The Domestic Minimum Top-up Tax (DMTT) is a new tax in Bahrain for large Multinational Enterprises (MNEs) and is outlined in Decree Law (11) of 2024. As per the Bahrain National Bureau for Revenue (Bahrain NBR), the new tax has been introduced for Multinational Enterprises and is in line with the Organisation for Economic Co-operation and Development’s (OECD) guidelines, as Bahrain demonstrates its commitment to international economic standards. The new tax will take effect from January 1, 2025. Eligible businesses should seek to register with the NBR before the deadline.
The new tax for MNEs in Bahrain applies to those surpassing the threshold of EUR 750 million, so it is expected that this will currently only affect very large foreign entities.
The tax is not anticipated to catalyse significant reactions or changes, with minimal risk of affecting Bahrain’s investment-friendly environment. This tax is only for very large companies, who will be subject to the 15% tax, otherwise it isn’t expected to affect the average market in Bahrain. The introduction of a tax could be expected to encourage double-tax treaties, where countries minimise the tax effects of multinational businesses through these treaties.
Bahrain’s participation in this OECD-mandated tax complies with the organisation’s international regulations and demonstrates the country’s adherence to international guidelines. The addition of a tax will increase the country’s revenue and income and won’t necessarily affect foreign direct Investment (FDI), as it only applies to very large MNEs.
This change brings both opportunities and challenges for businesses considering setting up in the GCC. This move will impact many large corporations with operations or subsidiaries in Bahrain, potentially altering their tax planning strategies and operational structures. Smaller businesses and startups are unlikely to be affected directly, but the broader implications for the business environment and investment landscape are significant.
With Bahrain introducing its new tax for MNEs, businesses need to understand the local tax landscape. This includes the new corporate tax, VAT and other potential taxes. Businesses should work with local tax advisors to ensure compliance and optimise their tax strategy in light of the new regulations.
GCC countries, including Bahrain, offer various incentives to attract foreign investment. These can include tax breaks, subsidies, and access to special economic zones. It is important to note that Bahrain remains a relatively tax-free zone compared to other countries, especially with regard to corporation and income taxes.
Given the complexities involved in setting up a business in a new region, it is advisable to seek professional advice. Local business consultants can provide crucial insights and assistance in navigating the regulatory environment, compliance and market entry strategies.
Bahrain’s introduction of a new tax for multinational enterprises marks a notable shift in the GCC’s tax landscape and aligns with global tax reform efforts. For businesses looking to establish a presence in the GCC, staying informed about these changes and carefully considering the implications for their operations is essential. By understanding the new tax regulations, selecting the right business structure, and leveraging local incentives, businesses can navigate the GCC’s dynamic market and capitalise on the region’s growth opportunities.
