Bh Transfer Pricing

---
name: bh-transfer-pricing
description: "Bahrain transfer pricing for the 2026 tax year. Bahrain has no general transfer pricing regime. This skill sets out the three rule sets that do exist: the arm's length adjustment, the five methods and the local file and master file under the Domestic Minimum Top-up Tax (DMTT) for multinational groups with revenue of EUR 750 million or more; country-by-country reporting under Ministerial Order No. 28 of 2021 (BHD 342 million threshold, notification, report, penalties); and the 46% hydrocarbon income tax, which has no arm's length clause. Use for \"transfer pricing Bahrain\", \"Bahrain local file\", \"Bahrain master file\", \"CbCR Bahrain\", \"CbC notification Bahrain\", \"arm's length Bahrain DMTT\", \"related party pricing Bahrain\" and APA or MAP questions. Out of scope: the full DMTT computation and other corporate taxes (bh-corporate-income-tax), residence, permanent establishment, withholding and treaty relief (bh-cross-border-tax), VAT (bahrain-vat)."
license: "AGPL-3.0-or-later (code) / OpenAccountants Guide License v1.0 (content)"
metadata:
  source: openaccountants
  openaccountants_url: "https://www.openaccountants.com/skills/bh-transfer-pricing"
  jurisdiction: "BH"
  tax_year: "2026"
  last_updated: "2026-10-29"
---

# Bahrain transfer pricing v0.1

**Draft law.** This skill states the law in force for 2026. A draft corporate income tax law went to the legislature on 29 December 2025. Secondary sources report fiscal years from 1 January 2027 and transfer pricing rules for residents above BHD 1 million ([KPMG, March 2026](https://kpmg.com/us/en/taxnewsflash/news/2026/03/tnf-bahrain-overview-of-draft-law-introducing-10-percent-corporate-income-tax.html)). We found no confirmation of enactment. Before advising on a period starting in 2027, check its status with the NBR.

Tax year 2026. Under the law in force for 2026, Bahrain has no general corporate income tax and no general
transfer pricing law. Transfer pricing rules exist in three places only, set out
below. Every rule here comes from the law or the National Bureau for Revenue
(NBR) guidance listed under Sources. The DMTT Law, its Executive Regulations and
the CbCR Order are read in English translations that the publishers mark
"unofficial"; the Arabic text in the Official Gazette governs.

## Who this applies to

**1. Multinational groups in scope of the DMTT.** The arm's length rule in
Bahrain binds Constituent Entities located in Bahrain, and Joint Ventures and
Joint Venture Subsidiaries located in Bahrain, of a Multinational Enterprise
Group that meets the Revenue Test: annual revenue of EUR 750 million or more in
the Consolidated Financial Statements of the Ultimate Parent Entity in at least
two of the four Fiscal Years immediately before the year (DMTT Law art. 3(A)-(C)).
The DMTT applies to Fiscal Years starting on or after 1 January 2025 (DMTT Law
art. 44; NBR DMTT FAQ 1.5). A Bahraini branch of a group member is a Permanent
Establishment and is in scope (NBR DMTT FAQ 2.4).

The related-party test is the accounting consolidation test, not a shareholding
percentage. A Constituent Entity is an Entity consolidated line by line by the
Ultimate Parent Entity; a Joint Venture is an Entity reported under the equity
method where the Ultimate Parent Entity holds at least 50% of its ownership
interests (NBR DMTT FAQ 2.9 and 2.11). The NBR DMTT Transfer Pricing Guide
calls these parties "related parties" (Guide section 1.2).

**2. Groups that must file country-by-country reports.** Ministerial Order
No. 28 of 2021 applies to every Multinational Enterprise (MNE) Group except an
Excluded MNE Group, meaning a group with total consolidated revenue of less than
BHD 342 million in the Fiscal Year immediately before the Reporting Fiscal Year
(Order art. 1(g)). It covers Ultimate Parent Entities resident in Bahrain,
including financial institutions licensed by the Central Bank of Bahrain, from
the Fiscal Year beginning 1 January 2021 (Order art. 2; CBB Directive
EDFIS/C/020/2021). Every Constituent Entity resident in Bahrain must notify
(Order art. 3). Only a Bahrain-resident Ultimate Parent Entity files the report
(Order art. 4).

**3. Hydrocarbon companies.** The Income Tax Law (Legislative Decree No. 22 of
1979) taxes bodies corporate directly engaged in exploration for or production
of crude oil or other natural hydrocarbons in Bahrain, or refining crude oil in
Bahrain, at 46% (art. 2). It has no arm's length or related-party clause. It
allows only "reasonable" costs and expenses (art. 4(a)-(b)), and where the
taxpayer's accounting method "does not fairly reflect the taxpayer's income" the
computation is made by a method that does (art. 7).

**Who is outside for 2026.** If a company is not in the hydrocarbon sector and belongs to
no group that meets the EUR 750 million DMTT Revenue Test, Bahrain law sets no
arm's length rule and no transfer pricing documentation for it. It still has a
CbCR notification duty if its group is an MNE Group with consolidated revenue
of BHD 342 million or more. Individuals have no transfer pricing obligations in
Bahrain.

## Rates, bands and thresholds

| Item | Rate or amount | Year | Source URL |
|---|---|---|---|
| DMTT Revenue Test (arm's length rule and local file/master file apply above it) | EUR 750 million or more in 2 of the 4 preceding Fiscal Years | Fiscal Years from 1 Jan 2025, incl. 2026 | https://www.nbr.gov.bh/laws_regulations/dmtt |
| DMTT Minimum Rate | 15% | 2026 | https://www.nbr.gov.bh/laws_regulations/dmtt |
| CbCR: Excluded MNE Group | Consolidated revenue under BHD 342 million in the preceding Fiscal Year | Fiscal Years from 1 Jan 2021, incl. 2026 | https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf |
| CbCR report deadline (Bahrain Ultimate Parent Entity) | 12 months after the last day of the Reporting Fiscal Year | 2026 | https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf |
| Transitional CbCR safe harbour, de minimis test | Bahrain revenue under EUR 10 million and profit before tax under EUR 1 million on the CbC report | Fiscal Years beginning on or before 31 Dec 2026 (none ending after 30 Jun 2028) | https://www.nbr.gov.bh/laws_regulations/dmtt |
| Transitional CbCR safe harbour, alternative ETR test | 16% (Fiscal Years beginning in 2025), 17% (Fiscal Years beginning in 2026) | 2025, 2026 | https://www.nbr.gov.bh/laws_regulations/dmtt |
| Master file supply chain description | Five largest products or services, plus any product or service of at least 5% of group turnover | 2026 | https://www.nbr.gov.bh/laws_regulations/dmtt |
| Local file and master file size threshold | None set: every in-scope Bahrain entity with an intra-group transaction prepares both | 2026 | https://www.nbr.gov.bh/laws_regulations/dmtt |
| Record retention, incl. transfer pricing documentation | 5 years after the end of the Fiscal Year | 2026 | https://www.nbr.gov.bh/publications/view/dmtt_procedural_guide |
| Hydrocarbon income tax | 46% | 2026 | https://www.lloc.gov.bh/Legislation/id/L2279 |

The two thresholds are different tests. The DMTT test is in euros and looks at
two of the four prior years (DMTT Law art. 3(C)). The CbCR test is in Bahraini
dinars and looks at the single preceding year (Order art. 1(g)). Check each one
separately.

## The taxable base

**Arm's length adjustment under the DMTT.** A Constituent Entity located in
Bahrain adjusts the amount recorded in its financial accounts so that each
transaction or arrangement with a group Constituent Entity located in a
different jurisdiction gives an arm's length outcome (Executive Regulations,
Decision No. 172 of 2024, art. 13(A)). The arm's length principle means
transactions are recorded "by reference to the conditions that would have been
obtained between independent enterprises in comparable transactions and under
comparable circumstances" (ER art. 1(33)). The adjustment changes the Constituent
Entity Income or Loss, which feeds the DMTT computation: Taxable Income is Net
Constituent Entity Income less the Substance-based Income Exclusion, and the tax
is the Additional Tax Rate (15% less the Effective Tax Rate) times Taxable Income
(DMTT Law art. 9(A)-(C)).

**Methods.** Use the most appropriate method for the facts, chosen from five,
applied consistently with the OECD Transfer Pricing Guidelines (ER art. 13(B)):

1. Comparable uncontrolled price.
2. Resale price.
3. Cost plus.
4. Transactional net margin.
5. Profit split.

**Advance pricing agreements.** Where the competent authorities have agreed a
bilateral or multilateral APA, the adjustment follows the APA price
(ER art. 13(C)).

**Domestic transactions.** Transactions between two Bahrain entities are outside
the transfer pricing requirements, except a sale or transfer of an asset (NBR
DMTT Transfer Pricing Guide, section 1.2). A loss on a sale or transfer of an
asset between group Constituent Entities located in Bahrain is adjusted to the
arm's length amount (ER art. 13(D)).

**Local file.** Each Constituent Entity located in Bahrain that is party to an
intra-group transaction prepares and maintains a local file and a master file
(ER art. 13(E)). The local file has 13 contents, including: the entity's
business and strategy and any restructuring; local management structure; each
intra-group transaction and counterparty; a comparability and functional
analysis; the comparables and the search strategy; comparability adjustments;
the transfer pricing policy; the method chosen and why, and the tested party;
copies of material intercompany agreements; existing APAs and rulings; the
annual accounts; and schedules tying the transfer pricing data to the accounts
(ER art. 13(F)).

**Master file.** The master file is prepared for each Fiscal Year (Guide
section 3.3) and has 11 contents: group structure chart; profit drivers; supply
chain for the five largest products or services and any above 5% of turnover;
important service arrangements; main markets; functional analysis; restructurings
in the year; intangibles strategy, list and policies and transfers; group
financing and the central financing entity; financing transfer pricing policies;
the consolidated financial statements; and unilateral APAs and rulings
(ER art. 13(G)).

**Country-by-country report.** This is an information return, not a tax base.
It shows, for each jurisdiction, revenue, profit or loss before income tax,
income tax paid and accrued, stated capital, accumulated earnings, employees
and tangible assets other than cash, and lists each Constituent Entity with its
residence and main activity (Order art. 5(a)). It follows the OECD template in
Annex III of Chapter V of the OECD Transfer Pricing Guidelines and the OECD
CbC XML Schema (Order art. 5(b)).

**Hydrocarbon income tax.** Income is gross income from sales of crude oil,
natural hydrocarbons and products less the deductions in article 4 (art. 1(d)).
Related-party costs are deductible only to the extent they are reasonable
(art. 4(a)-(b)), and the computation follows a method that fairly reflects
income (art. 7). The Minister may dispute a declaration that is not certified by
an approved accounting firm (art. 9).

## Deadlines and filing

| Obligation | Who | Deadline | Where | Source |
|---|---|---|---|---|
| CbCR notification: is the entity the Ultimate Parent Entity, and if not, who is the Reporting Entity and where it is resident | Every Bahrain-resident Constituent Entity of an MNE Group that is not excluded | Last day of the Reporting Fiscal Year | Ministry of Industry and Commerce, by email to es@moic.gov.bh | Order art. 3(a); NBR Action 13 page |
| Country-by-country report | Bahrain-resident Ultimate Parent Entity | 12 months after the last day of the Reporting Fiscal Year | NBR International Tax Information Exchange System (ITIES), https://ities.nbr.gov.bh | Order art. 4; NBR Action 13 page; MOIC Circular FAEI/11/MSJ/2021 |
| DMTT Tax Return, which carries the arm's length adjustments | Filing Constituent Entity | 15 months after the last day of the Reporting Fiscal Year | NBR | ER art. 66(A) |
| Local file and master file | Each in-scope Bahrain entity with intra-group transactions | No filing date. Prepare for each Fiscal Year and hand over on request within the period the NBR sets | Kept by the entity | ER art. 13(E); DMTT Law art. 25(B); Guide section 3.3 |
| Keep transfer pricing documentation | Each in-scope Bahrain entity | 5 years after the end of the Fiscal Year | Kept by the entity | ER art. 75(A); DMTT Administrative Guide section 10.1 |
| Hydrocarbon estimated income tax declaration | Hydrocarbon taxpayer | 15th day of the third month of the taxable year | Minister of Finance and National Economy | Income Tax Law art. 8 |

There is no transfer pricing disclosure form in Bahrain. The Ministry may set
the form of the CbCR notification and may extend the notification deadline
(Order art. 3). The NBR page (updated 25 October 2026) sends notifications to
the Ministry by email; the 2021 MOIC circular had asked for both the report and
the notification on ITIES. Use the NBR page route for notifications and file the
report on ITIES. An entity must register as an ITIES user before it can file
(NBR Action 13 page).

## Penalties and interest

**CbCR.** A breach of the Order is punished under article 20 of Legislative
Decree No. 27 of 2015 on the Commercial Register (Order art. 7). The Ministry
first orders the entity, by a reasoned decision, to stop the breach. If the
entity does not comply within the period set, the Ministry may impose one of
these (art. 20(a)):

| Measure | Amount |
|---|---|
| Suspend the commercial registration | Up to 6 months |
| Daily fine, first breach | Up to BHD 1,000 a day |
| Daily fine, further breach within 3 years | Up to BHD 2,000 a day |
| Cap on the total daily fine | BHD 50,000 |
| Single administrative fine | Up to BHD 100,000 |
| Delete the commercial registration | Where the breach relates to the registration |

**DMTT documentation.** Failing to keep records in a regular manner, or failing
to provide requested documents, or providing them late, carries a fine of up to
BHD 50,000 (DMTT Law art. 28(B)(1), (3) and (4)).

**DMTT under-declaration from wrong transfer prices.** Incorrect data in the Tax
Return that lowers the tax carries a fine of up to 30% of the tax that should
have been declared, or up to 20% if the taxpayer voluntarily files a correct
amended return (DMTT Law art. 28(A)(4)). The NBR says no fine applies if the
correct amended return is filed within the original filing deadline (DMTT FAQ
8.4). Late payment costs 1% of the unpaid tax for each month or part of a month,
capped at 70% of the tax due (art. 28(A)(3)). There is no separate interest
charge.

**Hydrocarbon income tax.** Failing to file a declaration or pay on time adds a
fine of 1% for each 30 days or part of 30 days (art. 8). A taxpayer whose records
are falsified or who makes a false statement is liable to a fine of up to 500
dinars on conviction (art. 12).

## Cross-border points

- **Which transactions.** The DMTT arm's length adjustment targets transactions
  with group entities located in other jurisdictions (ER art. 13(A)). The only
  domestic rule is the asset-transfer loss rule (ER art. 13(D)).
- **Disputes and corresponding adjustments.** Bahrain has 51 double taxation
  treaties in force (NBR Tax Treaties Network page). Every one has a mutual
  agreement procedure (MAP) article, and the NBR grants MAP access for transfer
  pricing cases (NBR MAP Guidance). Where a treaty sets no time limit, the
  Bahrain competent authority applies a 3-year limit. Requests go to
  Competent.Authority@nbr.gov.bh.
- **APAs.** No Bahrain law or NBR guide sets an application procedure for a
  unilateral, bilateral or multilateral APA. The Executive Regulations only
  require the DMTT adjustment to follow a bilateral or multilateral APA that the
  competent authorities have agreed (ER art. 13(C)).
- **CbC report exchange.** Bahrain is a non-reciprocal jurisdiction: it sends
  CbC reports filed by Bahrain Ultimate Parent Entities to partner
  jurisdictions but does not receive reports (NBR Action 13 page). The
  Multilateral Competent Authority Agreement on CbC reports entered into force
  for Bahrain on 28 January 2021 (NBR Tax Treaties Network page).
- **CbC data and the DMTT.** For Fiscal Years beginning on or before
  31 December 2026, the DMTT is deemed zero if the group's CbC report meets the
  de minimis test, the alternative ETR test or the routine profits test for
  Bahrain (DMTT Law art. 13(A)). An accurate CbC report for Bahrain therefore
  decides whether any DMTT is due.
- **Withholding, residence and treaty relief** are in bh-cross-border-tax.

## Worked examples

### 1. Services charged at cost to a foreign group company

A Bahrain company is a Constituent Entity of a group that meets the EUR 750
million Revenue Test. In 2026 it provides support services to a group company in
another country and charges its costs of BHD 2,000,000 with no markup. Its
benchmarking supports an 8% markup on costs; **8% is an assumed result for this
example, not a Bahrain rate**. Under ER art. 13(A)-(B) (cost plus method), the
arm's length charge is BHD 2,160,000, so Constituent Entity Income rises by
BHD 160,000. Assume Bahrain has no Covered Taxes for this group (Effective Tax
Rate 0%), Net Constituent Entity Income before the adjustment of BHD 500,000 and
a Substance-based Income Exclusion of BHD 300,000. Taxable Income becomes
BHD 360,000 and the DMTT is 15% of that, BHD 54,000 (DMTT Law art. 9). The
adjustment alone adds BHD 24,000 of DMTT.

```oa-check
name: Bahrain DMTT arm's length adjustment on cost-only services
inputs:
  costs: 2000000
  assumed_markup: 0.08
  charged: 2000000
  net_income_before: 500000
  sbie: 300000
  minimum_rate: 0.15
  etr: 0
steps:
  arm_length_charge: costs * (1 + assumed_markup)
  adjustment: max(0, arm_length_charge - charged)
  net_income_after: net_income_before + adjustment
  taxable_income: max(0, net_income_after - sbie)
  top_up_rate: minimum_rate - etr
  dmtt: top_up_rate * taxable_income
  dmtt_from_adjustment: top_up_rate * adjustment
expected:
  arm_length_charge: 2160000
  adjustment: 160000
  net_income_after: 660000
  taxable_income: 360000
  dmtt: 54000
  dmtt_from_adjustment: 24000
```

### 2. Loss on an asset sold between two Bahrain group companies

Two Bahrain companies in the same in-scope group trade with each other.
Domestic transactions are normally outside the transfer pricing rules, but an
asset transfer is not (Guide section 1.2). Company A sells equipment with a
carrying value of BHD 1,000,000 to Company B for BHD 400,000 and books a loss of
BHD 600,000. An independent valuation puts its arm's length value at
BHD 900,000. Under ER art. 13(D) the loss is adjusted to the arm's length loss
of BHD 100,000, so BHD 500,000 is added back to Company A's Constituent Entity
Income. Had the sale been at a gain, article 13(D) would not apply, because it
reaches losses only.

```oa-check
name: Bahrain domestic asset transfer loss adjusted to arm's length
inputs:
  carrying_value: 1000000
  sale_price: 400000
  arm_length_value: 900000
steps:
  recorded_loss: max(0, carrying_value - sale_price)
  arm_length_loss: max(0, carrying_value - arm_length_value)
  add_back: recorded_loss - arm_length_loss
expected:
  recorded_loss: 600000
  arm_length_loss: 100000
  add_back: 500000
```

## Ask the client first

- What was the group's consolidated revenue in each of the four prior Fiscal
  Years (for the EUR 750 million DMTT test) and in the year just before the
  reporting year (for the BHD 342 million CbCR test)?
- Which group entity is the Ultimate Parent Entity, where is it resident, and
  has the group named a Reporting Entity for CbCR?
- Which Bahrain companies, branches and joint ventures does the group have, and
  what does the UPE own of each joint venture?
- What intra-group transactions does each Bahrain entity have, with which
  countries, and are any of them asset sales between Bahrain entities?
- Does the group's CbC report for Bahrain show revenue under EUR 10 million and
  profit under EUR 1 million, or an alternative ETR of 17% or more for 2026?
- Does any Bahrain entity explore for, produce or refine hydrocarbons, and are
  there foreign APAs, foreign transfer pricing adjustments or open MAP cases?

## Sources

| Source | URL | Read on |
|---|---|---|
| Decree-Law No. 11 of 2024 (DMTT Law), arts. 1, 3, 5, 9, 13, 25, 28, 44 (NBR unofficial English) | https://www.nbr.gov.bh/laws_regulations/dmtt | 2026-10-29 |
| Decision No. 172 of 2024, DMTT Executive Regulations, arts. 1(33), 13, 66, 75 (NBR unofficial English) | https://www.nbr.gov.bh/laws_regulations/dmtt | 2026-10-29 |
| NBR DMTT Transfer Pricing Guide, version 1.0, June 2026, sections 1.2 and 3 | https://www.nbr.gov.bh/publications/view/dmtt_transfer_pricing_guide | 2026-10-29 |
| NBR DMTT Administrative Guide, version 1.1 (2 July 2025), section 10.1 | https://www.nbr.gov.bh/publications/view/dmtt_procedural_guide | 2026-10-29 |
| NBR DMTT FAQs 1.5, 2.4, 2.9, 2.11, 8.4 | https://www.nbr.gov.bh/dmtt_faqs | 2026-10-29 |
| Ministerial Order No. 28 of 2021 concerning Country-by-Country Reporting (Sijilat unofficial English) | https://www.sijilat.bh/temp/CommercialLaws/18%20EN.pdf | 2026-10-29 |
| Ministerial Order No. 28 of 2021, Arabic, Official Gazette No. 3509 of 4 February 2021 | https://www.sijilat.bh/temp/CommercialLaws/18%20AR.pdf | 2026-10-29 |
| Legislative Decree No. 27 of 2015 on the Commercial Register, art. 20 (Arabic) | https://www.sijilat.bh/temp/CommercialLaws/6.docx | 2026-10-29 |
| CBB Directive EDFIS/C/020/2021, 21 March 2021 | https://www.cbb.gov.bh/wp-content/uploads/2021/03/Directive-on-CbCR-Reporting.pdf | 2026-10-29 |
| MOIC Circular FAEI/11/MSJ/2021, 30 December 2021 | https://www.nbr.gov.bh/media/MOIC_Circular_FAEI_11_MSJ_2021 | 2026-10-29 |
| NBR, Action 13 (Country-by-Country Reporting) | https://www.nbr.gov.bh/FTR/bebs_projects/action_thirteen | 2026-10-29 |
| NBR, Tax Treaties Network | https://www.nbr.gov.bh/FTR/bahrain_tax_treaties_network | 2026-10-29 |
| NBR, Guidance on Mutual Agreement Procedure, version 1.1 | https://www.nbr.gov.bh/publications/view/Bahrains_Mutual_Agreement_Procedure_MAP_Guidance | 2026-10-29 |
| Legislative Decree No. 22 of 1979, Income Tax Law, arts. 1, 2, 4, 7, 8, 9, 12 (LLOC English) | https://www.lloc.gov.bh/Legislation/id/L2279 | 2026-10-29 |

Not yet confirmed: whether the draft corporate income tax law has been enacted, and its final terms; whether the NBR accepts unilateral or bilateral APA requests
(no published procedure); the deadline the NBR sets when it requests a local
file or master file (set case by case under DMTT Law art. 25(B)); whether the
NBR has prescribed a form or language for the local file and master file under
ER art. 13(E); the treatment of the buyer's asset value in a domestic asset
transfer under ER art. 13(D); the CbCR notification deadlines the Ministry has
set or extended for each year after 2021.

## Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-10-29. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `bh-transfer-pricing` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/bh-transfer-pricing. If neither is available, confirm every figure against the official source pages cited above before relying on it.