Bahrain cross-border tax

Draft law. This skill states the law in force for 2026. A draft corporate income tax law went to the legislature on 29 December 2025. Secondary sources report fiscal years from 1 January 2027, 10% above BHD 200,000 and an expected 5% withholding tax on interest, royalties and services (KPMG, March 2026). We found no confirmation of enactment. Before advising on a period starting in 2027, check its status with the NBR.

Tax year 2026. Under the law in force for 2026, Bahrain taxes income through two laws only: the Income Tax Law for hydrocarbon companies (Legislative Decree No. 22 of 1979) and the Domestic Minimum Top-up Tax on multinational groups (Decree-Law No. 11 of 2024, in force from 1 January 2025). Most cross-border questions in Bahrain therefore have a short answer: there is no Bahrain tax to withhold or credit. This skill states what exists, what does not, and the source for each. The DMTT Law and its Executive Regulations are read in the National Bureau for Revenue's (NBR) English translation, which it marks "unofficial"; the Arabic text governs.

Who this applies to

• A Bahrain business paying a non-resident (dividends, interest, royalties, management or technical fees). Bahrain imposes no withholding tax on these payments (see the base section).
• A non-resident company doing business in Bahrain. It is taxed in Bahrain only if it is a hydrocarbon company or a member of a multinational group in scope of the DMTT. The Income Tax Law taxes every body corporate "wheresoever established or incorporated" that explores for, produces or refines hydrocarbons in Bahrain (Income Tax Law art. 2). The DMTT reaches a non-resident group member through a Bahrain permanent establishment (DMTT Law art. 5(D); NBR DMTT FAQ 2.5).
• A Bahrain company or individual with foreign income who needs a foreign treaty rate. The NBR issues certificates of residence (COR) to individuals, businesses and government entities resident in Bahrain (NBR COR page).
• Individuals moving to or leaving Bahrain. The Income Tax Law taxes only bodies corporate, establishments and companies (art. 1(a)), so a move in or out has no Bahrain income tax effect. Social insurance on a move is in bh-payroll-social.

Rates, bands and thresholds

Item	Rate or amount	Year	Source URL
Withholding tax on dividends, interest, royalties and service fees paid to non-residents	None under the law in force for 2026: neither income tax law has a withholding provision	2026	https://www.lloc.gov.bh/Legislation/id/L2279 ; https://www.nbr.gov.bh/laws_regulations/dmtt
Hydrocarbon income tax, residents and non-residents alike	46%	2026	https://www.lloc.gov.bh/Legislation/id/L2279
DMTT Minimum Rate	15%	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
DMTT Revenue Test	EUR 750 million or more in 2 of the 4 preceding Fiscal Years	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
COR for an individual: physical presence	At least 183 days in the year the COR covers	2026	https://www.nbr.gov.bh/FTR/certificate_of_tax_residence
Permanent establishment: building, construction, assembly or installation site	Only if it lasts more than 12 months	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
Double taxation treaties in force	51 (plus 10 information exchange agreements and 6 air transport agreements)	2026	https://www.nbr.gov.bh/FTR/bahrain_tax_treaties_network
MLI in force for Bahrain	From 1 June 2022	2026	https://www.nbr.gov.bh/FTR/bahrain_tax_treaties_network
MAP request time limit where the treaty sets none	3 years	2026	https://www.nbr.gov.bh/publications/view/Bahrains_Mutual_Agreement_Procedure_MAP_Guidance
DMTT deregistration application	Within 30 days of the event	2026	https://www.nbr.gov.bh/laws_regulations/dmtt

The taxable base

Withholding tax. Under the law in force for 2026, Bahrain has no withholding tax on payments to non-residents. The Income Tax Law has 13 articles and none provides for withholding (Legislative Decree No. 22 of 1979, arts. 1-13). The DMTT Law and Executive Regulations tax the Bahrain profits of in-scope groups through the Filing Constituent Entity and contain no withholding obligation (DMTT Law arts. 3, 18, 22). A Bahrain company pays the non-resident the gross amount, files no withholding return and issues no withholding certificate.

Residence of companies. Bahrain has no general residence rule for companies because it has no general corporate income tax. For the DMTT, an Entity is located in the jurisdiction where it is tax resident "based on its place of management, place of creation, or any other similar criteria", and otherwise where it was created (DMTT Law art. 5(A)). For a COR, a business needs a valid Commercial Registration certificate and, for regulated or professional firms, its licence (NBR COR page).

Residence of individuals. No Bahrain law taxes individuals on income, so there is no statutory residence test. For a COR the NBR requires physical presence in Bahrain of at least 183 days in the year; the NBR checks this with the Nationality, Passport and Residence Affairs office and calls it "absolute" (NBR COR page). It also needs a valid Bahraini identity card, passport and, for non-Bahrainis, residency permits for the year.

Permanent establishment. For the DMTT, a non-resident group member has a permanent establishment in Bahrain if it has a fixed or permanent place of business here, a dependent agent who habitually exercises authority to conduct business for it, or another nexus set by Ministerial decision (Executive Regulations, Decision No. 172 of 2024, art. 4(A)). A fixed place includes a place of management, branch, office, factory, workshop, mine, oil or gas well or quarry, and a building, construction, assembly or installation site lasting more than 12 months (ER art. 4(B)). Storage, display, delivery, purchasing and information-gathering places are excluded where the activity is preparatory or auxiliary (ER art. 4(C)), but not where the activities of the entity and a related person together form a cohesive business (ER art. 4(D)). A Bahraini branch of a group member is a permanent establishment (NBR DMTT FAQ 2.4).

Relief for foreign tax. Bahrain law has no foreign tax credit. The Income Tax Law lets a hydrocarbon taxpayer deduct from its tax only other taxes paid to the Government of Bahrain (art. 3). Under the DMTT, foreign tax works differently: Covered Taxes include taxes recorded in a Constituent Entity's financial accounts with respect to its income or profits (DMTT Law art. 7(A)(1)). Foreign tax on the Bahrain entity's income therefore raises its Effective Tax Rate and lowers the top-up, which is the 15% Minimum Rate less the Effective Tax Rate (DMTT Law art. 9(A)). The allocation rules move some taxes to another entity: tax relating to a permanent establishment goes to the permanent establishment, controlled foreign company tax goes to the controlled company, and tax on a distribution goes to the entity that made it (ER art. 29(A), (C) and (G)).

Exit and cessation. Bahrain has no exit tax. Under the DMTT, a Registrant must apply to deregister within 30 days when the group no longer has Bahrain entities (for example after liquidation), is no longer a multinational group, or otherwise falls outside the law (ER art. 63(A)-(B)). The NBR will not approve deregistration while any amount or obligation is outstanding (ER art. 63(C)).

Deadlines and filing

Obligation	Deadline	Where	Source
Withholding tax return or payment	None for 2026: no withholding tax in force	n/a	Income Tax Law arts. 1-13; DMTT Law
Certificate of residence	No fixed deadline. The timeframe depends on how complete the request is	Foreign Tax Relations Directorate, NBR, by mail, e-fax or email to FTR@nbr.gov.bh, in Arabic or English	NBR COR page
MAP request	Within the time limit in the treaty; 3 years where the treaty sets none	NBR competent authority, Competent.Authority@nbr.gov.bh	NBR MAP Guidance
DMTT registration by the Filing Constituent Entity, incl. for a Bahrain permanent establishment	120 days from the first day of the Transition Year	NBR	ER art. 62(A)
DMTT deregistration on exit	30 days from the event	NBR	ER art. 63(B)
Hydrocarbon estimated income tax declaration	15th day of the third month of the taxable year	Minister of Finance and National Economy	Income Tax Law art. 8

COR request contents. The applicant sends a request letter that states the purpose and cites the treaty articles or foreign law relied on, supported by an opinion of independent legal counsel or another independent qualified expert. Documents are certified by an independent lawyer, notary or auditor, or shown in original to NBR officials. The request also includes a justification from the body asking for the COR (for example the foreign tax authority), that body's contact details, the agent's letter of engagement if an agent applies, and, if the foreign authority asks, evidence of withholding tax paid (NBR COR page).

Penalties and interest

No withholding tax is in force for 2026, so there are no withholding penalties.

For a non-resident group member with a Bahrain permanent establishment in scope of the DMTT, the DMTT fines apply: failing to register on time or registering with incorrect information, up to BHD 100,000; late or missing return, up to 30% of the tax that should have been declared; late payment, 1% of the unpaid tax for each month or part of a month, capped at 70% (DMTT Law art. 28(A)(1)-(3)). For a hydrocarbon company, late filing or payment adds 1% for each 30 days or part of 30 days (Income Tax Law art. 8).

Cross-border points

• Treaty rates for payments out of Bahrain. For 2026 a non-resident does not need a treaty to reduce Bahrain withholding, because none is in force. See the draft law note above for later periods. A treaty matters to a non-resident in Bahrain mainly for the permanent establishment definition and for MAP.
• Treaty rates for payments into Bahrain. A Bahrain resident claims the reduced rate in the payer's country with a Bahrain COR (NBR COR page). The payer country's own forms and rules apply there.
• Treaty network. 51 double taxation treaties, 10 tax information exchange agreements and 6 air transport agreements are in force (NBR Tax Treaties Network page). Under Bahrain law a treaty in force overrides all other domestic law except the Constitution (NBR MAP Guidance).
• MLI. Bahrain signed the Multilateral Instrument on 27 November 2020; it entered into force for Bahrain on 1 June 2022 (NBR Tax Treaties Network page).
• Disputes. Every Bahrain treaty has a MAP article; MAP covers transfer pricing cases, anti-abuse claims and multi-year cases (NBR MAP Guidance).
• Transfer pricing and CbCR are in bh-transfer-pricing.

Worked examples

1. Bahrain company paying three foreign suppliers

A Bahrain trading company pays a UK parent a dividend of BHD 300,000, a Dutch lender interest of BHD 50,000 and a US software owner a royalty of BHD 100,000. Bahrain has no withholding tax, so the company withholds nothing and pays the full BHD 450,000 (Income Tax Law arts. 1-13; DMTT Law). No Bahrain withholding return is due. Each recipient's own country decides how it taxes the income.

name: Bahrain payments to non-residents, no withholding tax
inputs:
  dividend: 300000
  interest: 50000
  royalty: 100000
  bahrain_wht_rate: 0
steps:
  gross_paid: dividend + interest + royalty
  wht: gross_paid * bahrain_wht_rate
  net_received: gross_paid - wht
expected:
  gross_paid: 450000
  wht: 0
  net_received: 450000

2. Foreign tax on royalty income of a Bahrain DMTT entity

A Bahrain company in a group that meets the EUR 750 million DMTT Revenue Test licenses software to a customer abroad and earns a royalty of BHD 1,000,000. The customer's country withholds 10% under its treaty with Bahrain, after the company shows a Bahrain COR; 10% is an assumed foreign rate for this example, not a Bahrain figure. The BHD 100,000 is recorded in the company's accounts as tax on its income, so it is a Covered Tax (DMTT Law art. 7(A)(1)). The tax expense is added back in computing Constituent Entity Income (ER art. 12(A)(1), Net Taxes Expense). Assume the royalty is the group's only Bahrain income, with no costs, no other adjustments and no Substance-based Income Exclusion, so Constituent Entity Income is BHD 1,000,000. The Effective Tax Rate is 10%, the top-up rate is 5% and the DMTT is BHD 50,000 (DMTT Law art. 9). Without the foreign tax the DMTT would be BHD 150,000, so the foreign tax reduces it by BHD 100,000. Bahrain gives no refund or credit beyond that.

name: Bahrain DMTT with foreign withholding as Covered Tax
inputs:
  royalty: 1000000
  assumed_foreign_wht_rate: 0.10
  minimum_rate: 0.15
  sbie: 0
steps:
  covered_taxes: royalty * assumed_foreign_wht_rate
  etr: covered_taxes / royalty
  top_up_rate: max(0, minimum_rate - etr)
  taxable_income: max(0, royalty - sbie)
  dmtt: top_up_rate * taxable_income
  dmtt_without_foreign_tax: minimum_rate * taxable_income
  reduction: dmtt_without_foreign_tax - dmtt
expected:
  covered_taxes: 100000
  etr: 0.10
  top_up_rate: 0.05
  dmtt: 50000
  dmtt_without_foreign_tax: 150000
  reduction: 100000

Ask the client first

• Who is paying whom, from which country, and for what (dividend, interest, royalty, services)?
• Is the Bahrain company, or the foreign company working in Bahrain, part of a group with revenue of EUR 750 million or more in two of the last four years?
• Does any group company explore for, produce or refine hydrocarbons in Bahrain?
• Does the foreign company have an office, branch, site lasting over 12 months or a dependent agent in Bahrain?
• For a COR: which year, which treaty and article, and (for an individual) how many days were spent in Bahrain that year?
• Is the group leaving Bahrain, and are any NBR amounts or filings outstanding?

Sources

Source	URL	Read on
Legislative Decree No. 22 of 1979, Income Tax Law, arts. 1-13 (LLOC English)	https://www.lloc.gov.bh/Legislation/id/L2279	2026-10-29
Decree-Law No. 11 of 2024 (DMTT Law), arts. 1, 3, 5, 7, 9, 18, 22, 28, 44 (NBR unofficial English)	https://www.nbr.gov.bh/laws_regulations/dmtt	2026-10-29
Decision No. 172 of 2024, DMTT Executive Regulations, arts. 4, 29, 62, 63 (NBR unofficial English)	https://www.nbr.gov.bh/laws_regulations/dmtt	2026-10-29
NBR DMTT FAQs 2.4 and 2.5	https://www.nbr.gov.bh/dmtt_faqs/2	2026-10-29
NBR, Certificate of Residence for Tax Purposes	https://www.nbr.gov.bh/FTR/certificate_of_tax_residence	2026-10-29
NBR, Tax Treaties Network	https://www.nbr.gov.bh/FTR/bahrain_tax_treaties_network	2026-10-29
NBR, Guidance on Mutual Agreement Procedure, version 1.1	https://www.nbr.gov.bh/publications/view/Bahrains_Mutual_Agreement_Procedure_MAP_Guidance	2026-10-29

Not yet confirmed: whether the draft corporate income tax law has been enacted, and its final terms; whether controlled foreign company tax is allocated as ER art. 29(C) is described above; an NBR or Ministry statement in terms that Bahrain has no withholding tax (the rule above rests on reading both income tax laws in full, which contain none); any fee for a certificate of residence and the time the NBR takes to issue one; whether any Ministerial decision under ER art. 4(A)(3) has set an extra permanent establishment nexus; Bahrain's MLI positions and which treaties the MLI modifies; the withholding rates in each treaty partner's law and treaty, which the paying country applies.