Bahrain - Multinational enterprises (MNEs) in Bahrain must swiftly prepare for the next standard advance payment deadline in November for the Domestic Minimum Top-Up Tax (DMTT).

This looming deadline follows the inaugural filing and payment on August 31, 2025, which officially ushered the kingdom into the corporate taxation era.

This watershed moment, demanding a minimum effective tax rate of 15 per cent on local profits, delivered an immediate financial shock to MNEs long accustomed to a tax-free environment.

The introduction of the advance payment system – designed to smooth government revenue – required MNEs to pre-pay expected liabilities. This system had an immediate and significant impact on cash flow, amplified by a unique transitional rule requiring the first two quarters’ payments and filings to be submitted simultaneously.

“The first advance tax payment has been a learning curve for both businesses and regulators,” said Grant Thornton Abdulaal associate partner Shashank Arya.

Mr Arya noted that the financial effect was substantial: “A lot of companies didn’t anticipate their liability well in advance, due to which a huge working capital impact was evident.”

A core challenge was accurately calculating the liability. While MNEs could estimate based on prior-year figures, most defaulted to the current-year method, estimating profits and effective tax rates based on incomplete data.

“Most groups preferred to default to the current year method, estimating taxable profits and effective tax rates based on incomplete data. This created uncertainty,” explained Grant Thornton Abdulaal senior partner Jatin Karia.

He added that many businesses underestimated the complexity of aligning DMTT calculations with the global Pillar Two rules.

As the November deadline approaches, experts stress the need for proactive measures to mitigate financial surprises.

“Businesses should start integrating their tax planning with group-level reporting systems to avoid surprises at the year-end true-up,” advised Mr Karia.

Going forward, Mr Arya stated that “robust documentation and conservative estimates will be critical to managing risks.”

The clear message is that MNEs must immediately invest in stronger forecasting models and align tax compliance with their treasury management to manage this new financial reality.

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