The 2025–2026 budget approved in March 2025 outlined plans to implement a broad corporate tax, and the upcoming Bahrain CIT is expected to include specific provisions related to capital gains tax and transitional rules.
On 29 December 2025, the Bahraini Cabinet approved the introduction of Corporate Income Tax (“CIT”) in Bahrain, with implementation anticipated from 2027. Based on the Cabinet’s announcement, Bahrain is expected to introduce a 10% CIT applicable to businesses that meet either of the following thresholds:
- Annual revenues exceeding BHD 1 million, or
- Net annual profits exceeding BHD 200,000.
What is CIT?
Corporate Income Tax (CIT) is a direct tax levied on taxable income earned by a taxable person during a financial year. CIT is generally assessed through an annual tax return and may be subject to audit by the tax authority. In Bahrain, taxable persons could include companies, establishments, branches of foreign entities, and individuals whether or not commercially registered-who are considered to be carrying on a business.
Capital gains on the disposal of assets are expected to be taxable, with potential exemptions subject to meeting conditions (for example, group restructuring). Transitional provisions should prevent taxation of gains generated prior to CIT go-live.
Alert: With CIT on the horizon, businesses should act in three phases: first, assess the impact on your current structure, operations, and related-party transactions; then, once regulations are released, address transitional rules, tax accounting adjustments, and ERP readiness; and finally, get your administration in order, covering tax registration, filing processes, transfer pricing documentation, and audit preparedness.
