Bahrain: 2026 HR and Corporate Tax Reforms
Introduction
Bahrain’s 2026 HR and corporate tax reforms mark a significant shift in how organizations plan workforce costs and manage expatriate employment. They will also affect how businesses prepare for future tax compliance. As a result, HR leaders, legal teams, and finance professionals operating in the Kingdom should monitor these developments closely.
How Bahrain’s 2026 HR and Corporate Tax Reforms Affect Employers
Bahrain’s 2026 HR and corporate tax reforms will directly affect workforce costs, compliance planning, and long-term business strategy. In practice, employers should assess both the proposed corporate tax framework and the phased increases in expatriate employment fees. This will help them understand the combined financial and operational impact.
1. Corporate Tax Reform: A Strategic Policy Shift
Bahrain has traditionally stood out in the Gulf region for not imposing a general corporate income tax, except in certain extractive sectors. That position is now changing.
The Government has announced its intention to introduce a corporate income tax at a 10 per cent rate. This will apply to entities exceeding specified revenue or profit thresholds. However, the final legislative text and implementing regulations are still pending. Current indications suggest implementation in 2027, subject to parliamentary approval. Therefore, early assessment will help affected companies align governance, financial reporting, and compliance frameworks in advance.
2. Foreign Work Permit Reforms: Phased Cost Adjustments and Compliance Impact
Alongside the tax proposal, Bahrain has formalized a phased increase in statutory fees linked to the employment of expatriate workers. These measures aim to rebalance labor market incentives and support local employment objectives. At the same time, they are intended to ensure the long-term sustainability of public services.
Importantly, these workforce cost increases form part of Bahrain’s broader workforce and tax changes affecting employers from 2026 onwards.
2.1 Annual Work Permit Issuance and Renewal Fees
The standard LMRA work permit issuance or renewal fee has historically been around BHD 100 per expatriate worker. From 1 January 2026, this fee will increase to BHD 105. It will then rise annually, reaching BHD 125 by 2029.
2.2 Mandatory Expatriate Healthcare / Insurance Contributions
Mandatory healthcare or insurance contributions for expatriate workers will also increase. The current fee of BHD 72 per worker will rise to BHD 95 in 2026. In addition, further increases are approved, reaching BHD 144 by 2029. As a result, the total statutory cost of employing expatriates will rise materially over the implementation period.
2.3 Monthly Work Permit Levies
The monthly LMRA levy per expatriate worker has been updated and is already in effect for 2026:
First five expatriate workers: BHD 7.5 per month
Workers beyond five: BHD 12.5 per month
Looking ahead, future increases for 2027 to 2029 have been publicly discussed. Local sources, including News of Bahrain, indicate a potential alignment toward a BHD 30 monthly levy by 2029. However, binding regulations confirming these figures have not yet been formally published on the Government website.
3. Broader HR and Compliance Considerations
Beyond direct costs, these reforms have wider HR and compliance implications:
Budgeting and forecasting: Organizations should adopt multi-year cost models rather than static assumptions.
Workforce planning: Rising expatriate employment costs may accelerate localization and internal talent development strategies.
Contracts and policies: Employment contracts and assignment frameworks should be reviewed for alignment with updated fees.
Regulatory monitoring: HR and legal teams must continue tracking LMRA circulars, Cabinet decisions, and Official Gazette publications.
Conclusion
Bahrain’s evolving corporate tax framework and the structured increase in expatriate work permit costs represent a meaningful regulatory shift. For HR and legal professionals, early engagement and cross-functional coordination will be essential.
Although the phased implementation provides a transition window, it will benefit only organizations that plan ahead. From an HR and compliance perspective, Bahrain’s employment and tax updates require coordinated action across HR, finance, and legal teams.
With a strong regional footprint across Bahrain and the GCC, we assist organizations with HR, employment, immigration, and compliance matters, focusing on workforce planning and regulatory impact. For tailored advice please get in touch with our local team
