Bahrain to Introduce Corporate Tax Once International Agreement is Reached

Manama, Bahrain – Bahrain is set to implement a corporate tax regime once an international agreement on the taxation framework is reached, announced Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa during a recent parliamentary session. The Organisation for Economic Co-operation and Development (OECD) is currently working on developing a global corporate taxation structure.

The Paris-based organization defines corporate tax as taxes imposed on the net profits of enterprises after allowable tax relief, including taxes on capital gains. In October 2021, the international community, under the auspices of the OECD, reached a significant agreement addressing the tax challenges arising from the digitalization and globalization of the economy. This landmark deal, referred to as the two-pillar solution, includes the establishment of a global minimum effective corporate tax rate of 15 percent for large multinational enterprises.

Minister Shaikh Salman emphasized Bahrain’s commitment to complying with the global direction of corporate taxation. He stated, “When the international legislations are crystal clear, then a comprehensive local legislation would be formulated and presented to the National Assembly.” The minister underscored the importance of companies contributing to the sustainability of the economy and the country’s financial development.

The delay in introducing corporate tax in Bahrain has been attributed to the need for input from international organizations and companies. Minister Shaikh Salman highlighted the significant contribution of the non-oil sector, which now accounts for over 83 percent of Bahrain’s economy. This growth has led to increased employment in the private sector, with the welfare of Bahraini workers being a crucial consideration.

The government is actively working to ensure the sustainability of pension funds, as Shaikh Salman explained. The Social Insurance Organisation (SIO) is conducting a comprehensive actuarial study to ensure the continued stability and operations of these funds. Upon completion of the study, updated lifespan statistics will be presented, and legislators will collaborate on proposals, options, and solutions to enhance the funds’ sustainability levels.

During the parliamentary session, Minister Shaikh Salman and other senior government officials responded to various questions and discussed proposals reviewed by the Cabinet. These topics included corporate tax, the resumption of suspended flights, regulations for video and audio productions, and market-related matters.

As Bahrain aligns with international efforts to establish a fair and effective corporate tax system, the government remains committed to striking a balance that ensures economic growth, employment stability, and a conducive investment environment. The introduction of corporate tax will contribute to the country’s long-term financial sustainability while supporting the ongoing development of the private sector.

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