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March 15, 2021

Bahrain introduces Country-by-Country Reporting

Executive summary

The Kingdom of Bahrain (Bahrain) has introduced Country-by-Country (CbC) Reporting (CbCR) requirements.

The new requirements apply to all businesses that have a legal entity or branch in Bahrain and are members of a multinational enterprise (MNE) group with annual turnover of BHD342m (approximately US$907m).

The CbCR rules are effective for fiscal years beginning on or after 1 January 2021. Affected entities will need to submit a CbCR notification before the last day of the fiscal year and submit the first CbC report 12 months after the last day of the fiscal year end.

Detailed discussion


In May 2018, Bahrain became a member of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Inclusive Framework, committing Bahrain to align with the international tax framework, and implement the BEPS minimum standards.

One of the minimum standards is CbCR, which is covered in Action 13. It introduces a requirement for MNE groups to file a CbC report, setting out financial information for each tax jurisdiction where the group has a presence. The objective of a CbC report is for tax authorities to assess high-level risks related to transfer pricing and BEPS for MNE groups.

In addition, Bahrain became a signatory to the Multilateral Competent Authority Agreement (MCAA) on the exchange of CbC reports in December 2019, which provides a mechanism for the automatic exchange of CbC reports among members. Bahrain ratified the MCAA on the exchange of CbC reports in January 2021.

Bahrain CbCR rules

On 4 February 2021, Bahrain issued Ministerial Decision No. 28 of 2021, which introduces CbCR rules for MNE groups operating in Bahrain. Broadly, the resolution is in line with the OECD Model Legislation set out in the Action 13 report and Annex III of Chapter V of the OECD Transfer Pricing Guidelines.

Under the new rules, an entity or branch located in Bahrain is required to file a CbC report and/or CbCR notification in Bahrain, if it is a member of an MNE group that had at least BHD342m consolidated group revenue in the preceding fiscal year. The new reporting requirements apply to fiscal years beginning on or after 1 January 2021. An entity subject to the CbCR rules is referred to as a Constituent Entity.

Filing requirements

A Bahraini Constituent Entity will be required to submit a notification no later than the last day of the reporting fiscal year of the MNE group. This notification should identify whether the Constituent Entity is the Ultimate Parent Entity (UPE) of the MNE group. If the Constituent Entity is not the UPE, the notification shall include the identity and tax residence of the Reporting Entity. For MNE groups with a 31 December 2021 fiscal year end, the first Bahrain notification deadline will be 31 December 2021.

A Bahraini Reporting Entity (i.e., UPE) must file its CbC report no later than 12 months after the last day of the reporting fiscal year of the MNE group. For MNE groups with a 31 December 2021 fiscal year end, the first Bahrain filing deadline will be 31 December 2022.

Further guidance is expected to be provided by the Ministry of Industry, Commerce and Tourism (MOICT) in respect of the format and submission process of the CbC notification.

Penalties for non-compliance

Failure to comply with the CbCR obligations set out in the ministerial decision may result in penalties being levied in the form of administrative fines not exceeding BHD100,000 and/or suspension of commercial registration of the company for a period not exceeding six months.

Next steps

MNE groups with operations in Bahrain should assess if they are subject to CbCR notification and filing requirements under the new rules and, if so, review their CbCR processes to ensure compliance with CbCR requirements in all relevant jurisdictions.


For additional information with respect to this Alert, please contact the following:

Ernst & Young — Middle East, Manama

Ernst & Young LLP (United States), Middle East Tax Desk, New York