Mubeen Khadir, Partner and Head of Tax and Corporate Services at KPMG in Bahrain, highlights that it is critical for key stakeholders at Bahrain businesses to keep track of the latest developments on the introduction of Corporate Income Tax (CIT) in Bahrain, and how the introduction of CIT in the United Arab Emirates (UAE) may impact their operations.
Historically, Bahrain businesses have been operating in a tax-free environment so the introduction of a CIT will require business leaders to significantly rethink their strategy to ensure they are not adversely impacted which may lead to negative financial and commercial implications for their business.
“With the UAE implementing CIT from 1 June 2023, we have entered a new era for tax in the region – Bahrain is currently the only GCC country without a broad-based CIT. The introduction of a CIT in Bahrain is no longer a question of ‘IF’ but ‘WHEN’ it will happen.” Mubeen explained.
He stated: “Given the Bahrain CIT is likely to apply to all commercial activities with limited exclusions, this will be a paradigm shift for Bahrain businesses. Key stakeholders in Bahrain businesses will need to ensure their business and systems are ready for the introduction of CIT.”
The Kingdom of Bahrain has already implemented initiatives to diversify its’ economy and reduce its reliance on oil revenues in recent years. CIT, when implemented, will be a significant step towards achieving these goals and is expected to contribute to the country's long-term economic growth and stability.
“Bahrain businesses have an opportunity to learn from the recent UAE implementation and should be conducting, at least, a preliminary analysis of the potential impact CIT could have on their business operations. This includes, reviewing their current legal structure, processes, contracts, and transactions and take practical steps to mitigate any adverse consequences when CIT is introduced in Bahrain.” Mubeen stated.
