Bahrain’s National Bureau for Revenue has issued a new guide explaining the methodology for calculating Domestic Minimum Top-up Tax liabilities, including the treatment of safe harbours, exclusions and special entity categories under the DMTT framework.
Bahrain’s National Bureau for Revenue (NBR) has published a new guide outlining the methodology for calculating Domestic Minimum Top-up Tax (DMTT) liabilities for entities within the scope of the country’s global minimum tax regime.
The DMTT Computations Guide sets out the NBR’s current views on the application of the DMTT Law and Executive Regulations and is intended to provide general principles for determining tax obligations under the framework. The NBR noted that the document is informational in nature and should be read alongside the DMTT Law and Executive Regulations, as it does not address every scenario that may be relevant to a Multinational Enterprise (MNE) Group.
Reference to OECD guidance
According to the guide, MNE Groups may also refer to the OECD’s Model Rules, Administrative Guidance and Commentary for additional information when assessing the impact of the DMTT. The NBR emphasised that the guide is not legally binding, does not provide binding interpretative directions, and should not replace professional advice.
Determining entities in scope
The guide explains that its primary purpose is to outline the methodology for computing tax due under Bahrain’s DMTT framework for entities that fall within its scope. Businesses are directed to the NBR’s separate “Entities in Scope of DMTT Guide” to determine whether they are subject to the regime.
Safe harbours and exclusions
The document also details a number of exclusions and safe harbour provisions that may reduce a taxpayer’s DMTT liability to nil for a fiscal year and remove the need to calculate tax due. These include the Exclusion for the Initial Phase of International Activity, the Transitional Country-by-Country Reporting Safe Harbour, the De Minimis Exclusion, and the Simplified Computation Safe Harbour.
Entities seeking to rely on a safe harbour or exclusion must demonstrate that the relevant conditions are met, or that an election has been made where required. However, the guide clarifies that administrative obligations, including registration and tax return filing requirements, continue to apply even where a safe harbour or exclusion is available.
Filing constituent entity obligations
The guide further outlines the responsibilities of a Filing Constituent Entity, defined as a Bahrain-located entity appointed by the Bahrain-based Constituent Entities of an MNE Group to undertake the group’s principal DMTT compliance obligations.
Calculating the effective tax rate
Under the standard approach, a single DMTT computation is prepared for all Bahrain-located Constituent Entities, combining their adjusted financial results to determine a single Effective Tax Rate. However, separate Effective Tax Rate calculations are required for Minority Owned Constituent Entities, Investment Entities and Insurance Investment Entities, and Stateless Constituent Entities, which are subject to special computational rules.
The resulting tax liabilities from these separate calculations are then aggregated to determine the total tax due for the fiscal year.
Special rules for joint ventures
The guide also provides specific rules for Bahrain-located Joint Ventures and Joint Venture Subsidiaries. These entities must appoint a separate Filing Constituent Entity and calculate their DMTT liability independently, as though the Joint Venture were the Ultimate Parent Entity of a separate MNE Group.
Assessing reliefs before computation
Before undertaking DMTT calculations, the NBR advises Filing Constituent Entities to first assess whether any exclusions or safe harbour provisions apply under Bahrain’s DMTT framework. The publication forms part of Bahrain’s ongoing implementation of its Domestic Minimum Top-up Tax regime and provides further guidance on compliance and calculation requirements for affected multinational groups.
