Corporate Taxation in Bahrain: What You Need to Know

Published on September 29, 2025 and written by Cyril Jarnias

Bahrain, a small archipelago in the Persian Gulf, has established itself as one of the most attractive destinations for foreign companies seeking to optimize their taxation. With its advantageous tax system and business-friendly environment, the kingdom is attracting more and more international investors. Let’s dive into the details of Bahraini taxation for businesses and discover why this country has become a true tax haven.

An ultra-competitive tax system: (almost) non-existent taxes for businesses

Bahrain stands out for its extremely advantageous taxation for businesses, making it one of the most sought-after tax havens in the world. Unlike many countries, the kingdom has chosen not to tax corporate profits, offering a significant advantage to companies establishing operations there.

No corporate tax

The most remarkable feature of Bahrain’s tax system is the complete absence of corporate tax for most business sectors. This attractive tax policy applies to both local companies and foreign corporations, regardless of their size or revenue. Only oil and gas companies are subject to a profits tax, set at 46%.

No value-added tax (VAT)

Unlike many Gulf countries that recently introduced VAT, Bahrain has not yet implemented this consumption tax. This means businesses don’t have to deal with the administrative complexity of collecting and remitting VAT, greatly simplifying their financial operations.

No withholding tax

Bahrain does not levy any withholding tax on dividends, interest, or royalties paid to non-residents. This favorable tax policy encourages foreign investment and facilitates international financial flows.

Reduced customs duties

Customs duties in Bahrain are generally low, with a standard rate of 5% for most imported products. Additionally, many exemptions are provided, particularly for raw materials and industrial equipment, promoting the development of manufacturing and industrial activities in the country.

This extremely advantageous taxation allows companies to maximize their profits and reinvest more in their development. However, it’s important to note that specific taxes may apply in particular sectors, such as the oil industry.

Administrative simplicity: how to register with Bahraini tax authorities

One of Bahrain’s strengths lies in the simplicity of its administrative procedures, particularly regarding taxation. The registration process with tax authorities is relatively straightforward and quick, greatly facilitating the establishment of foreign companies.

Creating a legal entity

The first step to register with Bahraini tax authorities is to create a legal entity in the country. The most common legal forms are:

• Limited Liability Company (LLC)
• Joint Stock Company
• Branch of a foreign company

The choice of legal structure will depend on the company’s objectives, its activities, and specific needs.

Obtaining a commercial license

Once the legal entity is created, the company must obtain a commercial license from the Ministry of Industry, Commerce and Tourism. This license is mandatory to conduct commercial activities in Bahrain.

Registration with the tax authority

Although Bahrain does not impose corporate tax on most businesses, it is nevertheless necessary to register with the national tax authority (National Bureau for Revenue – NBR). This step is particularly important for companies that might be subject to specific taxes or that wish to benefit from international tax treaty advantages.

Obtaining a tax identification number

When registering with the NBR, the company will be assigned a unique tax identification number. This number will be used for all communications with tax authorities and for any required declarations.

Timelines and costs

The registration process with Bahraini tax authorities is generally quick and can be completed within a few weeks. Associated costs are relatively moderate, contributing to the country’s attractiveness for foreign investors.

It’s important to note that the Bahraini government has established a one-stop shop to facilitate administrative procedures for foreign companies. This centralized service speeds up the registration process and obtaining necessary licenses.

Minimal tax obligations: the key to simplified management

One of the major advantages of Bahrain’s tax system lies in the simplicity of tax obligations imposed on businesses. This minimalist approach allows companies to focus on their core business rather than managing tax complexities.

No corporate tax filing

For the vast majority of businesses operating in Bahrain, there is no requirement to file an annual corporate tax return. This absence of regular tax filing significantly simplifies companies’ administrative and financial management.

Maintaining accounting records

Although tax obligations are minimal, companies are nevertheless required to maintain accurate and up-to-date accounting records. These documents must be kept for a minimum period of 5 years and may be subject to spot checks by authorities.

Specific declarations for certain sectors

Certain business sectors, particularly the oil and gas industry, are subject to stricter tax obligations. Companies operating in these fields must make regular declarations and pay the applicable profits tax.

Social contributions

Bahraini companies are required to pay social contributions for their employees. These contributions cover unemployment insurance and retirement pensions, among other things. The contribution rate is relatively low compared to other countries, helping to maintain competitive labor costs.

Annual audit

Joint stock companies and certain LLCs are required to have their accounts audited annually by an approved audit firm. This obligation aims to guarantee transparency and reliability of financial information for companies operating in Bahrain.

License renewal

Companies must regularly renew their commercial licenses, typically on an annual basis. This renewal process is generally simple and quick, but it’s important to comply with it to maintain the legality of the company’s operations.

This minimalist approach to tax obligations offers several advantages to businesses:

• Reduction in tax compliance costs
• Simplification of administrative management
• Time savings allowing focus on business development
• Decreased risk of errors or tax non-compliance

An international tax treaty network: the key to avoiding double taxation

Bahrain has developed an extensive network of double taxation avoidance agreements with many countries, thereby enhancing its attractiveness to international investors. These agreements aim to prevent companies from being taxed twice on the same income, once in their home country and once in Bahrain.

An expanding network

The Bahraini kingdom has signed tax treaties with over 40 countries, covering a large portion of the world’s major economies. Among the countries that have concluded agreements with Bahrain are:

• France
• United Kingdom
• China
• Germany
• United States
• Japan
• Singapore
• United Arab Emirates

This treaty network is constantly expanding, with new conventions regularly signed to cover more countries.

Benefits of tax treaties

Double taxation avoidance agreements offer several benefits to companies operating in Bahrain:

• Elimination or reduction of double taxation
• Reduced withholding tax rates on dividends, interest, and royalties
• Clarification of taxation rules for cross-border income
• Mechanisms for resolving tax disputes between countries

Treaty application

To benefit from tax treaty advantages, companies generally need to provide proof of their tax residence in Bahrain. This proof can be obtained from Bahraini tax authorities in the form of a tax residence certificate.

Tax information exchange

It’s important to note that these tax treaties often include clauses for information exchange between the tax authorities of signatory countries. Although Bahrain maintains a high level of tax confidentiality, companies should be aware that certain information may be shared under these agreements.

International tax planning

Tax treaties offer opportunities for international tax planning for multinational companies. By wisely structuring their operations, companies can optimize their overall tax burden while complying with applicable laws and regulations.

Bahrain vs other offshore jurisdictions: an advantageous tax comparison

Bahrain positions itself as one of the world’s most attractive offshore jurisdictions for corporate taxation. Let’s compare Bahrain’s tax regime to other popular offshore destinations to better understand its competitive advantage.

Bahrain vs Dubai (United Arab Emirates)

Although Dubai is often considered a tax-attractive destination, Bahrain offers certain advantages:

• Complete absence of corporate tax in Bahrain, versus a 9% rate in Dubai for certain companies
• No VAT in Bahrain, versus 5% VAT in Dubai
• Simpler administrative procedures in Bahrain

Bahrain vs Cayman Islands

The Cayman Islands are a renowned tax haven, but Bahrain offers certain advantages:

• Better international reputation for Bahrain
• More extensive tax treaty network in Bahrain
• More developed economic and financial infrastructure in Bahrain

Bahrain vs Singapore

Singapore is a popular destination for businesses in Asia, but Bahrain stands out on certain points:

• No corporate tax in Bahrain, versus a 17% rate in Singapore
• No VAT in Bahrain, versus 8% VAT in Singapore
• Generally lower cost of living and business in Bahrain

Bahrain vs Ireland

Ireland is often chosen as a European base by multinationals, but Bahrain offers superior tax advantages:

• No corporate tax in Bahrain, versus a 12.5% rate in Ireland
• No VAT in Bahrain, versus 23% VAT in Ireland
• Simpler administrative procedures in Bahrain

Specific advantages of Bahrain

Beyond its advantageous taxation, Bahrain stands out for other strengths:

• Political and economic stability
• Modern and constantly improving infrastructure
• Strategic geographical location at the heart of the Persian Gulf
• Skilled and multilingual workforce
• High quality of life for expatriates

Important considerations

Although Bahrain offers an extremely advantageous tax regime, it’s important to consider other factors when choosing an offshore jurisdiction:

• Compliance with international tax transparency standards
• Alignment with the company’s strategic objectives
• Proximity to target markets
• Sector-specific regulations

Bahrain stands out as a premier tax destination for international companies. Its extremely advantageous tax regime, combined with administrative simplicity and an extensive network of double taxation avoidance agreements, makes it a true tax haven in the heart of the Persian Gulf.

However, it’s crucial for companies to consider all factors, beyond taxation alone, when choosing an offshore jurisdiction. Compliance with international standards, political and economic stability, and alignment with the company’s strategic objectives must be carefully evaluated.

Bahrain offers a unique balance between tax advantages and a favorable business environment, making it an attractive option for many companies seeking to optimize their international tax structure.