Bahrain’s Cabinet has approved fiscal reforms, including a draft law to impose a profit tax on qualifying local companies, while maintaining household electricity and water subsidies.
Bahrain’s Cabinet approved a package of fiscal and economic measures aimed at curbing government spending, increasing revenues and safeguarding key subsidies, following a Cabinet meeting chaired by Crown Prince and Prime Minister Prince Salman bin Hamad Al Khalifa.
The measures were announced at a press conference held at Gudaibiya Palace on 29 December.
The Government confirmed that electricity and water tariffs for the first and second tariff bands for citizens’ primary residences will remain unchanged, including for extended families living in a single household. The Cabinet also agreed to postpone any changes to the mechanisms of electricity and water subsidies for citizens’ main homes pending further study. Adjustments to electricity and water consumption tariffs for other user categories are scheduled to take effect from January 2026.
The reforms build on progress under Bahrain’s Fiscal Balance Program, under which non-oil revenues more than doubled between 2018 and 2024, while recurring government spending was reduced. Over the past two decades, gross domestic product increased fivefold from around USD 9 billion to USD 47 billion. During the same period, average wages for Bahraini workers more than doubled, while inflation remained comparatively low relative to major advanced economies.
The Cabinet said the measures align with Bahrain’s Economic Vision 2030, supporting expenditure discipline, diversification of revenue sources beyond hydrocarbons and long-term fiscal sustainability, while protecting households from cost-of-living pressures.
Key measures approved by the Cabinet include the following:
- Reduction in administrative expenses: Administrative expenses will be reduced by 20% across all government entities, while maintaining the quality of services provided to Bahraini citizens. The Minister of Finance and National Economy was tasked with implementing the necessary measures.
- Higher contributions from government-owned companies: Government-owned companies will increase their contributions to the Kingdom’s general budget.
- Draft law for a 10% profit tax: A draft law will be referred to the Legislative Branch to impose a 10% tax on the profits of local companies whose annual revenues exceed BHD 1 million or whose net annual profits exceed BHD 200,000, based on agreements with the Legislative Branch. The tax will apply to any amount exceeding the BHD 200,000 benchmark. The objective is to diversify income sources, with a target for implementing the draft law in 2027. The Minister of Finance and National Economy was tasked with taking the necessary measures.
- Selective levy on soft drinks: A draft law will be referred to the Legislative Branch to increase the selective levy on soft drinks, in coordination with the Legislative Branch. The Minister of Finance and National Economy was tasked with implementation.
- Fee on undeveloped investment land: Measures will be introduced to enhance the utilisation of undeveloped investment lands with existing infrastructure services through a monthly fee of 100 fils per square metre. Implementation is targeted for January 2027. The Minister of Municipalities Affairs and Agriculture was tasked with taking the necessary measures.
- Sewage services fees: Fees for sewage services will be introduced, excluding citizens’ primary residences. The fee will be calculated at 20% of water consumption charges, with implementation planned for January 2026. The Minister of Works was tasked with implementation.
- Review of worker permit and healthcare fees: Worker permit and healthcare fees will be reviewed and revised gradually over a four-year period starting in January 2026. Domestic workers will be exempt. The Minister of Labour, the Minister of Legal Affairs and the Minister of Health were tasked with taking the necessary measures.
- Natural gas price adjustments: Natural gas prices for companies and factories will be adjusted to reflect the actual cost of consumption. The changes will be implemented gradually over four years starting in January 2026. The Minister of Oil and Environment was tasked with implementation.
- Fuel price mechanism: A mechanism for determining fuel prices will be developed. The Minister of Oil and Environment was tasked with taking the necessary measures.
- Electricity and water tariffs: The Cabinet reaffirmed that electricity and water tariffs for the first and second tariff bands for citizens’ primary residences will remain unchanged, including for extended families. Changes to subsidy mechanisms were postponed pending further study, while tariff amendments for other categories will be implemented from January 2026. The Minister of Electricity and Water Affairs and the Minister of Social Development were tasked with implementation.
- Investment-related procedures: Government procedures supporting investment will be streamlined and made more efficient to attract foreign investment and strengthen the role of the private sector.
The Government said the package of measures is intended to support fiscal sustainability while continuing to protect citizens from cost-of-living pressures.
