KPMG in Bahrain highlights the potential benefits and challenges that businesses in Bahrain need to prepare for with the implementation of Corporate Income Tax and E-Invoicing

Over 120 senior business leaders representing a range of sectors in the Kingdom of Bahrain attended a seminar hosted by KPMG in Bahrain on the introduction of Corporate Income Tax (CIT) in the United Arab Emirates (UAE) and the potential implementation of CIT and ‘E-Invoicing’ in Bahrain. 

Held under the theme “The evolving Tax landscape in Bahrain and the UAE”, the event highlighted the implication of the CIT on Bahraini businesses with operations and transactions in the UAE. The UAE Ministry of Finance recently published the new federal CIT law which will be effective for the financial year commencing on or after 1 June 2023.  

Wassim Chahine, Partner and Head of Corporate Tax, at KPMG Lower Gulf spoke about the key features of the UAE CIT stating: “CIT in the UAE is based on global tax principles and includes concepts such as Corporate Tax grouping; ability to carry forward tax losses; participation exemption; and the requirement for UAE entities to comply with Transfer Pricing laws. The new law impacts Bahraini businesses that have operations and transactions in the UAE as well as Bahrain registered entities that may have their management and controls based in the UAE. I believe this is an opportune time for Bahraini businesses to also prepare for the imminent introduction of CIT in the Kingdom. If Bahrain does not roll out CIT, this may lead to Bahrain missing out on tax revenue, which in turn may end up being taxed in another jurisdiction due to the introduction of the Global Minimum Tax under BEPS Pillar II”.

During the event, Shashank Chandak, Manager, KPMG in Bahrain, explained what companies need to consider with the potential introduction of ‘E-Invoicing’. Bahrain’s National Bureau for Revenue (NBR) is considering the launch of ‘E-Invoicing’ after having invited proposals from consultants to assist them with the relevant legal framework, in addition to holding a series of focus group sessions with large Bahrain based taxpayers. As Bahrain has not made any formal announcement in relation to the introduction of E-invoicing, Shashank highlighted the technical E-invoicing requirements based on the rules introduced in the Kingdom of Saudi Arabia (KSA). He commented: "Businesses can start preparing now by conducting a gap analysis based on the KSA rules and general principles of E-invoicing.”

Mubeen Khadir, Partner and Head of Tax and Corporate Services at KPMG in Bahrain commented during the seminar and said “Following in the footsteps of the Kingdom of Saudi Arabia (KSA), Bahrain is likely to make an announcement on the introduction of E-invoicing in the next six months with the possible implementation in 2024 or 2025. Once announced, this development will require significant changes to the existing ERP systems and deploying an E-invoicing solution to allow the issue of tax compliant E-invoices.”   

Mubeen also stated that businesses in Bahrain need to consider taking early steps on the potential introduction of Corporate Tax. He commented, “given that it’s a question of ‘when’, and not ‘if’ in relation to Bahrain introducing Corporate Tax, it would be prudent for businesses leaders to look at their current structures for tax leakages and implement robust policies around the demarcation between private vs businesses expenses, especially for family businesses. 

The seminar took place on Wednesday, 8 March 2023 at the Downtown Rotana hotel. 

KPMG in Bahrain is a member firm of KPMG international. The firm was established in 1968 as the first national accounting and auditing firm, and it has grown to be one of the largest professional services firms in the country.  The firm provides Audit, Tax and Advisory services to a wide array of clients operating in different sectors, utilizing the in-depth technical and industry experience of its’ professional staff.