Executive summary

In June 2026, Bahrain's National Bureau for Revenue (NBR) issued the Domestic Minimum Top-up Tax (DMTT) Transfer Pricing (TP) Guide Version 1.0 (Guide), providing general guidance on the application of TP principles under Bahrain's DMTT framework.

The Guide provides general guidance on the application of TP rules and outlines the application of the arm's-length principle, comparability analysis, TP methods and TP documentation expectations for Bahrain DMTT in-scope multinational enterprise (MNE) groups.

Further, the Guide indicates that MNE groups should refer to the Organisation for Economic Co-operation and Development(OECD) TP Guidelines for further guidance.

In the context of TP documentation, the Local File should document all relevant transactions, including cross-border transactions and, where relevant, domestic transactions that fall within the scope of the TP requirements (i.e., asset sales or transfers resulting in a loss). The Master File should provide a broader overview of the MNE group's global operations and TP policies.

The Guide is intended to provide general guidance only, is not legally binding, is not exhaustive and should be read in conjunction with the DMTT Law and Executive Regulations.

Detailed discussion

Background

Bahrain introduced the DMTT through Decree-Law No. (11) of 2024 together with Executive Regulations, issued pursuant to Decision No. (172) of 2024. Article 13 of the Executive Regulations, specifically introduces TP provisions, including the application of the arm's-length principle and TP documentation requirements.

The Guide has now been issued to provide administrative guidance on these TP matters relevant to the DMTT framework. The Guide should be read together with the DMTT Law, Executive Regulations, OECD Model Rules, Administrative Guidance and OECD TP Guidelines.

Highlights of the Guide

The Guide is closely aligned with the OECD TP Guidelines for MNEs and tax administrations (2022). It confirms that the OECD framework serves as guidance for applying the arm's-length principle, including in relation to comparability analysis, TP methodologies and documentation requirements under the DMTT framework.

If specific guidance is not provided, the OECD TP Guidelines are expected to apply. This update reinforces Bahrain's alignment with internationally accepted TP standards and provides greater certainty for MNE groups that have implemented OECD consistent TP policies.

The Guide recognizes the full range of OECD endorsed TP methods, including the Comparable Uncontrolled Price (CUP), Resale-Price Method (RPM), Cost-Plus Method (CPM), Transactional Net-Margin Method (TNMM) and Profit-Split Method (PSM).

TP outcomes are expected to reflect the arm's-length principle, supported by appropriate functional and comparability analyses. Bahrain-based DMTT in-scope Constituent Entities, joint ventures and joint venture subsidiaries are required to make TP adjustments for DMTT purposes if in-scope transactions do not reflect arm-length's outcomes. The framework also extends to certain permanent establishment arrangements in which profit attribution is relevant.

Scope of TP requirements

The TP requirements apply to in-scope MNE groups under Bahrain's DMTT Law. The Guide covers transactions or arrangements between Constituent Entities within the same MNE group, Bahrain-located joint ventures and joint venture subsidiaries, and certain permanent establishments and their main entity.

The Guide reconfirms that TP adjustments are primarily applicable to cross-border transactions. Domestic transactions between Bahrain-located entities are generally outside the scope of the TP framework, with limited application restricted to scenarios involving a loss on the sale or transfer of assets.

TP documentation expectations

The Guide sets out detailed Local File and Master File expectations for Bahrain-located entities. The Local File should include functional analysis, benchmarking support, details of intercompany agreements, explanation of TP methodologies, financial tie-outs and disclosures relating to key intangibles, financing arrangements and business restructurings.

Notably, the Local File is expected to cover both cross-border and in-scope domestic transactions.

The Master File should provide a comprehensive overview of the MNE group's global business operations, TP policies, key value drivers and worldwide distribution of income and economic activity.

Implications

The issuance of the Guide provides general guidance on the application of TP principles under the DMTT framework and reinforces the increasing importance of robust, documentation-driven compliance. MNE groups should assess whether existing intercompany arrangements are appropriately supported for DMTT purposes. They should review TP policies, methodologies and benchmarking analyses for Bahrain DMTT in-scope entities. MNE groups should also evaluate Local File and Master File readiness, including alignment with the content expectations and treatment of in-scope domestic transactions. They should assess financial reporting and TP governance processes to align with the Bahrain TP framework and examine whether the existing financial accounting processes appropriately capture intercompany transactions and any necessary TP adjustments for DMTT purposes. In addition, MNE groups should ensure timely preparation and maintenance of TP documentation as a proactive compliance measure.