In Resolution No. 28 of 2021 published on 4 February 2021, Bahrain’s Ministry of Industry, Commerce and Tourism established Country-by-Country (Cbc) reporting standards.
This Resolution was passed following Bahrain’s approval of the Multilateral Competent Authority Agreement (MCCA) on the Exchange of Country-by-Country Reports.
As a reminder, in December 2019, Bahrain became a signatory to the MCCA on the exchange of CbC reports. In January 2021, Bahrain ratified the MCAA.
Resolution No. 28 provides three key highlights:
- Applicability of the Resolution
- Filing and Penalties
1. There are 3 key definitions provided by Resolution No.28:
1A. The definition of a “group” is a group of commercial establishments linked between them through ownership or control, and they are required to prepare consolidated financial statements for financial reporting purposes following the applicable accounting standards, or they will be required to do so if the shares of any of those establishments are traded in a public stock market.
1B. The definition of a group of “multinational establishments” (MNE) is any group that includes two or more commercial establishments whose residence is in different countries or includes a commercial establishment residing in one country and subject to tax in relation to its activity that it conducts through a permanent establishment in another country. The group of multinational enterprises is not an exception according to the provisions of this decision.
1C. A “group of multinational enterprises” exclude: a group of multinational enterprises whose total consolidated revenue in relation to any financial year of the group is less than 342 million dinars during the fiscal year immediately preceding the reported fiscal year, as shown in the consolidated financial statements for that previous fiscal year
2. Applicability of The Resolution
The new requirements apply to all businesses that have a legal entity or branch located in Bahrain.
They are required to file a CbC report and/or a CbC reporting notification with Bahraini authorities if the entity is a member of a multinational enterprise (MNE) group with an annual turnover greater than BHD 342 Million.
An entity subject to the CbCR rules is referred to as a Constituent Entity.
3. Filing and Penalties
1. Group constituent entities resident in Bahrain are required to submit a Cbc notification by the last day of the reporting fiscal year, including information on whether the entity is the ultimate parent of the group and if not, information on the tax residence and identity of the reporting entity.
2. The requirements to submit a CbC report applies to ultimate parent entities in Bahrain. Reports are due within 12 months following the end of the fiscal year.
3. The required content of the Cbc report is in line with the OECD guidelines and must be submitted in the manner specified by the Ministry. As of today, no reporting manner has been specified by the Ministry.
4. Failure to comply and submit the Cbc report will result in penalties. These penalties include firstly suspension of the commercial registration of the company for a period of up to 6 months. Secondly, administrative fines of up to BHD 50, 000. Or if this is a second offence, an administrative fine of up to BHD 100,000
It is most important that groups with entities in Bahrain review their internal filing rules and compliance process to ensure that if this CbC requirement applies to them, preparation and filing of CbC reports are made accordingly.