Capital Gains Taxation in Bahrain
Definition of Capital Gains
In Bahrain, capital gains are defined as profits or gains derived from the disposal of capital assets. Capital assets include:
- Real estate properties
- Stocks and shares
- Bonds and debentures
- Business assets
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
Tax Rates
Capital gains in Bahrain are taxed at a flat rate of 0%. This means that individuals and businesses do not have to pay any tax on profits realized from the sale or disposal of capital assets.
Legal Framework
The taxation of capital gains in Bahrain is governed by the following legal provisions:
- Income Tax Law (Decree No. 14 of 2018)
- Article 14: Defines capital gains as profits or gains derived from the disposal of capital assets.
- Article 15: Specifies that capital gains are exempt from income tax.
Policy Objectives
The 0% capital gains tax rate in Bahrain is designed to encourage investment and economic growth. By eliminating the tax burden on capital gains, the government aims to attract foreign investment and stimulate domestic investment. This policy is in line with Bahrain's overall economic development strategy, which seeks to diversify the economy and create a more favorable business environment.
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