Taxation in the Kingdom of Bahrain

Taxation of Companies

The Kingdom of Bahrain does not operate a general tax system but only taxes the income of oil companies. The oil & natural gas companies are subject to tax on any profits generated from exploring, producing, processing, or refining oil and oil-related products in Bahrain regardless of the company’s place of incorporation.

Payroll and Social Security Taxes

Employers pay ten percent of payroll, and the employees pay five percent for social insurance against old age, disability and death (only for Bahraini employees only). For workplace injuries, employers contribute nearly three percent of all employees’ payroll. This contribution is reduced to 1 percent if the employer provides benefits and medical cover at employer-owned hospitals. Besides, companies with more than 50 employees must either provide an approved training scheme or pay a training levy of one percent of the Bahraini employee pay and four percent for foreign employees.

Individual, Capital, Withholding and other Taxes

• According to the Bahrain laws, there is no individual tax for income and wealth. The religious wealth tax (Zakat) is not levied in the Kingdom.
• No form of capital tax is levied
• No withholding tax on interest, dividends, fees or royalty payments
• The municipal tax of 12 percent on the rental of commercial property has to be paid