Manama, 7th December 2017: On 5th of December 2017, after a very short round of final consultations the Kingdom of Bahrain was named by the European Union (EU) as a non-cooperative jurisdiction for tax purposes. This list was based on criteria around perceived approaches to transparency and information exchange, fair tax competition and implementation of the OECD’s Base Erosion and Profit Shifting (BEPS) standards.
According to the EU statement, Bahrain’s inclusion was due to the Kingdom not covering all EU Member States for the purpose of automatic exchange of information; having apparently not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended; facilitating offshore structures and arrangements aimed at attracting profits without real economic substance; not applying the BEPS minimum standards; and not committing addressing these issues by 31 December 2018.
The Kingdom of Bahrain strongly believes that it cannot be considered a tax haven as, , it is globally recognized for the strength and transparency of its financial regulatory infrastructure. Contrary to the EU statement, on 29th June 2017, Bahrain signed both the OECD Convention on Mutual Administrative Assistance in Tax Matters (the Convention) and the Multilateral Competent Authority Agreement (the MCAA), allowing Bahrain to collect information from its financial institutions and automatically exchange that information on a yearly basis with its fellow Convention and MCAA signatories.
This will be ratified once both the Convention and MCAA have been approved by the Kingdom’s National Assembly, as required by Bahraini law, A process which has already commenced The OECD statement can be found here: https://www.oecd.org/tax/exchange-of-tax-information/bahrain-expands-its-capacity-to-fight-international-tax-avoidance-and-evasion.htm.
Again, as part of the continuing Common Reporting Standard (CRS) initiative Bahrain has already communicated to the Global Forum on Transparency and Exchange of Information its intention to exchange tax information automatically with all EU member states. Furthermore, on 5th December 2017, the Bahrain-US FATCA Inter-Governmental Agreement was approved by the National Assembly, whilst the Kingdom has signed 51 bilateral Tax Treaties which allow for exchange of information for tax purposes. Included in these treaties are 17 treaties with EU member, several of which have already been used to request information from Bahrain.
Bahrain is also an active member of the Global Forum on Transparency and Exchange of Information and it strives to ensure that it cooperates fully with its tax treaty partners and fellow Global Forum members, many of whom are EU member states, to ensure a full and fair exchange of information for tax purposes. Moving forward, Bahrain will commit to be a member of the Inclusive Framework on BEPS which brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD / G20 BEPS Package.
Bahrain will initiate dialogue with the EU on this matter, to ensure understanding and recognition of the Kingdom’s efforts to ensure financial transparency, international cooperation and a robust regulatory environment.