This is so because Bahrain is one of those countries that are characterized by low level of taxation and hence it is easy for an expatriate to decide whether or not to migrate to Bahrain. Here’s an overview of the key aspects of Bahrain’s tax system that expats should be aware of:
Personal Income Tax
There exist no taxed personal income on salaries wages and any other personal income and the Bahrain government does not impose it. This is a situation that has not implemented income tax in Bahrain and anyone who has been paid for the services he or she offers in this country, is paid in full.
Corporate Tax
There are many types of legal persons who are not subject to corporate taxation, but rather pay other taxes. However this is not a global tendency as taxes in the oil and gas industry are at a 46% average.
Social security contributions
While the employer is bound by the legal obligation to contribute 12 percent of the employee’s wage to the social insurance, the employee’s contribution is 7 percent.
For Non-Bahraini Nationals: It is 3% of the non – Bahraini employees’ basic salary for the employers although the employees contribute nothing towards the scheme.
Zakat and religious taxes
It is also important to point out that taxes like the Zakat which the Islamic followers in Bahrain are supposed to pay does not point an accusation to the Bahrainian authority based on the religion of the population of Bahrain.
Custom duties
One of the GCC member countries that have implemented CETs is Bahrain and the current account balance is US$2. These are averagely set at 5% for the imported goods but vary according to the type of good being imported.
Other Taxes
They include:
Excise Tax
It was established in 2017 and partially implemented to some of the products including; 100% on implementation on tobacco goods, 100% and 50% for the energy and carbonated drinks products.
Municipal Tax
In addition to that the municipal tax is also charged at the rate of 10 percent on the rental income earned through residential premises.
Double Taxation Agreements (DTAs)
An individual has to part with taxes to both Bahrain and his home country on the basis of the income earned Bahrain has double taxation avoidance treaties with the following countries.
Tax Residency
It has already been noted that Bahrain has no laws concerning the personal income taxes. accordingly, it has no laws on tax residency in the country either. The following is a list of residency requirements that expats do not need to meet in order to pay taxes. But these conditions do not apply to expats in order to liberate them from the payment of taxes.
Residency requirements for expats
Practical considerations for Expats here include:
Banking and financial management
The expats should be educated on how to handle their money whether to save or invest as they get tax free income.
Consult a tax advisor
The complex tax matters are those, which relate to the expatriates who earn their income in other countries or where they face some difficulties in the systems of taxation. in this case, one needs to address a tax advisor who should be familiar with the Bahrain tax law as well as the law of the country of origin of the expatriate.
Stay Informed
The reader should also be informed that taxes can be reviewed from time to time, this is why it is necessary to touch upon the current tax legislation of Bahrain.
Conclusion
At the moment it can be said that Bahrain has rather liberal taxation policy in respect of the foreign investors, individuals are not taxed on their income and the levels of indirect taxes are also comparatively low. It is therefore advisable that one should at least get to know some of the tax systems that will enable one to ensure that the expats get all they need while in Bahrain.
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