Bahrain

• Section 18(3) of the Income Tax Act CAP 470 provides that, ‘Where a non-resident person carries on business with a related resident person or through its permanent establishment and the course of that business is so arranged such that it produces to the resident person or through its permanent establishment either no profits or less than the ordinary profits which might be expected to accrue from that business if there had been no such relationship, then the gains or profits of that resident person or through its permanent establishment from that business shall be deemed to be the amount that might have been expected to accrue if the course of that business had been conducted by independent persons dealing at arm’s length’.
• In addition to the above, a multi-national enterprise (MNE) is required to comply with The Income Tax (Transfer Pricing) Rules, 2006 which offer guidelines on how to apply the arm’s
• The rules prescribe a general overview on the application of transfer pricing rules and Kenya heavily relies on the OECD guidelines which offer a more formulaic expression on implementation.
• The TP rules empower the Commissioner of Domestic Taxes (KRA) to request for TP documentation to any Multinational enterprise operating in Kenya on transactions where transfer pricing is applicable.

With effect from the financial year commencing on or after 1 January 2021, all Bahrain-resident entities or branches that are part of a multinational entity whose consolidated revenue was at least BHD 342 million (approximately Euro 760 million or USD 907 million) in the preceding financial year must file a notification with the MoICT on or before the last day of the group’s financial year, setting out whether or not the Bahrain entity is the group’s ultimate parent entity or has been nominated as the surrogate parent entity. Where the entity is neither the ultimate parent entity nor the surrogate parent entity, it must identify the country-by-country reporting entity and its tax residence. A country-by-country report must be filed by the ultimate parent entity or the surrogate parent entity within twelve months of the group’s financial year-end (for the fiscal year ended 31 December 2021, the report must be submitted by 31 December 2022).

The ministerial resolution sets out potential penalties for failing to file country-by-country notifications or reports by the due dates. These include suspension of the commercial registration for six months, as well as administrative penalties of up to BHD 100,000 (approximately USD 265,000).