is usually imposed at the point of manufacture or importation. Bahrain joined the Gulf Cooperation Council's (GCC) Common Excise Tax Agreement on February 1, 2017. The Bahrain cabinet subsequently approved the Excise Tax Law, which became effective on December 30, 2017. This law imposes a 100% excise tax on tobacco goods and energy drinks and a 50% excise tax on soft (carbonated) drinks. Additionally, the excise tax might be expanded to include additional products in the future.

• Custom Duty

Bahrain uses the term "customs duty" to describe the taxes levied on imports and exports of products. A general customs duty rate is 5% of the value. Customs tax rates in Bahrain might change based on the nature of the imported or exported commodities, their country of origin, and any relevant trade agreements. With other countries and companies, Bahrain has signed a number of bilateral and multilateral trade agreements that might affect the tariff rates for particular products.

The customs tax rate for alcoholic drinks is fixed at 225%. This implies that the government will receive an extra 225% of the stated value of alcoholic beverage imports into Bahrain as a tax. Similarly, the customs duty rate for cigarettes is 200%. The Bahraini government requires importers of tobacco goods, such as cigarettes, to pay an additional duty equal to 200% of the product's reported value.

However, other product categories, such as those involving paper and aluminium, benefit from a 20% tariff rate that is more favourable. Due to the lower duty rate, importers and exporters who deal with these products will only be required to pay 20% of the stated value of the commodities in extra customs tax.

• Registration and License Tax

Fees ranging from BHD 25 to BHD 1000 will be levied at the time of the registration of companies or their licensing.

• Stamp Duty

A 2% stamp duty is paid for the registration or transfer of the property. the rate can be reduced if the payment is made within two months of the day on which the stamp duty was paid.

• Municipality Tax

A 10% municipality tax is levied in Bahrain.

Services Offered by Enterslice

An extensive range of tax management services are available from Enterslice, which also has competence in various fields. Our offerings consist of the following:

• Corporate Tax Advice: We offer an array of corporate tax consulting services to ensure that our clients are aware of and in compliance with the relevant tax legislation. We handle any tax-related issues companies may have, examine transactions to identify tax situations and create tax-efficient structures. Additionally, we identify prospects for tax optimization and offer regular updates.
• Corporate Tax Compliance: Enterslice offers assistance with corporate tax compliance, beginning with tax registration. We calculate and file all required tax returns, as well as create business tax returns. Our team of professionals assesses and aids in responding to requests from tax authorities to ensure smooth compliance with tax regulations.
• Tax Compliance Advisory: With our approach to tax compliance, we want to improve quality, strategic value, cost control, and risk management for all kinds of businesses. We help clients navigate regulatory changes, turn data into insightful knowledge, and enhance compliance and planning procedures. Our tax, financial, and legal professionals work together multidisciplinary to ensure smooth cooperation.
• Advice on Customs and Excise: Enterslice provides thorough advice services about Customs and Excise issues. This covers advice on client risk assessments, free zone companies, duty deferral and suspension plans, duty disadvantages, and post-clearance audit management. In addition, we offer guidance on supply chain management, market access policies, labelling requirements, authorized economic operator applications, and anti-dumping claims and defences.
• Tax Policy Advisory: We support companies in addressing local and global tax issues while considering the necessity to defend tax positions and the growing level of scrutiny. Our experts create strategies to minimize prospective tax obligations while assuring adherence to changing tax regulations. We offer specialized answers to our client's problems as well as crucial advice on handling tax disputes.
• Advice on VAT: A variety of VAT-related concerns are covered by our consulting services. To guarantee compliance, we perform VAT health checks and offer support for the creation and filing of VAT returns. We assist with tax agencies, VAT refunds, voluntary disclosures, clarification requests, and reconsideration requests to the appropriate tax authorities.
• R&D Tax: We help companies determine their eligibility for research and development (R&D) tax advantages provided by various nations. We assist customers in maximizing their R&D tax benefits while adhering to all regulatory regulations, ensuring compliance.
• Acquisitions & Mergers: For complicated cross-border transactions, we offer expert assistance while considering local tax laws. We may maximise tax outcomes by proactively addressing any tax problems and challenges while ensuring seamless transaction execution.
• International Tax Planning: Through initiatives like the OECD's BEPS programme and more tax transparency, our professionals assist organizations in navigating dynamic local legal and regulatory contexts in the face of shifting international tax rules. To minimize tax risks and maintain compliance with changing rules, we provide strategic help.

With the help of our integrated services, market expertise, and cutting-edge tools and technology, Enterslice is committed to assisting our clients at every level of their business operations.