Taxes are imposed on incomes according to the Bahrain income tax law. Only a few taxes apply to individuals in the country. The taxes and duties such as customs duties are deducted from taxable income. The income of residents or non-residents earned abroad is not liable to be taxed.
Types of Taxes
There are several taxes in the nation but some do not fully apply to persons or businesses.
Excise Tax
This tax applies to goods that are harmful to our health and the environment. The tax purpose is to dissuade citizens from consuming such products that bring more harm than good to their health. Excise Tax rates on the retail price of some goods are listed below
- 100 % on Tobacco and its derivatives
- 50 % on Carbonates and soft drinks
- 100 % on Energy drinks
Value Added Tax (VAT)
A VAT at a rate of 5% is imposed on certain goods and services in the Kingdom of Bahrain. VAT is implemented by the National Bureau for Revenue (NBR). Citizens pay VAT on taxable goods or services bought in the Kingdom. While companies forward the accrued VAT to the Bureau. Basic foodstuffs, domestic and international transport, new properties, healthcare, exports of goods and services, etc. attract a zero percent rate. Whereas, the supply of bare land and buildings, specific financial services, and certain imported goods are tax-exempt.
VAT Tourist Refund Scheme
When tourists visit the Kingdom of Bahrain, they may request for this tax refunds on purchases within the Kingdom. A refund should be filed at any designated desks at the Bahrain International Airport. Tourists may receive the VAT refund in cash, or it can be transferred to their credit card accounts provided the goods were bought during the tourist’s stay in the Kingdom, they fall under the list of goods eligible for VAT refunds, were purchased from any of the authorized merchants registered for the scheme, etc.
Income Tax
There is no personal income tax within the territory. However, employees working under a native or a legal corporation in the Kingdom are liable for certain contributions to the Social Insurance Organisation (SIO) rules. Natives have to pay 7 percent of their income in social security while expatriates pay 1 percent.
Corporate Income Tax
Corporate income is not charged on income earned by establishments, except for entities in the oil and gas industry. A tax rate of 46 percent of net income applies to such firms. Also, profits made from extracting and processing hydrocarbons are levied.
Capital Gains Tax
A Capital gains tax is not imposed here.
Property Transfer Tax
This tax does not apply to the transfer of properties between people.
Inheritance Tax
An inheritance tax or wealth tax is not imposed in the nation.
Municipality Tax
Expatriates need to pay a municipal tax, at a fixed rate of 10 percent of their monthly rent for a property or apartment.
Stamp Duty
This duty is charged on transfers and/or the registration of real estate, at a standard rate of 2 percent of the value of the property.
Customs Duty
A fixed rate of duty at 5 percent of the value in cost freight Insurance, except for alcoholic beverages that’s 125% and cigarettes, a100 percent. Some kinds of products such as paper and aluminum are charged a 20% duty rate.
Tourism Fees
When a person owns a hotel or restaurant in the kingdom, such business is subject to a 5 percent charge on the enterprise’s revenue quarterly. a 10% rate is deducted from the total turnover of hotels and first-rate restaurants.
Withholding Tax
Presently, this tax is not imposed on dividends, interests, royalties, et cetera.
Social security contribution
An employer’s social security contribution is 12 percent for native employees and 3 percent for non-citizens. It is estimated on maximum monthly earnings start at BHD 4,000.
Double Taxation Treaties
The Kingdom of Bahrain has double tax treaties (DTTs) with numerous counties such as Algeria, Austria, Bangladesh, China, Belarus, Belgium, Bermuda, Cyprus, Bulgaria, Bahrain, India, etc.
