Bahrain Publishes Supplementary Regulations for Domestic Minimum Top-Up Tax (DMTT)

Bahrain has officially released a Domestic Minimum Top-Up Tax (DMTT) regulation, complementing its primary DMTT law released in September 2024. MNE Groups operating in Bahrain need to assess whether they are impacted by the DMTT and ensure compliance with registration and tax payment requirements. With the registration deadline (January 30, 2025) looming, swift action is necessary to avoid penalties and ensure a smooth transition into the new tax regime.

By Qian Zhou 

On December 15, 2024, Bahrain’s National Bureau for Revenue (NBR) officially released the executive regulations for the Domestic Minimum Top-Up Tax (DMTT) applicable to multinational enterprises (MNEs). These regulations complement the primary DMTT law, which was introduced on September 1, 2024, and will come into force on January 1, 2025.

Overview of the Bahrain DMTT law

The DMTT law applies a 15 percent effective tax rate on the profits of MNEs that meet certain criteria. Specifically, it targets MNEs with global consolidated revenues of at least EUR 750 million in two or more of the last four fiscal years. This includes both MNEs headquartered in Bahrain and foreign MNEs with operations within the country. Notably, local businesses with operations limited to Bahrain or those that do not meet the revenue threshold will not be affected by the law.

Key elements of the Bahrain DMTT regulations

The newly released DMTT Regulations mirror many aspects of the OECD’s Global Anti-Base Erosion (GloBE) Model Rules. These include the definitions of revenue, adjustments to constituent entity income or loss, covered taxes, substance-based income exclusions (SBIE), and safe harbours. The regulations also incorporate provisions from the GloBE Commentary and Administrative Guidance, ensuring alignment with international standards.

However, the DMTT Regulations include some Bahrain-specific details, primarily due to the country’s status as the primary tax jurisdiction for affected entities. These additional elements are designed to facilitate the proper functioning of the DMTT within Bahrain’s domestic tax framework.

DMTT registration and compliance in Bahrain

One of the key aspects of the DMTT Regulations is the registration requirement. Affected MNE Groups will need to register with the NBR by January 30, 2025, even if they qualify for safe harbors or de minimis exclusions. The registration process is extensive, requiring MNEs to make decisions on various matters, including appointing a Filing Constituent Entity (CE).

Furthermore, registered MNE Groups will be required to make quarterly advance payments, with the first payment due 60 days after the close of the first quarter of 2025. The advance payment for the Transition Year will be due on the same date as the second advance payment for the year.

Implications for MNE groups

MNE Groups operating in Bahrain should begin evaluating whether they will be subject to the DMTT. The deadline for registration, January 30, 2025, is fast approaching, and failure to comply may result in penalties. Additionally, businesses will need to gather significant documentation as part of the registration process, including confirming the identity of the Filing CE and other critical details.

The full impact of the DMTT Law and regulations will vary based on an MNE’s specific structure and operations. However, businesses should take immediate action to assess their obligations, ensure timely registration, and comply with the new requirements. For further guidance on registration and compliance, see our Detailed Guide to the DMTT Law.

Conclusion

Bahrain’s DMTT Regulations represent a significant step in aligning the country’s tax regime with international standards, particularly the OECD’s GloBE Model Rules. MNE Groups operating in Bahrain need to assess whether they are impacted by the DMTT and ensure compliance with registration and tax payment requirements. With the registration deadline looming, swift action is necessary to avoid penalties and ensure a smooth transition into the new tax regime.

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