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Article 10 introduces the Substance-based Income Exclusion (SBIE), which allows MNEs to reduce their taxable income based on tangible economic activity in Bahrain. The exclusion is calculated as the sum of specific percentages of payroll costs and the carrying value of certain tangible assets located within the Kingdom. According to the text, payroll costs are excluded at a rate between 5% and 9.6%, while tangible assets are excluded at a rate between 5% and 7.6%. These percentages and the specific rules for their application are further defined in the Regulations to ensure alignment with OECD Pillar Two international standards.
Chapter 3 - Effective Tax Rate and Safe Harbour
Article 10 - Substance-based Income Exclusion
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