1 June 2015
On 26 May 2015, officials from Bahrain and Portugal signed an income tax treaty. The treaty is the first of its kind between the two countries.
The treaty covers Bahrain income tax payable under Amiri Decree No. 22/1979, and Portuguese personal income tax, corporate income tax and surtaxes on corporate income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted if for a period of more than 90 days an enterprise of one Contracting State is directly engaged in the exploration for or production of crude oil or other natural hydrocarbons arising from the ground in the other State, or when refining crude oil in its facilities in the other State.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
The treaty includes a limitation on benefits article (27). The article includes the provision that the benefits of the treaty will not be granted to a resident of a Contracting State that is not the beneficial owner of the income derived from the other State. In addition, the benefits of the treaty will not be granted if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of the benefits provided by the treaty.
The treaty will enter into force 30 days following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.
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