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End of Service Benefits

How indemnity works in Bahrain — and what it costs employers.

EMPLOYMENTMarch 2026 · 5 min read

Calculation

Years of Service Entitlement Notes
First 3 years ½ month per year Based on last monthly salary
After 3 years 1 month per year Based on last monthly salary
Resignation < 3 years Zero No entitlement
Resignation 3-5 years 50% of above Half entitlement

Tax & VAT Implications

✅ EOSB payments are not subject to personal income tax (Bahrain has no PIT)

✅ EOSB is outside the scope of VAT — it's an employment obligation, not a supply

✅ EOSB provision is deductible for DMTT purposes as an employee cost

⚠️ Bahraini employees covered by GOSI pension — EOSB not additionally payable

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