The France-Bahrain tax treaty: no withholding tax, a clause reserved for taxed residents.

The France-Bahrain tax treaty does not set any withholding tax rates on dividends, interest, and royalties: these incomes are taxable only in the recipient's country. The first point to read is Article 19, paragraph 6: the treaty does not apply to a resident of Bahrain who is not subject to tax there on the income in question, except for two exceptions related to the Gulf Cooperation Council. This page presents the articles we have read in the consolidated text and explains what it does not cover.

A text from 1993, an amendment from 2009, and the MLI since the end of 2022

The convention was signed in Manama on May 10, 1993 and entered into force on August 1, 1994. An amendment, signed in Paris on May 7, 2009, entered into force on February 1, 2011. The administrative list of conventions classifies it among those which concern income, wealth and inheritance (BOI-ANNX-000306, of April 29, 2026).

The convention is also amended by the multilateral convention (MLI). According to the BOI-ANNX-000511 list, the effects in France begin on January 1, 2023, for taxes withheld at source and on December 1, 2022, for other taxes. The consolidated text published by the French tax authorities adds a clause before Article 1: a benefit of the convention is not granted for an item of income if obtaining that benefit was one of the principal objectives of an arrangement, unless granting it is consistent with the object and purpose of the convention.

Dividends, interest, royalties: the state of the beneficiary, without limit

The text therefore does not contain a table of maximum rates, as is the case in most conventions. Article 8, paragraph 2, further allows a resident of Bahrain who receives dividends from a French company to claim a refund of the French withholding tax relating to those dividends.

This rule should be read in conjunction with Article 19, paragraph 6, the MLI clause and the concept of resident in Article 4.

Article 19, paragraph 6: the Gulf clause

Paragraph 6 addresses income covered by Articles 8 to 11. It excludes the provisions of the convention for a resident of Bahrain who is not subject to tax there on the income in question. It provides for two exceptions. The first concerns a company in which more than 50% of the shares, units, or other rights are held, directly or indirectly, by member states of the Cooperation Council for the Arab States of the Gulf, their public entities or institutions, or by citizens of those states. The second concerns a citizen of a member state of that Council.

This is the particularity of this text: the status of resident is not sufficient to invoke articles 8 to 11. The application to a person depends on their taxation in Bahrain on the income in question and their nationality, and is verified on the full text with a professional of Bahraini law.

Capital gains: four cases, two holding thresholds

Article 11 distinguishes:

• the buildings (§ 1 a): taxable in the State where they are located; ;
• shares in companies whose assets consist of more than 80% real estate (%) (§ 1 b): gains may be taxed where the buildings are located, if the legislation of that State treats them as real estate gains; ;
• other assets (§ 2): taxable only in the State of residence of the transferor, unless connected to a permanent establishment or a fixed base in the other State; ;
• substantial participation, above 25 % of the company's profits (§ 3): taxable in the State of residence of the company.

Who is a resident?

For France, Article 4 defines a resident as a person subject to tax in France by virtue of their domicile, residence, or place of management; for Bahrain, a person domiciled or having their place of management in Bahrain. The full text contains further details, not repeated here. For Bahrain, the criterion is therefore not tax liability: Article 19, paragraph 6, treats separately a resident of Bahrain who is not subject to tax there. For an individual resident in both States, paragraph 2 applies, in order, the permanent home, then the center of vital interests, habitual residence, nationality, and finally the agreement between the competent authorities. For a legal entity, it is the place of effective management.

When the convention applies, its notion of resident takes precedence over French tax domicile (article 4 B of the CGI), according to the BOFiP (BOI-INT-DG-20-10-10, § 40).

Article 19, paragraph 5, adds a reservation: the State of legal residence may refuse the exemptions or reductions of the convention to a person who is resident in the other State only because of the criterion of nationality.

Employees: 183 days "during the fiscal year in question"«

Article 13 reserves the taxation of salaries to the State of residence, unless the employment is exercised in the other State. The exception in paragraph 2 is subject to three conditions: a stay that does not exceed a total of 183 days during the tax year in question, an employer who is not a resident of the other State, and remuneration that is not borne by a permanent establishment or fixed base in that State.

The text we read makes no mention of "twelve consecutive months" or a calendar year; it refers to the fiscal year in question. We did not see the definition of this year for Bahrain. Paragraph 3 provides professors and researchers with an exemption of up to 24 months from their initial arrival.

Stays of 175 days: numerical example (fictitious profile)

Situation. A fictional engineer, resident of France, is employed by a French company. During the fiscal year in question, he undertakes three missions to Bahrain: 90, 55 and 30 days.

Issue. He wants to know if the 183-day benchmark of Article 13 has been exceeded.

Strategy. He adds up his days of presence over the fiscal year, then has the other two conditions examined: the employer and the permanent establishment.

Result. His assignments total 175 days: the 183-day threshold is not exceeded, with a margin of 8 days. An additional 10-day assignment would bring the total to 185 days: the threshold would be exceeded by 2 days. This is not sufficient to reach a conclusion, as the conditions relating to the employer and the permanent establishment still need to be examined.

Pensions and public functions

According to Article 14, private pensions are taxable only in the state of residence, subject to Article 15. Pensions paid under social security legislation are taxable in the state that pays them. Article 15 reserves public remuneration for the paying state.

Fortune and inheritance

Fortune (article 17). Real estate is taxable in the state where it is located if its value exceeds the total value of certain other assets, which the text lists but which we will not repeat here. Paragraph 5 stipulates that, for a resident of France who is a citizen of Bahrain without French nationality, assets located outside France are not included in the tax base for the French wealth tax (ISF) for five years. Paragraph 6 is a most-favored-nation clause for the benefit of Bahraini residents with respect to the Gulf States. The text refers to the wealth tax (ISF). Its application to the French real estate wealth tax (IFI) is not established by the sources consulted, and this page does not address it.

Successions (article 18). Real estate is subject to inheritance tax only in the state where it is located. Assets connected with a permanent establishment or fixed base are taxable in that state. Other assets are taxable only in the state where the deceased was resident at the time of death. The convention therefore applies to inheritances. Gifts are not addressed here.

Eliminating double taxation in France

Article 20 stipulates that tax paid in Bahrain is not deductible from taxable income in France; a tax credit is granted. For income covered by Articles 6, 11, and 12, the credit equals the tax paid in Bahrain, up to a maximum of the corresponding French tax. For other income, it equals the amount of the corresponding French tax. For wealth, the credit equals the Bahraini wealth tax, up to a maximum of the corresponding French tax. Bahrain applies its own legislation.

Three other provisions to be aware of

• Residence in France (art. 19 § 3). Residents of Bahrain who have a private residence in France, without having their tax domicile there, are exempt from income tax established on the basis of rental value.
• Hydrocarbons (art. 6 § 2). Income that a company resident in France derives from the exploration or direct production of hydrocarbons whose deposits are in Bahrain is taxable in Bahrain according to its legislation.
• Exchange of information (art. 22 A). A state cannot refuse information solely on the grounds that it is held by a bank.

What this page does not cover

Bahraini tax rates, the Bahraini tax year, application to the French wealth tax (IFI), gifts, and the amicable settlement procedure are not addressed. The tax authorities' commentary (BOI-INT-CVB-BHR, 2012) on the French wealth tax (ISF) for Bahraini residents owning property in France is not transposed to the IFI.

What changes depending on your situation

• Your residence as defined by the convention, and your actual taxation in Bahrain on the relevant income.
• Your nationality, for Article 19, paragraphs 5 and 6, and Article 17, paragraph 5.
• The nature of the income: dividend, interest, royalty, capital gain, salary, pension.
• The number of days spent in each state during the fiscal year.
• The nature and location of your property.

An article should be read in light of the facts in your case, and no result is guaranteed in advance.