30 January 2026

Bahrain announces corporate income tax regime

Background

At the weekly Cabinet Meeting held at the end of December 2025 and chaired by His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, Bahrain announced a broad package of fiscal and economic measures to strengthen its financial position and support long‑term stability.

The Cabinet announced several steps to streamline government spending, adjust utility and service frameworks, and modernise parts of the tax system. One of the key developments is the proposal to introduce a corporate income tax for larger businesses. With this development, Bahrain will be the final Gulf country to implement a corporate income tax regime.

The Cabinet also highlighted other tax‑related initiatives, including higher selective levies on soft drinks and increase in the contributions of government-owned companies to the Kingdom’s general budget.

Key features of Bahrain's corporate income tax regime

Under the Cabinet’s proposal, Bahrain would introduce a 10% corporate income tax on companies whose annual revenues exceed BHD 1 million or whose net annual profits exceed BHD 200,000.

The announcement indicates that the tax would apply only to profits above the BHD 200,000 (USD 530,000) threshold, which suggests that profits below this level would be relieved from corporate income tax. This relief cap is significantly higher than in the UAE, where taxable income is subject to a 0% rate only up to approximately BHD 38,500 (AED 375,000).

The measure is intended to diversify national revenue sources while ensuring that its impact falls primarily on mid‑sized and large businesses. The corporate income tax law is expected to be published during 2026 and is reportedly planned to take effect in January 2027, subject to approval by the Ministry of Finance and National Economy. This timeline provides companies with sufficient time to assess their structures and prepare for compliance.

Key takeaway

Bahrain’s decision to introduce corporate income tax completes the region‑wide shift toward modernised tax systems across the Gulf.

With a high relief threshold, the new regime is designed to affect mainly mid‑sized and large businesses while giving the market sufficient time to prepare for compliance. The full impact will become clear once the law is publicly available.