Excludes expense from an intra-group financing arrangement expected to increase a low-tax entity's expense without a corresponding increase in the high-tax counterparty's income.
What should you do now?Document cash flows and tax effects for both parties over the arrangement term before recognising the expense.
What does the official Article provide?
The official source is Arabic. This English commentary is explanatory and is not presented as an official translation.
Excludes expense from an intra-group financing arrangement expected to increase a low-tax entity's expense without a corresponding increase in the high-tax counterparty's income.
This is a verified summary rather than a verbatim reproduction. Consult the official Arabic text, the Law and later decisions before making a final determination.
Arabic text of Article 18
The official source is Arabic. The English content on this page is explanatory and is not presented as an official translation.
Show the Article as published (Arabic)
التعديلات المتعلقة بترتيبات التمويل بين أعضاء المجموعة
أ- ينطبق حكم الفقرة (ب) من هذه المادة عندما يكون الكيان المشارك الذي يقع في المملكة كيانًا مشاركًا ذا ضريبة منخفضة، وقد تكبد أي نفقات تتعلق بترتيب تمويل من بين أعضاء المجموعة تمّ الحصول عليها من الطرف ذي الضريبة المرتفعة.
ب- لأغراض تحديد صافي دخل أو خسارة الكيان المشارك للسنة المالية، يجب على الكيانات المشاركة التي تقع في المملكة استبعاد أي نفقات تنُسب إلى ترتيب تمويل بين أعضاء المجموعة من المعقول توقعه خلال مدة الترتيب لزيادة مبلغ النفقات التي تم أخذها في الاعتبار عند تحديد صافي دخل أو خسارة الكيان المشارك، دون أن يؤدي ذلك إلى زيادة مطابقة في الربح أو الخسارة الخاضعة للضريبة لدى الطرف ذي الضريبة المرتفعة.
Source: Executive Regulations issued by Decision No. 172 of 2024, Legislation and Legal Opinion Commission (lloc.gov.bh).
What does the Article mean in plain language?
Examine an intra-group financing expense where the Bahrain entity is low-tax and the counterparty high-tax. Exclude the expense where the arrangement can reasonably be expected, over its duration, to increase deductible expenses for the income computation without a commensurate increase in the counterparty's taxable result. Assess the arrangement's full effect rather than the nominal rate alone or a single year. Retain both parties' projections, instrument terms and classification basis.
Financial reporting, tax, transfer-pricing and consolidation teams.
Document cash flows and tax effects for both parties over the arrangement term before recognising the expense.
Automatically accepting the expense because the recipient is in a high-rate jurisdiction.
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Is this Article enough on its own?
Usually not. Read it with the connected Law Article, definitions, any effective election and current NBR guidance, especially for an amount or deadline.
Does NBR guidance replace the Regulations?
No. Guidance explains application and supports procedures and examples, but current legislation and decisions prevail in case of inconsistency.