The introduction of Country-by-Country reporting obligations for MNE groups

On 4  February 2021, the Ministry of Industry, Commerce and Tourism issued Ministerial Decision no. 28/ 2021, setting out Country-by-Country Reporting (CbCR) obligations for multinational enterprise groups (MNE groups) headquartered and/or operating in the Kingdom of Bahrain, effective for financial years commencing on or after 1 January 2021.

This came after Kingdom of Bahrain ratified and published the Multilateral Competent Authority Agreement (MCAA) on exchange of Country-by-Country (CbC) reporting in the Official Gazette on 28 January 2021.

When are the Bahrain CbCR rules effective?

The rules are effective for financial years commencing on or after 1
January 2021.

What are the eligibility criteria?

The Bahrain CbCR rules shall apply to MNE groups:

• That have consolidated revenues of at least BHD 342 million in the financial year immediately preceding the reporting period, based on the consolidated financial statements of that preceding year (i.e. FY20); and
• if the ultimate parent entity (UPE) of the MNE group is resident in Bahrain or
• if a Bahraini resident constituent entity (CE) of the MNE group (with its UPE outside Bahrain) is nominated as the Surrogate Parent Entity (SPE); or
• if the MNE group has a Bahraini resident CE, which is neither the UPE or SPE.

What are the filing requirements?

The CbC report must be submitted within 12 months of the end of the reporting period (i.e. for fiscal year ending 31 December 2021, the report should be submitted by 31 December 2022).

For Constituent Entities in Bahrain, notifications shall therefore be
due by the last day of the reporting period (i.e., by 31 December 2021).

What are the contents and format of the report?

The content and format of the CbC report is in line with the Organization for Economic Co-operation and Development (OECD) CbCR guidance. It includes aggregate information related to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees and tangible assets other than cash or cash equivalents with regard to each jurisdiction in which the MNE group operates.

Further guidance will be provided by the Ministry in relation to the submission of the CbC notification and report.

What are the penalties of non-compliance?

The Bahrain CbCR rules outline penalties of non-compliance and following measures may be adopted by the authorities pursuant to Article (20) of the legislative decree No. (27) of 2015 with respect to the commercial register, as amended by Legislative Decree No. (52) of 2018:     

• Suspend the commercial registration of the company for a period not exceeding six months.
• Impose an administrative fine calculated on a daily basis, not exceeding BD 1,000 per day where the violation is being committed for the first time and BD 2,000 per day where it had committed any other violation within three years following the date on which a decision in respect of the previous violation against it had been issued. In all cases, the sum of the fine shall not exceed fifty thousand
  Bahraini Dinars.
• Impose an administrative fine not exceeding one hundred thousand Bahraini Dinars.