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Bahrain to Implement Domestic Minimum Top-up Tax for Multinational Enterprises in 2025

Bahrain to Implement Domestic Minimum Top-up Tax for Multinational Enterprises in 2025

Bahrain has announced the introduction of a Domestic Minimum Top-up Tax (DMTT) for multinational enterprises (MNEs), effective from January 1, 2025. This new tax aligns with the global tax reform led by the Organisation for Economic Co-operation and Development (OECD) and aims to ensure fair and transparent taxation of large corporations operating across borders.

The DMTT will require MNEs to pay a minimum tax of 15% on the profits they generate in Bahrain. The tax is part of the broader OECD initiative, known as the two-pillar reform, which seeks to promote a fairer distribution of tax revenues globally. Over 140 jurisdictions have adopted this reform, which includes establishing a global minimum corporate tax rate to prevent profit-shifting and base erosion by large multinational corporations.

Under Bahrain’s Decree Law No. 11 for the year 2024, the DMTT will apply to MNEs that meet the Pillar Two threshold, with global revenues exceeding €750 million. Eligible businesses are required to register with the National Bureau for Revenue (NBR) before the tax comes into effect.

The introduction of this tax marks a significant development for Bahrain, which has historically relied heavily on oil and gas revenues. By implementing the DMTT, the country seeks to boost its fiscal revenues while aligning with international tax standards. This move may signal a broader economic shift toward diversifying the national economy, encouraging growth in sectors like finance, technology, and tourism.

While the DMTT ensures compliance with global tax standards, it may also impact Bahrain’s competitiveness as a business hub. The long-term effects on the broader Gulf Cooperation Council (GCC) region will depend on how the tax is perceived in comparison to the traditionally tax-friendly environments of neighboring countries.

 

 

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