Tax treaty between Bahrain and The Netherlands signed

18 April 2008

A tax convention is signed on 16 April 2008 in the Hague, The Netherlands between the Bahraini Minister of Finance, Sheikh Ahmed bin Mohammed Al Khalifa and The State Secretary of Finance of the Netherlands, Mr Jan Kees de Jagerthe Netherlands.

This convention regulates taxes on income, capital gains and avoidance double taxation. The convention is meant for the prevention of fiscal evasion and exchange of fiscal information.

The commercial ties between Bahrain and the Netherlands are increasing at a great pace. The convention improves the conditions for investments both in Bahrain and in The Netherlands. Especially the certainty with respect to the tax treatment of income and capital is important for companies that want to invest in either country. Moreover, generally a tax treaty reduces the taxpayers’ administrative burden, because it is no longer necessary to report items of income in both countries.

The convention primarily aims to contribute to the further development of the economic relations between the Netherlands and Bahrain and to promote the mutual investments between both countries. It constitutes a complement to the investment protection agreement that has been signed in 2007 which contains binding engagements regarding the treatment of Dutch investments in Bahrain and vice versa. The convention has yet to be submitted for parliamentary ratification in The Netherlands and Bahrain.

In the convention the taxing rights regarding the income of both individuals and businesses are determined. In principle there are no withholding taxes on dividends, interest and royalties. This may boost Bahrain as an interesting country for Dutch companies for investments and vice versa. At the request of The Netherlands several anti-avoidance provisions have been included.

Both countries retain the right to tax profits made with building sites, construction, assembly or installation projects if these activities last more than twelve months.

The exchange of information laid down in the treaty is in conformity with the OECD Model Tax Convention 2005 and thus fits with the Netherlands’ and Bahrain’ s commitment toward the work of the OECD’s Global Forum on Taxation.

If you require more information on this subject, or if you wish concrete advice on your personal situation, please call  our office at the number +31 - 10-2010466 or contact us via e-mail.  

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Source: based on a press relase by the Dutch Ministry of Finance, The Hague, 16 April 2008