GTL Summary:

Article 8 details the formula for calculating the Effective Tax Rate (ETR) for Constituent Entities within the Kingdom. The ETR is determined by dividing the aggregate Adjusted Covered Taxes by the Net Constituent Entity Income for all members of the same MNE Group located in Bahrain. Pursuant to Paragraph C, Adjusted Covered Taxes and income from investment entities are excluded from this specific calculation. Stateless Constituent Entities must calculate their ETR separately. The Regulations will provide additional controls for minority-owned entities and multi-parented groups, maintaining consistency with the OECD Pillar Two Model Rules and providing a transparent mechanism for top-up tax assessment.

Document Type: Tax Law Article
Law: DMTT Law (Decree Law No. 11 of 2024)
Article Number: 8
Country: 🇧🇭 Bahrain
Location: Chapter 3 - Effective Tax Rate and Safe Harbour
Order: 8
Last updated at: 2026-02-23 12:13:40 UTC

Chapter 3 - Effective Tax Rate and Safe Harbour

Article 8 - Computation of the Effective Tax Rate

  1. The Effective Tax Rate for Constituent Entities located in the Kingdom and which are members of the same Multinational Enterprise Group shall be calculated according to the following formula:

    (Adjusted Covered Taxes for Constituent Entities located in the Kingdom)(Net Constituent Entity Income)

  2. The Net Constituent Entity Income referred to in Paragraph A of this Article means, the positive sum, if any, of the aggregate Constituent Entity Income of the Constituent Entities located in the Kingdom and the aggregate Constituent Entity Loss of the Constituent Entities located in the Kingdom.

  3. For the purposes of applying Paragraph A of this Article, the Adjusted Covered Taxes and Constituent Entity Income or Loss of investment entities shall be excluded from the computation of the Effective Tax Rate.

  4. The Effective Tax Rate for a Stateless Constituent Entity shall be calculated, for each Fiscal Year, separately from the Effective Tax Rate of other Constituent Entities.

  5. The Regulations shall prescribe the rules, conditions, and controls necessary for the application of the provisions of this Article, in addition to rules related to the computation of the Effective Tax Rate for minority-owned Constituent Entities, multi-parented Multinational Enterprise Group, investment entities and insurance investment entities. The Regulations shall also prescribe other matters 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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Article 7 - Covered Taxes and Adjusted Covered Taxes
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Article 9 - Computation of the Tax
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