Introduction
Bahrain offers a tax-friendly environment for businesses, but companies must comply with VAT and corporate tax regulations. Understanding tax registration, obligations, and exemptions is key to ensuring smooth operations in the country.
Understanding Bahrain’s Tax System
Unlike many countries, Bahrain does not impose a corporate income tax on most businesses. However, companies in the oil and gas sector face a 46% corporate tax.
The main tax obligation for businesses in Bahrain is Value Added Tax (VAT), introduced in 2019 at a standard rate of 10%.
Who Needs to Register for VAT in Bahrain?
Businesses must register for VAT if:
- Their annual taxable turnover exceeds BD 37,500 (Mandatory Registration).
- Their taxable turnover is between BD 18,750 and BD 37,500 (Voluntary Registration).
How to Register for VAT in Bahrain
- Create an Account on the National Bureau for Revenue (NBR) Portal.
- Submit Business Details:
- Commercial Registration (CR) certificate
- Financial records
- Expected taxable turnover
- Receive VAT Certificate: Once approved, you will be issued a VAT registration number.
Filing VAT Returns
VAT returns must be filed quarterly through the NBR portal. Businesses must maintain proper financial records and invoices to comply with tax regulations.
Social Insurance Contributions
Businesses must also contribute to Bahrain’s social security system:
- 12% of the employee’s salary for Bahraini nationals.
- 3% of the employee’s salary for expatriates.
Conclusion
Understanding Bahrain’s tax system is crucial for maintaining compliance and avoiding penalties. Registering for VAT, filing returns on time, and adhering to social insurance requirements will help businesses operate smoothly.