GTL Summary:

Article 5 establishes the criteria for determining the jurisdictional location of entities and permanent establishments for tax purposes. An entity is typically located where it is a tax resident based on management or creation. For flow-through entities, the location is generally the jurisdiction of establishment, provided specific conditions under Paragraph B are met; otherwise, they are treated as stateless. Article 5 also clarifies that entities incorporated in Bahrain or managed effectively from within the Kingdom are deemed tax residents. These rules ensure consistency with OECD Pillar Two standards regarding the allocation of taxing rights and the prevention of stateless constituent entities.

Document Type: Tax Law Article
Law: DMTT Law (Decree Law No. 11 of 2024)
Article Number: 5
Country: 🇧🇭 Bahrain
Location: Chapter 2 - Scope and Imposition of the Tax
Order: 5
Last updated at: 2026-02-23 12:13:40 UTC

Chapter 2 - Scope and Imposition of the Tax

Article 5 - Entity Location

  1. The location of an Entity that is not considered a Flow-through Entity shall be as follows:

    1. The jurisdiction in which the Entity is a tax resident based on its place of management, place of creation, or any other similar criteria.

    2. The jurisdiction in which the Entity is created, where Clause 1 of this Paragraph shall not apply.

  2. The location of an Entity that is considered a Flow-through Entity is the jurisdiction in which it is established, provided that one of the following conditions is met:

    1. It is the Ultimate Parent Entity of the Multinational Enterprise Group.

    2. Under the laws applicable in the jurisdiction, the Entity is required to apply rules consistent with the Income Inclusion Rule (IIR) in accordance with the Model Rules, administrative guidance, and commentary issued by the Organisation for Economic Co-operation and Development (OECD).

  3. An Entity that is considered a Flow-through Entity and shall not fall under Clauses 1 and 2 of Paragraph B of this Article shall be treated as a Stateless Constituent Entity.

  4. The Kingdom shall be the location of a Permanent Establishment if it has a place of business or a deemed place of business in the Kingdom in accordance with the rules and conditions specified by the Regulations. Otherwise, the Permanent Establishment shall be considered as a Stateless Constituent Entity.

  5. For the purposes of applying the provisions of this Law, an Entity that has a legal personality is considered a tax resident in the Kingdom if it is incorporated or established in accordance with the Kingdom's laws, or if it is incorporated or established under the laws applicable in a foreign jurisdiction and has its place of effective management in the Kingdom.

  6. The Regulations shall prescribe the rules and controls necessary to implement the provisions of this Article, particularly regulating matters related to Constituent Entities that are located in more than one jurisdiction and the change of a Constituent Entity's location within a Fiscal Year, in a manner consistent with the Model Rules, administrative guidance, and commentary issued by the Organisation for Economic Co-operation and Development (OECD).

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