Transfer Pricing
Country Summary
Bahrain
This document summarizes the transfer pricing requirements and regulations in Bahrain. Bahrain is not a member of the OECD and lacks domestic transfer pricing regulations. However, Bahrain has taken steps to align with international tax frameworks. They joined the OECD’s BEPS Inclusive System in 2018, committing to implement BEPS minimum criteria. Country-by-Country Reporting (CbCR) rules, following OECD guidelines, have been introduced as of 2021. Bahrain is part of the BEPS Inclusive Framework and signed agreements for the automatic exchange of CbC reports. It recognizes the importance of OECD’s ‘arm’s length concept’ for valuing related party transactions. Bahrain is also included in a list of non-EU tax havens.
Overview:
Bahrain and International Tax Commitments
Bahrain is not currently a member of the OECD and lacks domestic transfer pricing regulations. Nevertheless, it has taken significant steps to align with international tax standards. In 2018, Bahrain joined the OECD’s BEPS Inclusive System, demonstrating its commitment to implementing BEPS minimum criteria.
Introduction of CbCR Rules
Effective from January 2021, Bahrain introduced Country-by-Country Reporting (CbCR) rules, which follow the guidelines outlined in the OECD Action 13 report and Annex III of Chapter V of the OECD Transfer Pricing Guidelines. These rules apply to businesses or branches in Bahrain that are part of a Multinational Enterprise (MNE) group with consolidated revenues exceeding BHD342 million in the previous fiscal year.
BEPS Inclusive Framework
Bahrain’s adherence to the BEPS Inclusive Framework signifies its commitment to implementing BEPS minimum standards. The country also signed agreements in 2019 for the automatic exchange of CbC reports, further enhancing its alignment with international tax regulations.
Recognizing the Importance of ‘Arm’s Length’
Bahrain’s value-added tax statute acknowledges the significance of the OECD’s ‘arm’s length concept’ for valuing transactions between related parties. This highlights the importance of well-documented intercompany transfer pricing agreements.
Notable Mention in Tax Havens List
It’s worth noting that Bahrain was included in a list of 17 non-EU tax havens by European Union ministers. This reflects the global effort to combat tax avoidance and its growing recognition as a moral issue.