Bahrain: FAQs on country-by-country reporting

Bahrain ratified the MCAA on the automatic exchange of CbC reports, and a resolution for the exchange of CbC reports was issued.

Bahrain ratified the MCAA on the automatic exchange of CbC reports.

A set of “frequently asked questions” (FAQs) provides guidance regarding the country-by-country (CbC) reporting requirements in Bahrain.

Background

Bahrain—as a member of the Organisation for Economic Cooperation and Development (OECD) base erosion and profit shifting (BEPS) Inclusive Framework—committed to align its standards with those of the international tax framework and to implement the BEPS minimum standards. One of the minimum standards is CbC reporting (BEPS Action 13) that requires multinational enterprise (MNE) groups to file a CbC report, setting out financial information for each tax jurisdiction where the group has a presence. The objective of CbC reporting is for tax authorities around the world to assess risks related to transfer pricing and profit shifting of MNE groups.

Bahrain in January 2021 ratified the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of CbC reports, and a resolution for the exchange of CbC reports was issued in February 2021.

FAQs

Which entities are subject to the CbC reporting rules?

CbC reporting applies to all businesses that have a legal entity or branch in Bahrain and are members of a MNE group with annual turnover of at least BHD 342 million. A ministerial order (February 2021) defines relevant terms such as a multinational enterprise (MNE) group, an excluded MNE group, constituent entity (CE), ultimate parent entity (UPE), and reporting entity (RE).

Read an unofficial English translation of the ministerial order [PDF 341 KB]
 

When do the rules apply?

The new CbC reporting requirements apply to fiscal years beginning on or after 1 January 2021.
 

What does a Bahrain entity need to do?

An entity that is a member of an MNE group that had at least BHD 342 million consolidated group revenue in the preceding financial year is required to file a CbC notification and/or a CbC report. An entity subject to the CbC reporting rules is referred to as a “constituent entity” (CE).
 

Who is required to file a CbC notification and what is the deadline?

Each CE of an MNE group resident in Bahrain for tax purposes will be required to submit a notification no later than the last day of the reporting financial year of the MNE group. The notification is to identify whether it is the UPE of the MNE group.

When the CE is not the UPE, the notification must  include the identity and tax residence of the RE.

For MNE groups with a financial year-end of 31 December 2021, the first Bahrain CbC notification deadline is 31 December 2021.
 

Who is required to file a CbC report and what is the deadline?

Each UPE (a resident entity) resident in Bahrain is required to file its CbC report complying with requirements in Article 5 of the ministerial order, no later than 12 months after the last day of the reporting financial year of the MNE group.

For MNE groups with a financial year-end of 31 December 2021, the first Bahrain CbC report filing deadline is 31 December 2022.
 

Are there penalties for non-compliance?

Failure to comply with the CbC reporting obligations as set out in the ministerial order may result in administrative penalties not exceeding BHD 100,000 and/or suspension of the commercial registration of the entity.
 

What do Bahrain entities need to do next?

All entities and MNE groups with Bahrain operations need to determine if they are subject to CbC notification and reporting requirements in Bahrain. The form and method for submitting the CbC report and notifications is expected to be provided soon.

Read a May 2021 report [PDF 157 KB] prepared by the KPMG member firm in Bahrain

 

 

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