www.pwc.com/taxsummaries Worldwide Tax Summaries Corporate Taxes 2017/18 Quick access to information about corporate tax systems in 157 countries worldwide. Middle East Worldwide Tax Summaries Corporate Taxes 2017/18 All information in this book, unless otherwise stated, is up to date as of 1 June 2017. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Foreword Welcome to the 2017/18 edition of Worldwide Tax Summaries – Corporate Taxes, one of the most comprehensive tax guides available. This year’s edition provides detailed information on corporate tax rates and rules in 157 countries worldwide. As governments across the globe are Some of the enhanced features available looking for greater transparency and online include Quick Charts to compare with the increase of cross-border rates across jurisdictions. You may also activities, tax professionals often need access WWTS content through Tax access to the current tax rates and other Analysts at www.taxnotes.com. major tax law features in a wide range of countries. The country summaries, If you have any questions, or need more written by our local PwC tax specialists, detailed advice on any aspect of tax, include recent changes in tax legislation please get in touch with us. The PwC tax as well as key information about income network has member firms throughout taxes, residency, income determination, the world, and our specialist networks deductions, group taxation, credits and can provide both domestic and cross- incentives, withholding taxes, indirect border perspectives on today’s critical taxes, and tax administration. All tax challenges. information in this book, unless otherwise stated, is up to date as of 1 June 2017. Our online version of the summaries is available at www.pwc.com/taxsummaries. The Worldwide Tax Summaries (WWTS) website also covers the taxation of individuals and is fully mobile compatible, Colm Kelly giving you quick and easy access to Global Tax & regularly updated information anytime on Legal Services Leader your mobile device. PwC Ireland www.pwc.com/taxsummaries Foreword 1 Contents Foreword ...............................................1 Country chapters Bahrain .................................................4 Egypt .....................................................8 Iraq .....................................................23 Israel ..................................................29 Jordan .................................................54 Kuwait .................................................63 Lebanon ..............................................78 Libya ...................................................93 Oman ................................................100 Qatar ................................................. 111 Saudi Arabia ......................................123 United Arab Emirates ........................ 141 Worldwide Tax Summaries Editorial Team ...................................148 2 Contents PwC Worldwide Tax Summaries Country chapters Middle East Bahrain PwC contact Ken Healy PricewaterhouseCoopers ME Limited 13th Floor, Jeera I Tower PO Box 21144 Seef District, Kingdom of Bahrain Tel: +973 1711 8886 Email: [email protected] Significant developments On 1 February 2017, Bahrain signed the Cooperation Council for the Arab states of the Gulf (GCC) unified Value-added Tax (VAT) and Excise Treaties. The Minister of Finance stated that Bahrain is planning to introduce VAT by mid-2018 and is targeting to introduce excise tax by mid-2017. Taxes on corporate income There are no taxes in Bahrain on income, sales, capital gains, or estates, with the exception, in limited circumstances, to businesses (local and foreign) that operate in the oil and gas sector or derive profits from the extraction or refinement of fossil fuels (defined as hydrocarbons) in Bahrain. For such companies, a tax rate of 46% is levied on net profits for each tax accounting period, irrespective of the residence of the taxpayer. Corporate residence Income Tax Law No. 22 of 1979 (which only applies to oil and gas businesses) does not define residence. Other taxes Value-added tax (VAT) and excise duty There is currently no VAT or excise duty in Bahrain. However, Bahrain signed the GCC unified VAT and Excise Treaties on 1 February 2017. VAT is expected to be introduced in Bahrain by mid-2018. The standard rate of VAT will be 5%. Customs duty The general rate of customs duty is 5% of the value in cost, insurance, and freight (CIF), except for alcoholic beverages, which is 225%, and cigarettes, which is 200%. Certain categories of goods, such as paper and aluminium products, are subject to 20% duty rate. Stamp duty Stamp duty applies to the transfer and/or registration of real estate only and is levied at a rate of 2%. In case of payment of the stamp duty within the two months following the transaction date, the rate of the stamp duty is reduced to 1.7%. www.pwc.com/taxsummaries Bahrain 4 Bahrain Registration and licence fees Companies are subject to registration fees of 60 Bahraini dinar (BHD) and licence fees that vary according to the nature of their activity. Payroll taxes Social security contribution Employer’s social security contribution is 12% for Bahraini workers and 3% for non- Bahraini workers, calculated on their monthly salaries and capped at an income ceiling of BHD 4,000. Municipality taxes There is a 10% municipality tax levied on the rental of commercial and residential property to expatriates. Branch income Profit from branch income is taxable in Bahrain at 46% if it is derived from activities in the oil and gas sector. Income determination There are no specific rules in Bahrain with respect to the calculation of specific items of income, such as inventory valuation, capital gains, dividend income, interest income, or foreign income. However, the income tax law requires that taxable profits be calculated using generally accepted accounting principles (GAAP). Deductions The law generally allows deductions for all costs associated with taxable activities in Bahrain, such as the cost of production, refinement, remuneration of employees associated with these taxable activities (including social insurance and pensions paid for the benefit of these employees), and other operational losses. All reasonable and justifiable costs of production and exploration of products sold during the current taxable year are deductible for tax purposes, provided that these expenses have not been deducted elsewhere in calculating net taxable income. Depreciation and depletion Tax deductions may be claimed with respect to reasonable amounts for depreciation, obsolescence, exhaustion, and depletion incurred during the taxable year for properties used by the taxpayer in a trade or business from which income, taxable under the income tax law, is derived. Generally, such amounts may be claimed on a straight- line basis over the estimated remaining useful life of the properties, unless otherwise approved by the Minister of Finance. Taxes All taxes and duties not imposed by the Bahrain income tax law, including customs duties, may be deducted from taxable income as stipulated in Bahrain’s income tax law. 5 Bahrain PwC Worldwide Tax Summaries Bahrain Net operating losses Unutilised losses may be carried forward and deducted up to an amount equivalent to the net income in future years as defined by the Bahrain income tax law. Carryback of losses is not permitted. Payments to foreign affiliates There are no specific restrictions in the income tax law pertaining to payments made to foreign affiliates. Group taxation There is no legislation or mechanism for group relief or the taxation of group activities in Bahrain. Additionally, there is currently no specific legislation regarding transfer pricing or thin capitalisation in Bahrain. Tax credits and incentives There are no tax incentives in Bahrain. There is also currently no legislation regarding foreign tax relief in Bahrain. Withholding taxes There are no withholding taxes (WHTs) on the payment of dividends, interest, or royalties in Bahrain. Tax treaties Bahrain has double tax treaties (DTTs) in force with various countries, including Algeria, Austria, Barbados, Belarus, Belgium, Bermuda, Brunei, Bulgaria, China, Cyprus, Czech Republic, Egypt, Estonia, France, Georgia, Hungary, Iran, Ireland, Isle of Man, Jordan, Republic of Korea, Lebanon, Luxembourg, Malaysia, Malta, Mexico, Morocco, the Netherlands, Pakistan, Philippines, Portugal, Seychelles, Singapore, Sri Lanka, Sudan, Syria, Thailand, Tajikistan, Turkey, Turkmenistan, the United Kingdom, Uzbekistan, and Yemen. Tax administration Taxable period A company’s accounting period should normally follow the (Gregorian) calendar year (i.e. 1 January to 31 December). Tax returns The law is silent on the due date for the filing of the final income tax statement. However, an estimated income tax statement must be submitted on or before the 15th day of the third month of the taxable year. Where applicable, a taxpayer may also be required to file an amended estimated income tax statement quarterly thereafter, unless a final income tax statement has been provided. Approved accountants must prepare a certified tax return for the return to be acceptable to the authorities. www.pwc.com/taxsummaries