Bahrain is poised to implement a significant shift in its excise tax system, particularly impacting the beverage industry. A new draft law, currently before Parliament, proposes a tiered excise tax on sweetened drinks based on sugar content, while maintaining high rates on tobacco and energy drinks. This move, alongside a transfer of administrative responsibility, signals a broader effort to refine the Kingdom’s fiscal policies and promote public health. The amendments, decreed under No. (78) of 2025, have been presented to the Council of Representatives for review.
Understanding the Proposed Changes to Excise Tax in Bahrain
The core of the proposed legislation revolves around reshaping how excise taxes are applied to sweetened beverages. Currently, Bahrain applies a specific excise tax to certain goods, including tobacco and energy drinks. This revised bill introduces a more nuanced approach for sugary drinks, aiming to encourage the consumption of lower-sugar alternatives. Simultaneously, it streamlines the regulatory process by shifting oversight from the Ministry of Finance to the National Bureau for Revenue (NBR).
A Sugar-Based Tax System
The most notable change is the introduction of a tiered tax structure for sweetened drinks. This system directly correlates the tax rate with the amount of sugar present in the beverage.
- Zero Tax: Drinks containing only artificial sweeteners or with less than 5 grams of sugar per 100 milliliters will be exempt from excise tax.
- Lower Tier: Beverages with a sugar content between 5 and 7.099 grams per 100 milliliters will be taxed at BD0.079 per litre.
- Higher Tier: Drinks containing 8 grams or more of sugar per 100 milliliters will face a tax of BD0.109 per litre.
This tiered system is designed to incentivize manufacturers to reduce sugar levels in their products and provide consumers with healthier options. It also represents a move towards a more sophisticated taxation policy aligned with public health goals.
Shift in Administrative Control: NBR Takes the Lead
Beyond the changes to the tax schedule, the draft law fundamentally alters the administrative structure governing excise taxes. The responsibility for implementing and overseeing the excise tax system will transition from the Ministry of Finance to the National Bureau for Revenue (NBR).
This means the NBR’s Chief Executive Officer will assume the powers previously held by the Minister of Finance concerning excise tax regulations. The legislation explicitly replaces references to “the Ministry” with “the Bureau” and “the Minister” with “the Chief Executive” throughout the legal text. This consolidation of authority is expected to improve efficiency and consistency in tax administration.
What This Means for Businesses in Bahrain
The move to the NBR offers potential benefits for businesses through a potentially more streamlined and predictable regulatory environment. The draft law also addresses the registration process for entities already engaged in activities subject to excise tax, as outlined in Article (7) of the current legislation. These businesses will be permitted to register with the NBR before the amendments officially take effect.
Additionally, a transitional rule is included to manage existing stock of sweetened drinks currently within the Kingdom. Tax will only be due on these products once certain conditions are met: the goods are not subject to any tax suspension, they are held for commercial purposes, and the tax due exceeds BD500.
Implementation and Future Considerations
The draft law has been referred to the Council of Representatives’ Financial and Economic Affairs Committee as the primary reviewing body, with input also expected from the Legislative and Legal Affairs Committee. While the law itself doesn’t specify a concrete start date, it stipulates that the implementation date will be formally announced and published in the Official Gazette.
The law maintains flexibility by allowing for the addition of other excise goods, based on agreements within the Gulf Cooperation Council (GCC), through decisions approved by the Cabinet. Furthermore, provisions have been made for expanded refund cases, also subject to Cabinet approval under existing GCC agreements. This indicates Bahrain’s commitment to alignment with regional economic policies and its willingness to adapt the excise duty framework as needed.
The proposed changes also impact potential refunds related to excise taxes, allowing for the Cabinet to approve further cases for reimbursement under GCC agreements, further showcasing a dynamic and responsive approach to economic regulations. These modifications signify a continuous effort to refine and streamline the tax administrative structure within the Kingdom.
Conclusion: A Healthier and More Efficient Tax System for Bahrain
The proposed amendments to Bahrain’s excise tax law represent a significant step towards a more health-conscious and economically efficient system. By introducing a tiered sugar tax on sweetened beverages, the Kingdom aims to discourage the consumption of sugary drinks and promote healthier alternatives. The transfer of administrative control to the NBR promises to streamline tax processes and improve compliance.
This legislation is a clear indication of Bahrain’s commitment to both public welfare and sound fiscal management. Businesses should proactively familiarize themselves with the proposed changes and prepare for registration with the NBR to ensure a smooth transition. For readers interested in learning more about Bahrain’s economic landscape, resources from the National Bureau for Revenue (https://nbr.gov.bh/) offer further detailed information.
