National Bureau for Revenue (NBR) of Bahrain issued the Executive Regulations for the Domestic Minimum Top-up Tax (DMTT). These regulations complement Decree-Law No. 11 of 2024, issued in September, introducing an overall minimum tax of 15% for large multinational enterprises (MNEs) operating in Bahrain. 

Summary of Pillar 2 and DMTT

The Pillar 2 rules, developed by the OECD, set a global minimum tax to ensure that MNEs pay a minimum effective tax rate of 15% on profits in all countries. If an MNE has an effective rate lower than 15%, a top-up tax applies, which can be collected through: 

• Domestic Minimum Top-up Tax (DMTT): A 15% local tax on large MNEs within the jurisdiction implementing this measure.

• Income Inclusion Rule (IIR): The main collection mechanism under Pillar 2 rules, where the ultimate parent entity (SPU) accounts for the complementary tax in its own jurisdiction.

• Under-Taxed Profits Rule (UTPR): It backstops the IIR by allocating the right to collect the top-up tax to other entities in the group according to a proportion based on the number of employees and the value of tangible assets in their jurisdictions. 

Key Aspects of the DMTT Executive Regulations in Bahrain

• Revenue Test: MNEs are subject to the DMTT if their consolidated revenue exceeds €750 million in at least two of the previous four fiscal years. The regulations specify that these revenues must be determined according to the MNE’s consolidated financial statements, with certain adjustments, such as including unrealized gains from investments and extraordinary or non-recurring items. 

• Excluded Entities: The decree-law identifies entities excluded from the DMTT, such as government bodies, international organizations, and non-profit organizations, thus following the OECD recommendations. The regulations provide detailed definitions for these entities and the criteria to be met to be considered excluded. 

• Permanent Establishments: The regulations include a definition of permanent establishment and detail the calculation of the allocation of income and expenses, following OECD standards and principles. It ensures that branches of foreign entities in Bahrain are properly considered within the DMTT’s scope. 

• Qualified Domestic Minimum Top-up Tax (QDMTT) and Safe Harbor: If the DMTT implemented by Bahrain meets certain requirements, it is a QDMTT. It would enable the application of safe harbors for MNEs, reducing compliance burdens by deeming the top-up tax due in Bahrain to be zero for purposes of Pillar 2 rules. 

Relationship Between the DMTT and Transfer Pricing

Implementing the DMTT in Bahrain significantly implies MNEs’ Transfer Pricing policies. Companies must ensure that their related-entity transactions comply with international standards to avoid tax adjustments that may increase their tax burden to document Transfer Pricing methodologies properly and assess their effects on compliance with the DMTT. 

Implications for Multinational Enterprises in Bahrain

The introduction of the DMTT in Bahrain reflects a commitment to OECD initiatives to establish a global minimum tax and align the country with international tax trends. MNEs operating in Bahrain should assess the effects of these regulations on their tax burden and compliance obligations. Companies should review their tax structures and consider possible adjustments to ensure compliance with the new regulations and optimize their regional tax position.

Transfer Pricing, in addition to being more than a tax requirement, can be strategic to boost the success and sustainability of your business. Aligning these policies with your business goals will allow optimizing resources, improving financial management, and complying with international regulations. 

1. Definition of Strategic Goals

It determines how Transfer Pricing can contribute to your overall goals. For example, you might seek to optimize the tax burden, protect intangible assets, improve the competitiveness of a specific subsidiary, or ensure the efficient flow of resources among group entities. 

2. Understanding Value Chains

It analyzes how intercompany operations generate value within the group. It identifies which subsidiaries perform key functions, manage significant risks, or own essential assets. This analysis should be reflected in pricing policies to remunerate each entity appropriately and/or respect the Arm’s Length Principle. 

3. Design of Consistent Internal Policies

It develops clear and documented Transfer Pricing rules supporting your business model. These policies should be flexible to adapt to economic and regulatory changes. Conversely, they should always ensure that transactions comply with the Arm’s Length Principle. 

4. Regular Monitoring and Adjustments

It periodically reviews transfer prices to ensure aligning strategic objectives and current regulations. Economic changes, such as inflation, cost structure, or the emergence of new rules, may require adjustments. 

Aligning Transfer Pricing with business strategy reduces tax risks, strengthens your company’s competitive position, promotes better financial decision-making, and optimizes resource allocation within the group. 

The United Kingdom has decided to implement measures similar to those implemented by the European Union and Australia on public Country-by-Country reporting. It is a commitment to increase tax transparency and combat tax avoidance. Hence, we will address this regulation, its implications, and the preparation of companies.

Country-by-Country Reporting Implications

The Country-by-Country Report (CbCR) requires multinational companies to publish data on their transactions and tax contributions in each jurisdiction where they operate. This approach aims to:

• Increase tax transparency.

• Identify potential risks of tax base erosion.

• Promote responsible tax practices.

Concerning the UK, this measure follows the guidelines previously adopted by the EU and Australia, establishing more strict disclosure standards for large corporations.

Main Regulatory Requirements

The UK legislation establishes that companies must:

1. Report revenues, pre-tax profits, and taxes paid by the country.

2. Disclose the number of employees and tangible assets by jurisdiction.

3. Ensure that this information is publicly available.

It is a significant change in how companies handle their transparency obligations, requiring them to adjust their reporting systems and internal policies.

Effects on Companies

Multinational companies operating in the UK must be prepared to comply with these new requirements. Key challenges include:

• Need to ensure consistency and accuracy in published information.

• The implementation of internal processes to facilitate data gathering and analysis.

• The management of reputational risks related to public disclosure.

In addition, authorities should intensify audits to ensure regulatory compliance.

Preparation for These Amendments

In order to comply with the new provisions, it is essential:

• To have a specialized tax compliance team.

• To implement solid data management systems to report accurately.

• To keep up to date on the specific guidelines of the regulations.

Companies in advance of these amendments will be better positioned to avoid penalties and protect their reputation.

Background

The Singaporean authorities have updated their Transfer Pricing guidelines, requiring domestic-related party loans to comply with the Arm’s Length Principle in their interest rates. It reinforces the need for multinational companies to review their Transfer Pricing practices to ensure compliance with the new regulations.

New Guideline Requirements of Singapore

The recent update to the Transfer Pricing guidelines in Singapore states that related company loans in Singapore must have market-value interest rates. It implies that loans cannot have preferential rates, given that they must reflect terms similar to those available among unrelated parties.

The Arm’s Length Principle in Related Party Loans

Due to this new regulation, the authorities intend to ensure that related party loans comply with the Arm’s Length Principle, thus avoiding manipulating rates to reduce the tax burden. Companies must support the interest rates applied in these transactions against tax adjustments and possible penalties.

Effects on Multinational Companies and Their Financial Strategies

These amendments to the Transfer Pricing guidelines force companies to structure their internal loans thoroughly. Multinationals with transactions in Singapore must ensure that their domestic related-party loans comply with the new regulations, which may entail changes to their financial strategies.

The Significance of Transfer Pricing Documentation and Compliance

In order to comply with the new guidelines, companies must maintain solid documentation supporting the interest rates charged on their related party loans. Otherwise, tax adjustments and penalties can negatively affect a company’s profitability.

Conclusion

The review of Transfer Pricing guidelines in Singapore underscores the importance of transparency and compliance in related party transactions. Companies should take proactive measures to adapt to these new requirements and avoid potential tax risks.

Sustainability and Environmental, Social, and Governance (ESG) criteria have evolved from a trend to an indispensable requirement for global companies. In this context, the new international regulations, such as International Reporting Financing Standards (IFRS S1 and S2), along with regulatory incentives such as the EU Omnibus Package, are shaping a regulatory framework directly affecting Latin American companies. This region has a single opportunity to excel in corporate sustainable management but must face considerable challenges requiring immediate strategic action. 

Impact on Sustainability: Rhetoric vs Reality

• Least Strict Federal Policies: Donald Trump dismantled key environmental regulations, such as the retirement of the Paris Agreement in 2017. In 2025, he signed an executive order reaffirming his pro-fossil fuel policies. Conversely, despite these regressive federal policies, the U.S. private sector is still committed to sustainability. According to a Bloomberg study, over 75% of CFOs in the U.S.A. plan to maintain or increase their investments in sustainability, regardless of political situation. 

• Increasing ESG’s Investment: Although federal policies have loosened, the U.S. private sector maintains its solid commitment to sustainability.  Indeed, 77% of CFOs plan to increase their investments in this scope in 2025, according to a specialized survey performed this year by a recognized professional services company. This information reaffirms that sustainability is still crucial for corporate leaders, investors, and consumers. 

UE Omnibus Package: Streamlining and Competitiveness

The UE Omnibus Package aims to streamline the regulatory burden but requires transparency in disclosing non-financial information. Specifically, the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) will directly affect Latin American companies operating or intending to enter the European market. In Peru, approximately 16% of exports are for Europe, which implies a lot of Peruvian companies aligning with these new regulations. 

In this regard, Peruvian exporters, particularly mining and agro-industrial, will have to fit these standards due to the increased transparency required by Europe in sustainability and supply chain reporting. 

IFRS S1 and S2: Global ESG Disclosure Standard

The IFRS S1 and S2 of the International Sustainability Standards Board (ISSB) provide a standardized framework for disclosing sustainability and climate reporting. These rules align with approaches such as the Task Force on Climate-related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB), making them the most relevant standards for companies aiming to attract sustainable investments.  

According to the IFRS Foundation report, over 30 jurisdictions have adopted or are in the process of adopting these standards in their regulatory frameworks. These regions account for approximately 57% of the Gross Domestic Product (GDP) worldwide and over 50% of global greenhouse gas emissions. 

This environment displays global markets are swiftly progressing in implementing these standards, and companies not aligned with the latter will risk being left behind in an increasingly competitive and regulated environment. (IFRS Sustainability Consultant Content Programme, 2024) 

Latin American Sustainability Regulations: Chile, Mexico, Brazil, and Colombia

These countries, such as Brazil, Costa Rica, El Salvador, Chile, and Mexico, have adopted regulations aligning their non-financial reporting with the IFRS S1 and S2 Rules for listed companies. 

For other type of businesses, Mexico has adopted the NIS (Normas de Información de Sostenibilidad – Sustainability Reporting Standards) recently due to the CINIF (Consejo Mexicano de Normas de Información Financiera – Mexican Financing Reporting Standards Board), which requires private companies, either SMEs or large, operating in Mexico to disclose their financial statements, including 30 Basic Sustainability Indicators (BSI) in their notes. 

Colombia has required listed companies since 2021 to report under the SASB and TCFD standards. This March, voluntary sustainability reporting has been proposed for companies with a turnover above US$10 million (External Circular 100-000002). 

What Should Regional Companies Do as a Strategy?

• Adopt international standards: As regulations in the main global markets align with IFRS S1 and S2, Latin American companies must adopt them to ensure competitiveness. Adapting to these standards is a regulatory obligation and an opportunity to improve transparency, trust, and market perception. 

• Integrate sustainability into the core strategy: Reporting isolated sustainability data is no longer enough. Sustainability must be strategic for innovation, enhance corporate reputation, and increase financial resilience. Companies must incorporate these principles into their organizational culture and long-term goals. 

• Train teams and strengthen governance: In order to comply with sustainability standards and ensure accurate disclosure, companies must have specialized teams, solid measurement systems, and explicit commitment from senior management. In addition, they must ensure that ESG reporting is an integral part of their annual financial reporting. 

• Leverage sustainable financing: The issuance of green and social bonds has reached record levels, and companies can access finance at more competitive rates for projects primarily promoting climate change mitigation, as well as the growing interest in climate adaptation and nature. According to a report by Moodys, global issuance of sustainable bonds should amount to US$1 billion by 2025, similar to 2024, opening up new financing opportunities for Latin American companies. (2025 Sustainable Finance Outlook) 

• Promote forward-looking competitiveness: In an increasingly globalized business environment, regulatory requirements must be anticipated. Companies adopting ESG standards today can access cheaper capital, attract quality talent, and differentiate themselves from less sustainable competitors. 

Conclusion: A Path Full of Opportunities

Latin American companies have a unique opportunity to lead in sustainability globally. Regulatory progress and new international standards, such as IFRS S1 and S2, are creating a transparent and more demanding framework for companies in the region to further this agenda. Adopting these standards ensures competitiveness and access to international markets and represents a strong business strategy for the future. Companies must act now, leading sustainability to be the best positioned eventually.