Bahrain’s tax system offers one of the most tax-friendly environments globally, with no personal income, corporate, inheritance, gift, or wealth taxes for most sectors. The only exception is the oil and gas industry, which is taxed at 46%. Bahrain also applies a modest 5% VAT, making its tax framework both simple and business-friendly. Supported by a robust network of Double Tax Treaties (DTTs) and global compliance through CRS and FATCA, Bahrain blends local benefits with international transparency.
Bahrain’s Tax System overview
| Corporate Income Tax: | None |
| Personal Income Tax: | None |
| Inheritance Tax: | None |
| Gift Tax: | None |
| Wealth Tax: | None |
Legal System
The Kingdom of Bahrain is an Islamic constitutional monarchy, which applies a mixture of Civil Law and Sharia.
Currency and Exchange Controls
The currency in Bahrain is the Bahraini Dinar (BHD). There are no foreign exchange controls in Bahrain.
Personal Income Taxation
Bahrain does not impose income tax for individuals, and Bahrain does not impose gift, inheritance or wealth tax.
Corporate Income Tax
Bahrain does not generally impose corporate income tax. However, oil and gas exploration and production companies, and petrochemical companies, are subject to tax at rates of 46%.
Value Added Tax (VAT)
Bahrain applies VAT at a standard rate of 5% on goods and services, subject to exemptions.
Anti-Avoidance Rules
Bahrain does not have Transfer Pricing rules, Thin Capitalization rules or Controlled Foreign Corporation (CFC) rules.
Trusts
The Bahrain Trust Funds Law (2016) governs the formation, administration and regulation of Bahrain Trusts. The Trust Funds law waived foreign ownership restrictions, and allows the trust instrument to designate the Governing Law of the Trust. Bahrain does not tax trusts.
Double Tax Treaties (DTTs)
Bahrain has a broad network of DTTs, including with Austria, Barbados, Bermuda, China, Cyprus, France, Hungary, Ireland, Isle of Man, Luxembourg, Malta, Netherlands, Seychelles, Singapore, and the UK.
Tax Information Exchange Agreements (TIEAs)
Bahrain has TIEAs for the exchange of tax information with Australia, Canada, Denmark, Faroe Islands, Finland, Greenland, Iceland, India, Norway, and Sweden.
OECD Multilateral Convention
Bahrain has also ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by Protocol (2010). The Convention requires parties to exchange information “on request,” and allows parties to agree spontaneous and automatic exchange.
Common Reporting Standard (CRS)
Bahrain executed the Multilateral Competent Authority Agreement (MCAA) and has implemented automatic exchange under CRS.
FATCA
Bahrain has a FATCA Model 1 Intergovernmental Agreement (IGA) in effect with the United States.
