VAT in Bahrain

VAT Services in Bahrain

Value Added Tax, known as VAT, to put it plainly, is an indirect tax charged on the supply of products and services as well on imports. It is utilization tax imposed on value addition in each phase of the supply chain. This is accomplished through the idea of input VAT deduction which permits the business to set off the VAT paid on purchases (Input VAT) with the Vat collected on the business (Output VAT).

SPC WLL can help your business deal with VAT matters through our VAT services by providing VAT registration, VAT calculation, planning and returns.

We put the problems out of sorting out your VAT and ensure that you meet your obligations on time, and also your returns are filed correctly.

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Bahrain’s New VAT Rule 2019

Bahrain is good to join the class of VAT implementing States in GCC from first January, 2019. It will be the third GCC member state after UAE and KSA to execute VAT. While the authorities are working out to execute VAT on first January, 2019, it is significant for businesses to understand the VAT ideas and likewise get ready towards it.

The standard VAT rate in Bahrain is 5%, demanded on all taxable supplies. The structure of the VAT rate in Bahrain is mentioned below:

Bahrain VAT Rate Structure

 

Rate Type Rate of Tax
Standard Rate 5%
Zero-Rated Supplies 0%
Exempt Supplies Nil

 

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According to the above table, generally, the rates of VAT in Bahrain are categorized into Standard Rate, Zero-rate, and Nil rate. The standard rate of VAT at 5% will be demanded on all the supplies require some of which are either zero-rated or exempt from the VAT. The businesses registered under Bahrain VAT are responsible to require VAT at 5% on all taxable supplies and remit the VAT collected to the Bahrain government.

So as to require the correct rate of VAT on the supply of goods, it is significant for the businesses to identify the kind of supplies and decide the VAT applicability. The following steps will assist you with determining the VAT applicability and help you to charge the correct rate of the VAT.

  • Understand all types of supplies you are going to make
  • Know all the supplies which are notified in the law as zero-rated or exempted from the VAT
  • Identify whether any of your supplies are under zero-rated or exempt supplies list.
  • If none of your supplies are under zero-rated list and exempt list, it is comprehended that your supplies are taxable supplies and you have to charge VAT at 5%.
  • If your supplies are under zero-rated list or exempt list, with the exception of those, all other supplies will be taxable and you have to charge VAT at 5%.

Supplies such as exports of goods or services, transportation services for passengers, basic healthcare services etc. are zero-rated. All notified supplies, such as financial services, bare property, houses, etc., are excluded from VAT in Bahrain. On the other hand, these are subject to the conditions laid down in the VAT regulation in Bahrain which is still to be issued.

Who is eligible to pay VAT?

  • A taxable person who sells goods or services in Bahrain
  • A taxable customer who buys goods or services in Bahrain from a foreign supplier under the converse charge mechanism.
  • All merchants who are declared by the Unified Customs Law.
  • Each individual who issues invoices with tax amounts in Bahrain.

Conclusion

The VAT is transaction-based tax, for example, VAT is exacted on each and every transaction which is taxable. It is extremely basic for businesses to comprehend the goods or services they are providing and decide the VAT applicability.