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Value Added TAX

VAT in Bahrain

Bahrain is one of the Persian Gulf’s leading Sovereign nation. Bahrain has transformed itself as one of the world’s most successful economies. The government of Bahrain has set up an easy business set up for foreigners to invest in the country while offering them a business-friendly environment.

The Bahraini Government also monitors closely the implementation of the tax scenario, which is a duty of each and every businessman.

The government of Bahrain made it easy for the investors to pay tax, if you are planning to open a business in Bahrain then it is important for you to know about Tax Service and the process of its submission. Now let’s take a look on what is VAT (Value Added Tax) in Bahrain. Value Added Tax, known as VAT, is an indirect tax that is charged on the provision of goods and services and on imports.

In fact, at any stage of the supply chain, it is the sales tax imposed on value-added. It is done by the input VAT deduction principle, which enables the company to balance off the VAT charged on purchases (input VAT) with the VAT received on sales (output VAT)


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How Bahrain’s Value Added Tax Policy works? 

The businesses licensed under VAT serve as the government’s designated agent for collecting and remitting VAT, and the entire responsibility of paying 5 percent VAT is on the final consumer. When buying any goods or services subject to the tax, the end consumer pays VAT.

Companies in turn pay the National Bureau for Revenue VAT collected from the final consumer and recover the added value paid to their suppliers. 

The following goods will not be paid at VAT: 

  • Basic foodstuffs 
  • Public Medical Care 
  • Transport to passengers 
  • Petroleum and gas sector
  • International flights

You will file a tax return annually with the NBR and pay the surplus of your sales tax over yourOutput tax. If your input tax exceeds your output tax, you can seek a refund from the NBR for this disparity or carry it forward as a credit to be used against potential VAT obligations.

Bahrain’s Transition to a VAT System: Navigating the Landscape


Bahrain, a small but influential nation in the Persian Gulf, has made significant strides in economic diversification and modernization over the years. As part of its ongoing economic reform agenda, the government of Bahrain introduced a Value Added Tax (VAT) system, aligning the nation with international tax standards and fostering a more sustainable revenue base.

This comprehensive document delves into the world of VAT in Bahrain, exploring its introduction, implementation, and implications. We’ll examine the context in which VAT in Bahrain was introduced, its scope, how businesses have adapted, and the impact on both consumers and the economy. By the end of this extensive analysis, readers will gain a profound understanding of VAT in Bahrain and its broader implications.

The Genesis of VAT in Bahrain
Bahrain, a prominent player in the Gulf region, recognized the need for economic diversification and modernization to ensure its long-term sustainability. The nation is endowed with significant hydrocarbon resources, but these are finite and subject to price fluctuations. In the face of such challenges, the government of Bahrain decided to implement a VAT in Bahrain system as a strategic step towards creating a more sustainable revenue base.

1.1 Economic Diversification in Bahrain

Economic diversification has been a key driver of Bahrain’s vision for the future. The nation’s leadership recognized the vulnerability of an economy heavily dependent on oil revenues. It sought to diversify by promoting sectors like tourism, finance, and manufacturing, all of which have the potential to contribute significantly to the nation’s GDP.

1.2 The Role of VAT in Bahrain Economic Diversification

VAT plays a crucial role in economic diversification by providing a reliable and steady stream of revenue. While oil revenues can fluctuate due to external factors such as global oil prices, VAT revenue remains more stable. This stability allows the government to continue funding its various initiatives for economic diversification and development.

1.3 Aligning with International Standards

In implementing VAT in Bahrain aims to align itself with international tax standards. This alignment not only promotes transparency but also strengthens the nation’s credibility as a destination for foreign investment. Bahrain’s adherence to these standards enhances its reputation as a jurisdiction with a well-regulated and internationally recognized tax system.

Understanding VAT: A Global Perspective
Value Added Tax, commonly known as VAT, is an indirect tax applied to the consumption of goods and services. It is considered an equitable way to collect tax, as it is borne by the end consumer rather than the businesses in the supply chain. VAT in Bahrain systems vary worldwide in terms of rates, exemptions, and administrative procedures.

2.1 The Basics of VAT

At its core, VAT operates on the principle of taxing the value added at each stage of production and distribution. Businesses collect VAT from their customers (output VAT) while also paying VAT on their purchases (input VAT). The difference between the output VAT and input VAT is remitted to the tax authorities.

2.2 The Global Prevalence of VAT

VAT is one of the most common forms of taxation worldwide. It is used by over 160 countries, including members of the European Union, India, and many others. Its ability to generate a stable stream of revenue has made it a preferred choice for governments seeking to diversify their tax base.

Bahrain’s VAT Implementation: A Closer Look
The introduction of VAT in Bahrain involved extensive preparations, legal amendments, and public awareness campaigns.

3.1 The VAT Rate

Bahrain implemented a standard VAT rate of 5%, which applies to most goods and services. However, some items, such as basic foodstuffs and healthcare services, remain exempt from VAT in Bahrain. This rate aligns with the global average for VAT in Bahrain, making it competitive for businesses.

3.2 Mandatory Registration

Businesses with annual supplies exceeding the mandatory registration threshold are required to register for VAT in Bahrain. This process involves submitting an application to the National Bureau for Revenue (NBR). Registered businesses must comply with VAT in Bahrain regulations, maintain proper records, and submit regular VAT returns.

3.3 Voluntary Registration

While some businesses may fall below the mandatory registration threshold, they have the option to register for VAT in Bahrain voluntarily. This can be advantageous, as it allows them to recover input VAT on their expenses and present themselves as VAT-registered entities.

3.4 Input VAT and Output VAT

Businesses that are registered for VAT must understand the concepts of input VAT and output VAT. Input VAT refers to the VAT paid by a business on its purchases. Output VAT, on the other hand, is the VAT collected from customers on sales. The business must remit the difference between output VAT and input VAT to the tax authorities.

3.5 VAT Compliance and Administration

The National Bureau for Revenue (NBR) plays a pivotal role in administering VAT in Bahrain. Businesses must adhere to the NBR’s guidelines on VAT compliance, including registration, record-keeping, and reporting.


vat registration services

VAT Registration 

Companies dislike the term ‘turnaround consulting’ because it represents failure. 


VAT Submission

Companies dislike the term ‘turnaround consulting’ because it represents failure. 

vat in bahrain

About VAT

Companies dislike the term ‘turnaround consulting’ because it represents failure. 


VAT in Bahrain

Companies dislike the term ‘turnaround consulting’ because it represents failure. 

vat-calculation (1)

VAT Calculation

Companies dislike the term ‘turnaround consulting’ because it represents failure. 

How can we help?

We help our esteemed customers with every tax-related issue. By keeping your company  module in mind, we provide them with legal and unrivaled taxation solutions. We have an experienced team with adequate tax sector expertise.

Our specialists have in-depth awareness about VAT in Bahrain. To achieve high-end results we use hands on technology, tools, and software. If you think why avail tax registration services, the would be to professionally deal with corporate tax services if you don’t know about the specific procedure. It takes a lot of time and money to do the real and the right thing as well.


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