Bahrain transfer pricing

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 and transfer pricing rules for residents above BHD 1 million (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 has no general corporate income tax and no general transfer pricing law. Transfer pricing rules exist in three places only, set out below. Every rule here comes from the law or the National Bureau for Revenue (NBR) guidance listed under Sources. The DMTT Law, its Executive Regulations and the CbCR Order are read in English translations that the publishers mark "unofficial"; the Arabic text in the Official Gazette governs.

Who this applies to

1. Multinational groups in scope of the DMTT. The arm's length rule in Bahrain binds Constituent Entities located in Bahrain, and Joint Ventures and Joint Venture Subsidiaries located in Bahrain, of a Multinational Enterprise Group that meets the Revenue Test: annual revenue of EUR 750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity in at least two of the four Fiscal Years immediately before the year (DMTT Law art. 3(A)-(C)). The DMTT applies to Fiscal Years starting on or after 1 January 2025 (DMTT Law art. 44; NBR DMTT FAQ 1.5). A Bahraini branch of a group member is a Permanent Establishment and is in scope (NBR DMTT FAQ 2.4).

The related-party test is the accounting consolidation test, not a shareholding percentage. A Constituent Entity is an Entity consolidated line by line by the Ultimate Parent Entity; a Joint Venture is an Entity reported under the equity method where the Ultimate Parent Entity holds at least 50% of its ownership interests (NBR DMTT FAQ 2.9 and 2.11). The NBR DMTT Transfer Pricing Guide calls these parties "related parties" (Guide section 1.2).

2. Groups that must file country-by-country reports. Ministerial Order No. 28 of 2021 applies to every Multinational Enterprise (MNE) Group except an Excluded MNE Group, meaning a group with total consolidated revenue of less than BHD 342 million in the Fiscal Year immediately before the Reporting Fiscal Year (Order art. 1(g)). It covers Ultimate Parent Entities resident in Bahrain, including financial institutions licensed by the Central Bank of Bahrain, from the Fiscal Year beginning 1 January 2021 (Order art. 2; CBB Directive EDFIS/C/020/2021). Every Constituent Entity resident in Bahrain must notify (Order art. 3). Only a Bahrain-resident Ultimate Parent Entity files the report (Order art. 4).

3. Hydrocarbon companies. The Income Tax Law (Legislative Decree No. 22 of 1979) taxes bodies corporate directly engaged in exploration for or production of crude oil or other natural hydrocarbons in Bahrain, or refining crude oil in Bahrain, at 46% (art. 2). It has no arm's length or related-party clause. It allows only "reasonable" costs and expenses (art. 4(a)-(b)), and where the taxpayer's accounting method "does not fairly reflect the taxpayer's income" the computation is made by a method that does (art. 7).

Who is outside for 2026. If a company is not in the hydrocarbon sector and belongs to no group that meets the EUR 750 million DMTT Revenue Test, Bahrain law sets no arm's length rule and no transfer pricing documentation for it. It still has a CbCR notification duty if its group is an MNE Group with consolidated revenue of BHD 342 million or more. Individuals have no transfer pricing obligations in Bahrain.

Rates, bands and thresholds

Item	Rate or amount	Year	Source URL
DMTT Revenue Test (arm's length rule and local file/master file apply above it)	EUR 750 million or more in 2 of the 4 preceding Fiscal Years	Fiscal Years from 1 Jan 2025, incl. 2026	https://www.nbr.gov.bh/laws_regulations/dmtt
DMTT Minimum Rate	15%	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
CbCR: Excluded MNE Group	Consolidated revenue under BHD 342 million in the preceding Fiscal Year	Fiscal Years from 1 Jan 2021, incl. 2026	https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf
CbCR report deadline (Bahrain Ultimate Parent Entity)	12 months after the last day of the Reporting Fiscal Year	2026	https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf
Transitional CbCR safe harbour, de minimis test	Bahrain revenue under EUR 10 million and profit before tax under EUR 1 million on the CbC report	Fiscal Years beginning on or before 31 Dec 2026 (none ending after 30 Jun 2028)	https://www.nbr.gov.bh/laws_regulations/dmtt
Transitional CbCR safe harbour, alternative ETR test	16% (Fiscal Years beginning in 2025), 17% (Fiscal Years beginning in 2026)	2025, 2026	https://www.nbr.gov.bh/laws_regulations/dmtt
Master file supply chain description	Five largest products or services, plus any product or service of at least 5% of group turnover	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
Local file and master file size threshold	None set: every in-scope Bahrain entity with an intra-group transaction prepares both	2026	https://www.nbr.gov.bh/laws_regulations/dmtt
Record retention, incl. transfer pricing documentation	5 years after the end of the Fiscal Year	2026	https://www.nbr.gov.bh/publications/view/dmtt_procedural_guide
Hydrocarbon income tax	46%	2026	https://www.lloc.gov.bh/Legislation/id/L2279

The two thresholds are different tests. The DMTT test is in euros and looks at two of the four prior years (DMTT Law art. 3(C)). The CbCR test is in Bahraini dinars and looks at the single preceding year (Order art. 1(g)). Check each one separately.

The taxable base

Arm's length adjustment under the DMTT. A Constituent Entity located in Bahrain adjusts the amount recorded in its financial accounts so that each transaction or arrangement with a group Constituent Entity located in a different jurisdiction gives an arm's length outcome (Executive Regulations, Decision No. 172 of 2024, art. 13(A)). The arm's length principle means transactions are recorded "by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances" (ER art. 1(33)). The adjustment changes the Constituent Entity Income or Loss, which feeds the DMTT computation: Taxable Income is Net Constituent Entity Income less the Substance-based Income Exclusion, and the tax is the Additional Tax Rate (15% less the Effective Tax Rate) times Taxable Income (DMTT Law art. 9(A)-(C)).

Methods. Use the most appropriate method for the facts, chosen from five, applied consistently with the OECD Transfer Pricing Guidelines (ER art. 13(B)):

1. Comparable uncontrolled price.
2. Resale price.
3. Cost plus.
4. Transactional net margin.
5. Profit split.

Advance pricing agreements. Where the competent authorities have agreed a bilateral or multilateral APA, the adjustment follows the APA price (ER art. 13(C)).

Domestic transactions. Transactions between two Bahrain entities are outside the transfer pricing requirements, except a sale or transfer of an asset (NBR DMTT Transfer Pricing Guide, section 1.2). A loss on a sale or transfer of an asset between group Constituent Entities located in Bahrain is adjusted to the arm's length amount (ER art. 13(D)).

Local file. Each Constituent Entity located in Bahrain that is party to an intra-group transaction prepares and maintains a local file and a master file (ER art. 13(E)). The local file has 13 contents, including: the entity's business and strategy and any restructuring; local management structure; each intra-group transaction and counterparty; a comparability and functional analysis; the comparables and the search strategy; comparability adjustments; the transfer pricing policy; the method chosen and why, and the tested party; copies of material intercompany agreements; existing APAs and rulings; the annual accounts; and schedules tying the transfer pricing data to the accounts (ER art. 13(F)).

Master file. The master file is prepared for each Fiscal Year (Guide section 3.3) and has 11 contents: group structure chart; profit drivers; supply chain for the five largest products or services and any above 5% of turnover; important service arrangements; main markets; functional analysis; restructurings in the year; intangibles strategy, list and policies and transfers; group financing and the central financing entity; financing transfer pricing policies; the consolidated financial statements; and unilateral APAs and rulings (ER art. 13(G)).

Country-by-country report. This is an information return, not a tax base. It shows, for each jurisdiction, revenue, profit or loss before income tax, income tax paid and accrued, stated capital, accumulated earnings, employees and tangible assets other than cash, and lists each Constituent Entity with its residence and main activity (Order art. 5(a)). It follows the OECD template in Annex III of Chapter V of the OECD Transfer Pricing Guidelines and the OECD CbC XML Schema (Order art. 5(b)).

Hydrocarbon income tax. Income is gross income from sales of crude oil, natural hydrocarbons and products less the deductions in article 4 (art. 1(d)). Related-party costs are deductible only to the extent they are reasonable (art. 4(a)-(b)), and the computation follows a method that fairly reflects income (art. 7). The Minister may dispute a declaration that is not certified by an approved accounting firm (art. 9).

Deadlines and filing

Obligation	Who	Deadline	Where	Source
CbCR notification: is the entity the Ultimate Parent Entity, and if not, who is the Reporting Entity and where it is resident	Every Bahrain-resident Constituent Entity of an MNE Group that is not excluded	Last day of the Reporting Fiscal Year	Ministry of Industry and Commerce, by email to es@moic.gov.bh	Order art. 3(a); NBR Action 13 page
Country-by-country report	Bahrain-resident Ultimate Parent Entity	12 months after the last day of the Reporting Fiscal Year	NBR International Tax Information Exchange System (ITIES), https://ities.nbr.gov.bh	Order art. 4; NBR Action 13 page; MOIC Circular FAEI/11/MSJ/2021
DMTT Tax Return, which carries the arm's length adjustments	Filing Constituent Entity	15 months after the last day of the Reporting Fiscal Year	NBR	ER art. 66(A)
Local file and master file	Each in-scope Bahrain entity with intra-group transactions	No filing date. Prepare for each Fiscal Year and hand over on request within the period the NBR sets	Kept by the entity	ER art. 13(E); DMTT Law art. 25(B); Guide section 3.3
Keep transfer pricing documentation	Each in-scope Bahrain entity	5 years after the end of the Fiscal Year	Kept by the entity	ER art. 75(A); DMTT Administrative Guide section 10.1
Hydrocarbon estimated income tax declaration	Hydrocarbon taxpayer	15th day of the third month of the taxable year	Minister of Finance and National Economy	Income Tax Law art. 8

There is no transfer pricing disclosure form in Bahrain. The Ministry may set the form of the CbCR notification and may extend the notification deadline (Order art. 3). The NBR page (updated 25 October 2026) sends notifications to the Ministry by email; the 2021 MOIC circular had asked for both the report and the notification on ITIES. Use the NBR page route for notifications and file the report on ITIES. An entity must register as an ITIES user before it can file (NBR Action 13 page).

Penalties and interest

CbCR. A breach of the Order is punished under article 20 of Legislative Decree No. 27 of 2015 on the Commercial Register (Order art. 7). The Ministry first orders the entity, by a reasoned decision, to stop the breach. If the entity does not comply within the period set, the Ministry may impose one of these (art. 20(a)):

Measure	Amount
Suspend the commercial registration	Up to 6 months
Daily fine, first breach	Up to BHD 1,000 a day
Daily fine, further breach within 3 years	Up to BHD 2,000 a day
Cap on the total daily fine	BHD 50,000
Single administrative fine	Up to BHD 100,000
Delete the commercial registration	Where the breach relates to the registration

DMTT documentation. Failing to keep records in a regular manner, or failing to provide requested documents, or providing them late, carries a fine of up to BHD 50,000 (DMTT Law art. 28(B)(1), (3) and (4)).

DMTT under-declaration from wrong transfer prices. Incorrect data in the Tax Return that lowers the tax carries a fine of up to 30% of the tax that should have been declared, or up to 20% if the taxpayer voluntarily files a correct amended return (DMTT Law art. 28(A)(4)). The NBR says no fine applies if the correct amended return is filed within the original filing deadline (DMTT FAQ 8.4). Late payment costs 1% of the unpaid tax for each month or part of a month, capped at 70% of the tax due (art. 28(A)(3)). There is no separate interest charge.

Hydrocarbon income tax. Failing to file a declaration or pay on time adds a fine of 1% for each 30 days or part of 30 days (art. 8). A taxpayer whose records are falsified or who makes a false statement is liable to a fine of up to 500 dinars on conviction (art. 12).

Cross-border points

• Which transactions. The DMTT arm's length adjustment targets transactions with group entities located in other jurisdictions (ER art. 13(A)). The only domestic rule is the asset-transfer loss rule (ER art. 13(D)).
• Disputes and corresponding adjustments. Bahrain has 51 double taxation treaties in force (NBR Tax Treaties Network page). Every one has a mutual agreement procedure (MAP) article, and the NBR grants MAP access for transfer pricing cases (NBR MAP Guidance). Where a treaty sets no time limit, the Bahrain competent authority applies a 3-year limit. Requests go to Competent.Authority@nbr.gov.bh.
• APAs. No Bahrain law or NBR guide sets an application procedure for a unilateral, bilateral or multilateral APA. The Executive Regulations only require the DMTT adjustment to follow a bilateral or multilateral APA that the competent authorities have agreed (ER art. 13(C)).
• CbC report exchange. Bahrain is a non-reciprocal jurisdiction: it sends CbC reports filed by Bahrain Ultimate Parent Entities to partner jurisdictions but does not receive reports (NBR Action 13 page). The Multilateral Competent Authority Agreement on CbC reports entered into force for Bahrain on 28 January 2021 (NBR Tax Treaties Network page).
• CbC data and the DMTT. For Fiscal Years beginning on or before 31 December 2026, the DMTT is deemed zero if the group's CbC report meets the de minimis test, the alternative ETR test or the routine profits test for Bahrain (DMTT Law art. 13(A)). An accurate CbC report for Bahrain therefore decides whether any DMTT is due.
• Withholding, residence and treaty relief are in bh-cross-border-tax.

Worked examples

1. Services charged at cost to a foreign group company

A Bahrain company is a Constituent Entity of a group that meets the EUR 750 million Revenue Test. In 2026 it provides support services to a group company in another country and charges its costs of BHD 2,000,000 with no markup. Its benchmarking supports an 8% markup on costs; 8% is an assumed result for this example, not a Bahrain rate. Under ER art. 13(A)-(B) (cost plus method), the arm's length charge is BHD 2,160,000, so Constituent Entity Income rises by BHD 160,000. Assume Bahrain has no Covered Taxes for this group (Effective Tax Rate 0%), Net Constituent Entity Income before the adjustment of BHD 500,000 and a Substance-based Income Exclusion of BHD 300,000. Taxable Income becomes BHD 360,000 and the DMTT is 15% of that, BHD 54,000 (DMTT Law art. 9). The adjustment alone adds BHD 24,000 of DMTT.

name: Bahrain DMTT arm's length adjustment on cost-only services
inputs:
  costs: 2000000
  assumed_markup: 0.08
  charged: 2000000
  net_income_before: 500000
  sbie: 300000
  minimum_rate: 0.15
  etr: 0
steps:
  arm_length_charge: costs * (1 + assumed_markup)
  adjustment: max(0, arm_length_charge - charged)
  net_income_after: net_income_before + adjustment
  taxable_income: max(0, net_income_after - sbie)
  top_up_rate: minimum_rate - etr
  dmtt: top_up_rate * taxable_income
  dmtt_from_adjustment: top_up_rate * adjustment
expected:
  arm_length_charge: 2160000
  adjustment: 160000
  net_income_after: 660000
  taxable_income: 360000
  dmtt: 54000
  dmtt_from_adjustment: 24000

2. Loss on an asset sold between two Bahrain group companies

Two Bahrain companies in the same in-scope group trade with each other. Domestic transactions are normally outside the transfer pricing rules, but an asset transfer is not (Guide section 1.2). Company A sells equipment with a carrying value of BHD 1,000,000 to Company B for BHD 400,000 and books a loss of BHD 600,000. An independent valuation puts its arm's length value at BHD 900,000. Under ER art. 13(D) the loss is adjusted to the arm's length loss of BHD 100,000, so BHD 500,000 is added back to Company A's Constituent Entity Income. Had the sale been at a gain, article 13(D) would not apply, because it reaches losses only.

name: Bahrain domestic asset transfer loss adjusted to arm's length
inputs:
  carrying_value: 1000000
  sale_price: 400000
  arm_length_value: 900000
steps:
  recorded_loss: max(0, carrying_value - sale_price)
  arm_length_loss: max(0, carrying_value - arm_length_value)
  add_back: recorded_loss - arm_length_loss
expected:
  recorded_loss: 600000
  arm_length_loss: 100000
  add_back: 500000

Ask the client first

• What was the group's consolidated revenue in each of the four prior Fiscal Years (for the EUR 750 million DMTT test) and in the year just before the reporting year (for the BHD 342 million CbCR test)?
• Which group entity is the Ultimate Parent Entity, where is it resident, and has the group named a Reporting Entity for CbCR?
• Which Bahrain companies, branches and joint ventures does the group have, and what does the UPE own of each joint venture?
• What intra-group transactions does each Bahrain entity have, with which countries, and are any of them asset sales between Bahrain entities?
• Does the group's CbC report for Bahrain show revenue under EUR 10 million and profit under EUR 1 million, or an alternative ETR of 17% or more for 2026?
• Does any Bahrain entity explore for, produce or refine hydrocarbons, and are there foreign APAs, foreign transfer pricing adjustments or open MAP cases?

Sources

Source	URL	Read on
Decree-Law No. 11 of 2024 (DMTT Law), arts. 1, 3, 5, 9, 13, 25, 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. 1(33), 13, 66, 75 (NBR unofficial English)	https://www.nbr.gov.bh/laws_regulations/dmtt	2026-10-29
NBR DMTT Transfer Pricing Guide, version 1.0, June 2026, sections 1.2 and 3	https://www.nbr.gov.bh/publications/view/dmtt_transfer_pricing_guide	2026-10-29
NBR DMTT Administrative Guide, version 1.1 (2 July 2025), section 10.1	https://www.nbr.gov.bh/publications/view/dmtt_procedural_guide	2026-10-29
NBR DMTT FAQs 1.5, 2.4, 2.9, 2.11, 8.4	https://www.nbr.gov.bh/dmtt_faqs	2026-10-29
Ministerial Order No. 28 of 2021 concerning Country-by-Country Reporting (Sijilat unofficial English)	https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf	2026-10-29
Ministerial Order No. 28 of 2021, Arabic, Official Gazette No. 3509 of 4 February 2021	https://www.sijilat.bh/temp/CommercialLaws/18%20AR.pdf	2026-10-29
Legislative Decree No. 27 of 2015 on the Commercial Register, art. 20 (Arabic)	https://www.sijilat.bh/temp/CommercialLaws/6.docx	2026-10-29
CBB Directive EDFIS/C/020/2021, 21 March 2021	https://www.cbb.gov.bh/wp-content/uploads/2021/03/Directive-on-CbCR-Reporting.pdf	2026-10-29
MOIC Circular FAEI/11/MSJ/2021, 30 December 2021	https://www.nbr.gov.bh/media/MOIC_Circular_FAEI_11_MSJ_2021	2026-10-29
NBR, Action 13 (Country-by-Country Reporting)	https://www.nbr.gov.bh/FTR/bebs_projects/action_thirteen	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
Legislative Decree No. 22 of 1979, Income Tax Law, arts. 1, 2, 4, 7, 8, 9, 12 (LLOC English)	https://www.lloc.gov.bh/Legislation/id/L2279	2026-10-29

Not yet confirmed: whether the draft corporate income tax law has been enacted, and its final terms; whether the NBR accepts unilateral or bilateral APA requests (no published procedure); the deadline the NBR sets when it requests a local file or master file (set case by case under DMTT Law art. 25(B)); whether the NBR has prescribed a form or language for the local file and master file under ER art. 13(E); the treatment of the buyer's asset value in a domestic asset transfer under ER art. 13(D); the CbCR notification deadlines the Ministry has set or extended for each year after 2021.