Bahrain Issues Transfer Pricing Guidance Under the DMTT Regime
National Bureau for Revenue | DMTT Transfer Pricing Guide, Version 1.0 | June 2026
At a Glance
- Bahrain’s National Bureau for Revenue (NBR) has published its first dedicated Transfer Pricing Guide, Version 1.0, dated June 2026 (The Guide), integrated within the Domestic Minimum Top-up Tax (DMTT) regime rather than a separate, generally applicable Transfer Pricing (TP) system.
- The DMTT applies a 15% minimum effective tax rate to Multinational Enterprise (MNE) groups with consolidated revenue above BHD 342 million. Under this regime, the arm’s length principle (ALP) is applied to adjust the Financial Accounting Net Income or Loss of Bahrain Constituent Entities used to compute Constituent Entity Income or Loss, feeding into the Global Anti-Base Erosion (GloBE) base and therefore impacting the resulting top-up tax liability.
- The Guide closely follows the Organisation for Economic Co-operation and Development (OECD) TP Guidelines 2022 (five methods, comparability factors, Functions, Assets and Risks (FAR) analysis considerations), but is limited to in-scope DMTT groups and carries GloBE-specific scope features.
- In-scope groups must prepare a Local File and a Master File. The Guide is non-binding; however, it signals the standard the NBR will apply in practice.
Overview
Bahrain has historically operated without a corporate income tax or a standalone TP regime. This changed with the introduction of the Domestic Minimum Top-up Tax (DMTT), Bahrain’s implementation of the OECD/G20 Pillar Two global minimum tax.
The DMTT was introduced through Decree-Law No. 11 of 2024 (issued September 1, 2024) and is supplemented by the Executive Regulations under Decision No. 172 of 2024. The regime imposes a 15% minimum effective tax rate on in-scope MNE groups, broadly defined as those with consolidated revenues of at least EUR 750 million in accordance with the Pillar Two framework. The DMTT applies to fiscal years beginning on or after January 1, 2025.
The Guide (accessible here) sets out the NBR’s approach to the arm’s length principle, comparability analysis, transfer pricing methods and documentation for DMTT purposes. It applies to intercompany transactions and arrangements between Constituent Entities, Joint Ventures (JV), and JV Subsidiaries within the same MNE group. As a version 1.0 publication, it reflects the NBR’s current views and should be read together with the DMTT Law and Executive Regulations.
How the Guide Ties to the DMTT Law
The Guide does not create a general TP law. Instead, its scope is confined to the application of the TP principles within the context of the DMTT regime.
- The scope is limited to DMTT in-scope groups: The TP requirements apply only to members of MNE groups within the scope of the DMTT Law. Entities outside DMTT scope are not subject to these rules.
- The ALP feeds the GloBE base: Where a Bahrain Constituent Entity, Joint Venture, or JV Subsidiary records intercompany results that do not reflect the arm’s length principle, it must adjust its Financial Accounting Net Income or Loss when determining Constituent Entity Income or Loss. Such adjustment feed the GloBE income base and thereby influence the DMTT (rather than adjusting a separate corporate tax base).
- Cross-border focus: The ALP applies to transactions between Constituent Entities (and JVs and JV Subsidiaries within the same group) located in different jurisdictions, ensuring arm’s length outcomes are aligned across group members.
- A domestic carve-in for asset transfers: Domestic (Bahrain-to-Bahrain) transactions are out of scope, except where the transaction is a sale or transfer of an asset and an arm’s length adjustment (notably for losses) is required. This mirrors the GloBE Model Rules and can be easily overlooked in compliance efforts.
- Two-tier documentation: In-scope Bahrain entities must prepare and maintain a Local File (covering the specific transactions, FAR and comparability analyses, method selection, supporting financials, and copies of any Advance Pricing Agreements and rulings) and a Master File (the group’s structure, operations, intangibles, and financing).
Transfer Pricing Methods
The Guide adopts the five OECD-recognized methods. It emphasizes that the most appropriate method should be selected based on the facts and circumstances of the transaction. Consistent with the OECD approach, traditional transaction methods are preferred where they can be applied with equal or greater reliability than profit-based methods, and the comparable uncontrolled price (CUP) method is recommended where equally reliable data are available. The Guide also reiterates that internal comparables are generally more reliable than external comparables where available.
| Method | Best suited for | Key comparability factors |
| Comparable Uncontrolled Price (CUP) | Direct price comparison for similar goods/services; commodity transactions | Characteristics of property/services; contractual terms; economic circumstances (the OECD comparability factors most relevant to the CUP method) |
| Resale Price Method (RPM) | Distributors performing routine resale functions; analysis based on gross margin | Functions performed, assets used, risks assumed by distributor |
| Cost Plus Method (CPM) | Manufacturers/service providers remunerated on a cost-plus basis | Cost-base, mark-up determination, functional profile |
| Transactional Net Margin Method (TNMM) | One-sided net-margin analysis for routine functions | Functional comparability, profit level indicators (PLI) |
| Profit Split Method (PSM) | Highly integrated operations or transactions involving unique and / or valuable contributions | Value-creation drivers, contribution analysis, residual split |
Alignment With and Divergence From the OECD Guidelines
Substantively, the Guide is closely aligned with the OECD TP Guidelines: it expressly follows the OECD Model Tax Convention and the 2022 Guidelines and also refers to the OECD GloBE Model Rules, Commentary, and Administrative Guidance as supplementary references.
In practice, the methodology a practitioner applies in Bahrain is the same as in other OECD-aligned jurisdictions; the differences are structural rather than methodological.
| Area | OECD TP Guidelines (2022) | Bahrain DMTT TP Guide |
| Standard | ALP rooted in Article 9 of the OECD Model and the 2022 Guidelines | Expressly adopts the OECD Model Convention and 2022 Guidelines as the operative standard |
| Methods | Five methods; most appropriate method rule; traditional methods and CUP preferred where they are as reliable as, or more reliable than another method; no obligation to apply more than one method | Identical, same five methods, same selection criteria and preferences |
| Comparability and FAR | Five comparability factors; functional analysis; accurate delineation; substance over form | Identical framework and language |
| Documentation | Three-tier model under BEPS Action 13: Master File, Local File, and Country-by-Country Report (CbCR). | Addresses Local File and Master File, mirroring OECD Annexes I and II. CbCR applies to in-scope groups under separate Action 13 mechanics implemented starting January 1, 2021 |
| Legal anchor | Operates through domestic corporate income tax systems, adjusting a separately computed taxable income | No general corporate income tax (CIT) applies. The ALP adjusts Financial Accounting Net Income/Loss for the DMTT (GloBE) computation, it changes the top-up base, not a separate CIT charge |
| Taxpayer population | Applies to all in-scope CIT taxpayers, regardless of size | Applies only to DMTT in-scope groups (broadly EUR 750m+) |
| Status | Authoritative international standards, adopted into binding domestic law | Guidance reflecting the NBR’s current views; read alongside the Law and Executive Regulations |
Regional Comparison: TP Across the Gulf Cooperation Council (GCC)
Bahrain’s guidance is closely aligned with the OECD TP guidelines. However, its scope is narrower than the comprehensive regimes adopted elsewhere in the GCC. This is because the rules operate within the DMTT framework rather than a corporate income tax system of general application. Consequently, the regime focuses on arm’s length adjustments to Constituent Entity Income or Loss for GloBE purposes, together with the associated documentation requirements for in-scope MNE groups.
The figure below summarizes how transfer pricing frameworks compare across the GCC.
Transfer pricing frameworks across the GCC
The table below compares the principal transfer pricing features across the main GCC jurisdictions.
| Country | TP framework | Local File | Master File | CbCR | Key features |
| Bahrain | DMTT-specific TP guidance (2026) | In-scope groups | In-scope groups | Yes | Embedded within the DMTT regime; limited to groups above the EUR 750m threshold |
| UAE | Comprehensive TP regime (2023) | Yes | Yes | Yes | TP disclosure forms submitted with the corporate tax return |
| Saudi Arabia | Comprehensive TP regime (2018) | Yes | Yes | Yes | Mandatory related-party disclosure form, affidavit and local benchmarking expectations |
| Qatar | Comprehensive TP regime (2020) | Yes | Yes | Yes | TP declaration submitted with the income tax return |
| Oman | No formal TP regulations | Not mandated | Not mandated | Yes | CbCR applies, but no comprehensive TP documentation regime |
| Kuwait | DMTT-based TP framework (2025) | In-scope groups | In-scope groups | — | ALP rule, Local File, Master File and audited related-party disclosure under the DMTT |
A&M’s Point of View
Bahrain’s release of the Guide is an important development for in-scope MNE groups. While the framework broadly follows OECD TP principles, its integration with the DMTT creates a direct link between TP outcomes and Pillar Two calculations. Arm’s length adjustments now feed into the determination of Constituent Entity Income or Loss and, in some cases, may in turn affect the jurisdictional effective tax rate and any resulting top-up tax liability. The Guide is notable as Bahrain’s first formal articulation of TP principles. Although its application is currently limited to the DMTT framework, the publication of the Guide, together with the ongoing development of the corporate income tax regime, may signal a broader shift toward a comprehensive OECD-aligned regime of general application.
The immediate priority for in-scope Bahrain entities is ensuring TP documentation readiness. In-scope Bahrain entities should ensure Local File and Master File requirements can be met on a contemporaneous basis, with robust FAR and comparability analyses and method selection properly supported. Groups should also assess whether existing TP policies remain fit for purpose in light of the DMTT calculations, and whether they could contribute to an effective tax rate falling below the 15% minimum threshold under the GloBE Rules.
More broadly, the key priority for in-scope MNE groups is ensuring consistency between TP outcomes, financial reporting, and DMTT computations, supported by documentation that clearly reflects the group’s operating model and value drivers. We recommend the following steps:
- Identify the population: Confirm whether each Bahrain Constituent Entity is party to in-scope related-party transactions, and map the relevant financing, services, IP, and goods flows that involve it.
- Get documentation-ready: Ensure a Bahrain Local File and Master File can be produced contemporaneously, and that they are reconciled against the group’s existing OECD documentation, so the Bahrain position is consistent with the global story.
- Watch the domestic carve-in: Do not overlook the requirement to make arm’s length adjustments on domestic asset transfers between group members; this is the one domestic rule that could pose a compliance risk.
- Connect TP to the GloBE numbers: Ensure TP outcomes flow into the DMTT computation and the jurisdictional Effective Tax Rate, and assess the interaction with the Transitional CbCR Safe Harbour where relevant.
- Coordinate across the GCC: For groups with operations in KSA, UAE, and wider Gulf operations, align Bahrain DMTT TP positions with local tax authorities’ transfer pricing rules and the OECD standard to maintain a coherent, defensible GCC-wide approach.
How A&M Can Help
A&M Tax Middle East advises MNE groups across the GCC on the full TP lifecycle, DMTT and Pillar Two readiness, preparation of Local and Master Files, benchmarking, FAR and DEMPE (development, enhancement, maintenance, protection, and exploitation) analysis, intercompany financing, operating-model design, and controversy. We would be glad to discuss how these obligations apply to your Bahrain operations and to your wider GCC compliance position.
About Alvarez & Marsal Tax
Alvarez & Marsal Tax, part of Alvarez & Marsal (A&M), a leading global professional services firm, is an independent tax group made up of experienced tax professionals dedicated to providing customized tax advice to clients and investors across a broad range of industries. Its professionals extend A&M’s commitment to offering clients a choice in advisors who are free from audit-based conflicts of interest, and bring an unyielding commitment to delivering responsive client service. A&M Tax has global presence in major metropolitan markets throughout the Americas, EMEA, and APAC.
Disclaimer: This alert is provided for general information only and reflects the position as of June 2026 based on the DMTT Transfer Pricing Guide (Version 1.0). It does not constitute legal, tax or other professional advice and should not be relied upon for any specific transaction or arrangement. The Guide is non-binding and may be subject to change. Professional advice should be obtained before acting on any matter discussed.
