Bahrain’s ratification of its income tax treaty with Saudi Arabia marks a step towards closer tax cooperation, with the agreement covering corporate income tax, Zakat and income tax while setting withholding tax rates for cross-border payments.
Bahrain issued Law (32) of 2026 on 14 June 2026, approving the ratification of the income tax treaty with Saudi Arabia.
Signed on 3 December 2025, the provisions of the agreement apply to Bahrain corporate income tax as well as Saudi Zakat and income tax.
Under the applicable regulations, a 5% rate applies to dividends, while Interest is subject to a 0% rate. A rate of 8% is established for royalties, and the same 8% rate is mandated for Fees for technical services of a managerial, technical, or consultancy nature, all of which are subject to withholding tax.
The agreement seeks to prevent double taxation and fiscal evasion between the two nations and will take effect after ratification instruments are exchanged. It will apply from 1 January of the following year.
Earlier, The Bahrain Shura Council (upper house) gave its approval to the law for the ratification of the income tax treaty with Saudi Arabia during its 29th session held on 10 May 2026.
