GTL Summary:

Article 10 introduces the Substance-based Income Exclusion (SBIE), which allows MNEs to reduce their taxable income based on tangible economic activity in Bahrain. The exclusion is calculated as the sum of specific percentages of payroll costs and the carrying value of certain tangible assets located within the Kingdom. According to the text, payroll costs are excluded at a rate between 5% and 9.6%, while tangible assets are excluded at a rate between 5% and 7.6%. These percentages and the specific rules for their application are further defined in the Regulations to ensure alignment with OECD Pillar Two international standards.

Document Type: Tax Law Article
Law: DMTT Law (Decree Law No. 11 of 2024)
Article Number: 10
Country: 🇧🇭 Bahrain
Location: Chapter 3 - Effective Tax Rate and Safe Harbour
Order: 10
Last updated at: 2026-02-23 12:13:40 UTC

Chapter 3 - Effective Tax Rate and Safe Harbour

Article 10 - Substance-based Income Exclusion

  1. The Substance-based Income Exclusion for a Fiscal Year shall be the sum of the following:

    1. Certain payroll costs incurred by Constituent Entities located in the Kingdom, with a maximum of (9.6%) and a minimum of (5%) of those payroll costs.

    2. The carrying value of certain tangible assets of Constituent Entities located in the Kingdom at the end of the Fiscal Year, with a maximum of (7.6%) and a minimum of (5%) of the carrying value of those assets.

  2. The Regulations shall prescribe additional rules, conditions and controls necessary for the application of the provisions of this Article in addition to rules for computing the Substance-based Income Exclusion and other matters in a manner consistent with the Model Rules, administrative guidance, and commentary issued by the Organization for Economic Co-operation and Development (OECD).

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