Bahrain has introduced a Domestic Minimum Top-Up Tax (DMTT) through Decree-Law No. 11 of 2024, published in the Official Gazette in September 2024. It applies a 15% minimum effective tax rate to the Bahrain profits of large multinational groups for financial years beginning on or after 1 January 2025, aligning the Kingdom with the OECD/G20 Pillar Two GloBE rules.
Key takeaways
- Bahrain's DMTT was enacted by Decree-Law No. 11 of 2024 (Official Gazette, September 2024) and applies to financial years beginning on or after 1 January 2025.
- It secures a 15% minimum effective tax rate (ETR) on the Bahrain profits of in-scope multinational enterprise (MNE) groups, calculated on a jurisdictional basis.
- Scope follows the OECD Pillar Two revenue test: consolidated global revenue of at least EUR 750 million in at least two of the four immediately preceding fiscal years.
- Where the Bahrain ETR is below 15%, the top-up tax equals (15% - Bahrain ETR) x Excess Profits.
- Excess Profits are Net Constituent Entity Income less the Substance-Based Income Exclusion, with covered taxes adjusted under the GloBE rules.
- Government bodies, international organisations, pension funds and certain investment and real-estate vehicles that are ultimate parent entities fall outside the tax.
Why has Bahrain introduced a top-up tax?
Bahrain introduced the DMTT to keep tax revenue that would otherwise be collected abroad. Under the OECD/G20 Pillar Two framework, if a group is undertaxed in Bahrain — below the 15% minimum — another country can claim the shortfall through the income inclusion rule or the undertaxed profits rule, so a domestic top-up lets the Kingdom collect it first. Bahrain has historically levied no general corporate income tax; the DMTT changes that for the largest in-scope groups only, requiring them to bear an effective rate of at least 15% on their Bahrain profits.
An effective tax rate is simply tax paid divided by profit. Because the regime works on a jurisdictional basis, it looks at the combined result of all a group's Bahrain entities together, regardless of where the ultimate parent sits. For an in-scope group, the practical question is no longer "zero tax in Bahrain versus 15% elsewhere" — it is that Bahrain will now collect the 15% itself.
Which groups are in scope?
The DMTT applies only to MNE groups that meet the Pillar Two revenue test: consolidated global revenue of at least EUR 750 million in at least two of the four fiscal years immediately preceding the year being tested. That figure is read from the ultimate parent entity's consolidated financial statements, so a mid-sized Bahrain subsidiary of a large global group is caught even if its own turnover is modest. Purely domestic Bahraini businesses and smaller groups below the threshold are unaffected.
A defined set of entities is excluded from the tax altogether: government bodies, international organisations, pension funds, an investment fund that is an ultimate parent entity, a real-estate investment vehicle that is an ultimate parent entity, and certain other entities that meet prescribed conditions.
How is the top-up tax calculated?
The mechanism compares Bahrain's effective tax rate against the 15% floor. If the ETR is at or above 15%, no top-up is due. If it is below, the shortfall is charged as a top-up tax. The formula is straightforward: Top-Up Tax = (15% - Bahrain ETR) x Excess Profits. Excess Profits are Net Constituent Entity Income less the Substance-Based Income Exclusion — a carve-out that shields a routine return on the group's real presence in Bahrain, such as payroll and tangible assets, from the top-up. Adjusted covered taxes, the numerator of the ETR, are determined under the OECD GloBE rules.
| Parameter | Bahrain DMTT |
|---|---|
| Legal basis | Decree-Law No. 11 of 2024 (Official Gazette, September 2024) |
| Effective from | Financial years beginning on or after 1 January 2025 |
| Minimum rate | 15% effective tax rate |
| Scope test | Consolidated global revenue >= EUR 750 million in at least two of the four preceding fiscal years |
| Basis | Jurisdictional — all Bahrain constituent entities combined |
| Top-up formula | (15% - Bahrain ETR) x Excess Profits |
| Excess Profits | Net Constituent Entity Income - Substance-Based Income Exclusion |
| Excluded entities | Government bodies, international organisations, pension funds, and qualifying investment or real-estate vehicles that are ultimate parent entities |
Even with a historically zero headline rate, in-scope groups must now compute a Bahrain effective tax rate under the GloBE rules and fund any shortfall to 15% as a domestic top-up tax — a genuine cash cost, not a disclosure exercise.
What should in-scope groups do now?
In-scope groups should start by confirming status: does the group breach the EUR 750 million threshold, and which Bahrain entities are constituent entities? From there, the work is a data exercise — modelling the Bahrain ETR under the GloBE rules, mapping the financial data that feeds it, and designing a compliance and reporting framework with the governance to support it year on year. In practice, groups that settle the constituent-entity list before touching the numbers avoid reworking the whole ETR model when an entity is later added or overlooked.
Because the tax is driven by a GloBE effective tax rate, the quality of the underlying data matters as much as the rate itself. Intercompany pricing in particular flows directly into Bahrain's measured income, so groups should confirm that their transfer pricing positions hold up before they are tested through the ETR. Early modelling also shows whether the substance-based carve-out meaningfully reduces the base, and whether a top-up is likely at all.
Frequently asked questions
Who has to pay Bahrain's Domestic Minimum Top-Up Tax?
The DMTT applies to multinational enterprise groups with consolidated global revenue of at least EUR 750 million in at least two of the four preceding fiscal years that have constituent entities in Bahrain. Smaller groups and purely domestic Bahraini companies are outside its scope, as are excluded entities such as government bodies and pension funds.
When did the Bahrain DMTT take effect?
The DMTT applies to financial years beginning on or after 1 January 2025. It was enacted by Decree-Law No. 11 of 2024, published in the Official Gazette in September 2024, which gave in-scope groups a short window to prepare before the first affected year began.
How is the Bahrain top-up tax calculated?
If the group's Bahrain effective tax rate is below 15%, the top-up tax equals (15% - Bahrain ETR) multiplied by Excess Profits. Excess Profits are Net Constituent Entity Income less the Substance-Based Income Exclusion, and covered taxes are adjusted under the OECD GloBE rules.
Does the DMTT mean all Bahraini companies now pay corporate tax?
No. Bahrain has not introduced a general corporate income tax. The DMTT is a targeted top-up that applies only to large in-scope multinational groups; the vast majority of domestic businesses remain outside any corporate income tax.
How SBC Tax Consulting can help
SBC supports in-scope groups through Pillar Two impact assessments and Bahrain-specific ETR modelling, DMTT readiness reviews and gap analysis, GloBE data mapping and calculation support, and the design of a compliance and reporting framework. We also advise on governance and documentation so the position stays defensible year on year. Explore our international tax and corporate tax services, or contact our team to assess your Bahrain exposure.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.