Bahrain’s Parliament to Vote on 2% Tax on Expat Remittances

Bahrain's Parliament is set to vote on a controversial proposal that would impose a 2% tax on expatriate remittances, a measure aimed at boosting the local economy. The proposal, which was initially rejected by the Shura Council in January 2024, has raised concerns about its impact on the country's financial sector.

Background on the Proposal

The draft law, first introduced in February 2023, has undergone multiple revisions. The original version suggested a tiered tax system, including:

• 1% on transfers under 200 dinars
• 2% on transfers between 201 and 400 dinars
• 3% on amounts exceeding 400 dinars

Certain exemptions were also proposed, such as for investment agreements and capital transfers. Supporters of the tax, including MP Lulwa Al Rumaihi and Dr. Muneer Seroor, argue that the move would reduce Bahrain's dependence on oil revenues and encourage more money to stay within the country.

Concerns Over Financial Impact

However, the proposal has faced strong criticism. Critics warn that such a tax could push expatriates toward alternative, unregulated methods of sending money, such as black markets or cryptocurrencies. This could undermine Bahrain’s status as a global financial hub and potentially contribute to illegal financial activity.

The Shura Council’s Financial and Economic Affairs Committee expressed concerns that the tax could lead to unintended consequences, including increased money laundering and the rise of illegal remittance channels.

The Upcoming Vote

Despite the opposition, the proposal is now moving forward to Parliament for a final vote. A decision is expected by Tuesday, with the outcome set to shape Bahrain's approach to remittances and its broader economic strategy. The debate continues as lawmakers weigh the potential benefits of increased domestic circulation of funds against the risks to the country’s financial stability.

As the vote approaches, Bahrain’s expatriate community and financial experts await the final decision, which could significantly impact the way money is transferred out of the kingdom.