Bahrain's Domestic Minimum Top-Up Tax applies to constituent entities of multinational enterprise groups located in the Kingdom, once the group's consolidated annual revenue reaches EUR 750 million in at least two of the preceding four fiscal years, and the tax is imposed at a minimum rate of 15%.
Legal Basis and Purpose of the Tax
Legislative Decree No. (11) of 2024 on the Regulation of Tax on Multinational Enterprises was issued to implement the Pillar Two rules of the Organisation for Economic Co-operation and Development, aiming to ensure the application of a global minimum domestic top-up tax on the entities of multinational enterprise groups located in Bahrain.
The Minimum Rate
Article (1) of the Law clearly defines the minimum rate, and the official English translation of the Law states:
Minimum Rate: The minimum rate of fifteen percent (15%).
The Revenue Test: Who Is Subject to the Tax
Paragraph (c) of Article (3) sets out the core condition for a multinational enterprise group to become subject to the tax:
The Revenue Test for the Fiscal Year is considered met if the annual revenue of the Multinational Enterprise Group is equal or exceeds EUR 750 million in the Consolidated Financial Statements of the Ultimate Parent Entity
The text requires this revenue level to be reached in at least two of the four fiscal years immediately preceding the fiscal year under review, with the threshold adjusted proportionally if one of these years is longer or shorter than twelve months. Once this condition is met, and the reporting constituent entity is located in Bahrain, it must pay the current top-up tax.
Entities Excluded from the Scope of the Tax
Article (4) of the Law excludes specific categories of entities from the tax even where they are part of a group that meets the revenue test:
The provisions of this Law shall not apply to any excluded entity among the following entities: 1- Governmental entities. 2- International organisations. 3- Non-profit organisations. 4- Pension funds. 5- An investment fund that is an Ultimate Parent Entity. 6- A real estate investment vehicle that is an Ultimate Parent Entity.
The article also excludes an entity owned as to not less than 95% of its value by one or more of these excluded entities, where that entity operates exclusively or almost exclusively to hold assets or invest funds for their benefit.
Effective Date of the Law
Article (44) of the Law fixes the date its provisions take effect, stating:
The Prime Minister and the Ministers - each within his jurisdiction - shall implement the provisions of this Law, which shall come into effect from the first of January 2025, and shall be published in the Official Gazette.
Legal References
- Legislative Decree No. (11) of 2024 on the Regulation of Tax on Multinational Enterprises — Articles (1), (3), (4) and (44)
For questions about your specific situation, you can ask the Bahrain Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.