No Corporate Income Tax (General) in Bahrain
Reviewed by the Commoner Law Editorial Team. Sourced from Bahraini national legislation, decree-laws, and ministerial orders. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Bahrain does not levy corporate income tax on most businesses, making it a competitive jurisdiction for regional headquarters and holding companies:
- No general corporate tax: Companies in Bahrain pay zero income tax on profits — whether they are Bahraini-owned, foreign-owned, or joint ventures.
- Oil sector exception: Companies engaged in upstream oil and gas exploration and production are taxed at 46% on petroleum profits — the only direct business tax in the country.
- No dividend tax: Distributions to shareholders are untaxed.
- Municipal fee (not income tax): Commercial establishments pay a 10% municipal fee on the rental value of their premises — this is a property-linked charge, not a profits tax.
- OECD Pillar Two watch: Bahrain is monitoring the global minimum tax initiative, which may require large multinationals (revenue over EUR 750 million) to pay an effective 15% tax rate. Implementation details are pending.
When does it apply?
- You own or operate a business in Bahrain and want to understand your tax position.
- You are considering setting up a company and comparing Bahrain to other jurisdictions.
- Your company is in the oil and gas sector and subject to the 46% upstream tax.
What to Do If You Are Setting Up a Business in Bahrain and Want to Understand All Tax and Regulatory Costs
- Confirm your sector — if you are not in upstream oil/gas, you have no corporate income tax liability in Bahrain.
- Budget for other costs — municipal fees, LMRA labour market fees per foreign worker, SIO employer contributions, and VAT compliance costs.
- If your group has global revenue exceeding EUR 750 million, monitor OECD Pillar Two developments as Bahrain considers implementation.
- Contact the Economic Development Board (EDB) for sector-specific incentive information when setting up.
What should you NOT do?
- Do not assume zero tax means zero compliance — businesses must still comply with VAT, SIO, LMRA fees, commercial registration, and MOIC regulations.
- Do not overlook the 46% oil sector tax — it applies specifically to upstream exploration and production profits.
- Do not ignore international tax changes — the OECD global minimum tax may require restructuring for large multinational groups.
Common Questions
When does it apply — no corporate income tax (general)?
You own or operate a business in Bahrain and want to understand your tax position.You are considering setting up a company and comparing Bahrain to other jurisdictions.Your company is in the oil and gas sector and subject to the 46% upstream tax.
What should I do if I am starting a company in Bahrain and need to understand all my tax and fee obligations beyond zero corporate income tax?
Confirm your sector — if you are not in upstream oil/gas, you have no corporate income tax liability in Bahrain.Budget for other costs — municipal fees, LMRA labour market fees per foreign worker, SIO employer contributions, and VAT compliance costs.If your group has global revenue exceeding EUR 750 million, monitor OECD Pillar Two developments as Bahrain considers implementation.Contact the Economic Development Board (EDB) for sector-specific incentive information when setting up.
What should you NOT do — no corporate income tax (general)?
Do not assume zero tax means zero compliance — businesses must still comply with VAT, SIO, LMRA fees, commercial registration, and MOIC regulations.Do not overlook the 46% oil sector tax — it applies specifically to upstream exploration and production profits.Do not ignore international tax changes — the OECD global minimum tax may require restructuring for large multinational groups.