Bahrain is a tax free economy with no withholding tax, no corporate tax (non-oil and gas companies), no income tax and no VAT, no property tax or no production tax, which significantly contributed to a great influx of foreign investors in Bahrain. There are however, certain taxes imposed on oil, gas and petroleum.

The single corporate income tax in Bahrain is levied on oil, gas and petroleum companies at a rate of 46%. This tax is applicable to any oil company conducting business activity in Bahrain of any kind, including oil exploration, production, or refining, regardless of the company's place of incorporation.

Deductions are allowed for taxes and customs and duties, which are paid by the taxpayer. The costs of raw materials, production and management, may also be deducted from taxable income. Capital assets may be depreciated over the useful life of assets.

A municipal tax is payable by individuals or companies renting property in Bahrain. The rate of the tax varies according to the nature of the property, namely: unfurnished residential property, furnished residential property and commercial property.

The only tax on sales or turnover is a tax on gasoline which is levied at a low rate of 12%.

Employers who employ more than 10 employees, irrespective of their nationality, must pay 10% of the employee's gross income to social welfare taxes. The employer's contribution is 7% of gross wages for insurance against old age, disability and death (applicable only to Bahraini employees) and 3% of gross wages for insurance against employment injuries (applicable to all employees). The employee's contribution is 5% of gross wages for insurance against old age, disability and death (applicable to Bahraini employees only).

While there is no existing provision in the law expressly preventing double taxation, the foreign tax paid on income subject to a foreign country's tax system will generally be deductible from the tax imposed on taxable income in Bahrain.