In a recent session of the National Assembly, Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa shed light on Bahrain’s plans to introduce corporate tax. The implementation will be contingent upon the international community reaching a consensus on the taxation framework established by the Organisation for Economic Co-operation and Development (OECD). This blog post explores the minister’s statements and the factors driving Bahrain’s commitment to imposing corporate tax in alignment with global standards.
Minister Shaikh Salman revealed that the OECD is currently developing a comprehensive global corporate taxation structure. The organization defines corporate tax as levies imposed on net profits and capital gains of enterprises. Recognizing the need to address the challenges arising from the digitalization and globalization of the economy, the international community reached a historic agreement in October 2021. This landmark deal, known as the two-pillar solution, includes the establishment of a global minimum effective corporate tax rate of 15% for large multinational enterprises.
Minister Shaikh Salman emphasized that Bahrain is committed to complying with the global direction of imposing corporate taxes once international legislation becomes clear. The country firmly believes that companies should contribute to the sustainability of the economy and the nation’s financial development. However, the minister stressed the importance of formulating a comprehensive local legislation that safeguards against negative economic impacts on employment, economic growth, and investments.
The delay in introducing corporate tax in Bahrain can be attributed to the time required for input from international organizations and companies. Minister Shaikh Salman highlighted the significant contribution of the non-oil sector, which now accounts for over 83% of Bahrain’s economy. As employment in the private sector has increased, the welfare of Bahraini workers has become a priority. The government must ensure that the introduction of corporate tax aligns with their best interests.
Bahrain’s decision to impose corporate tax once an international agreement is reached reflects its commitment to global standards and economic sustainability. With a focus on the non-oil sector and the welfare of Bahraini workers, the government aims to strike a balance between taxation and economic growth. As Bahrain continues to work with the OECD, the formulation of a comprehensive local legislation will pave the way for a fair and effective implementation of corporate tax. By aligning with international frameworks, Bahrain aims to create a more stable and prosperous economic future.