The Gulf launched a VAT regime for all its states in January 2019. The countries falling in the Persian Gulf territory are Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates (UAE) and Bahrain. Along with other countries of the Gulf, the Kingdom of Bahrain also braced for this new tax.
Introduction of VAT in Bahrain 2019
With the introduction of Value Added Tax (VAT) in Bahrain and the other Gulf countries in January 2019, Bahrain became the third country out of the six Gulf Cooperation Council (GCC) member states to introduce VAT. This was the result of the 2016 Unified VAT Agreement for the GCC states. The Agreement established the basis of a well-coordinated VAT union across the member states of the GCC. Likewise, Bahrain, along with the other states, agreed to weave the key principles spelled out by the Agreement into their domestic VAT legislation.
Consequently, the Bahraini tax opened its VAT registration portal especially for those businesses which require VAT registration, and to make the whole procedure.
The National Bureau for Taxation (NMT) mandated that any resident business selling taxable supplies worth more than BD 5 million per annum to register by 20 December 2018. However, the Non-resident businesses must register immediately.
How to go ahead with VAT Registration in Bahrain
1. The Documents
To register for VAT in Bahrain, the following information must be provided by you:
- Name of the company
- Commercial Register details
- Details of Director or Administrator, including tax number
- Estimates of taxable sales, imports, and exports
- Latest audited financial statements
2. Necessities for VAT payments
As Bahrain implements the new VAT regime from when it was imposed in January, the invoices must contain:
- Identifying number
- Supplier's VAT number
- Where the customer has to 'self-account', a statement to that effect and the customer's VAT number.
3. Registration through the National Bureau for Taxation (NBT) Online Portal
Bahrain's National Bureau Taxation (NBT) has developed an online portal for Value Added Tax (VAT). In order to register for VAT online through the NBT portal, taxpayers must first create an NBT profile. First, you must fill in the NBT profile form and provide the following information and documents:
- Legal name, address, contacts details.
- Commercial registration details.
- Financial information (annual value of supplies, expenses, imports and exports).
- Registrant details- Name, ID number, DOB.
- Documentation- Company Registration certificate, audited financial statements, registrant ID.
After the submission of the information required by the NBT, submit the profile creation request. After the approval of your NBT profile, login details shall be provided to you with access to the VAT registration form. After filling and submitting the VAT application form, the NBT will have it reviewed and finally grant the VAT certificate.
You can access VAT registration through NBT by clicking on the following link
4. VAT Guidelines
Over the course of the implementation period, taxpayers must abide by the following guidelines from the tax authorities on VAT.
- A debit note for the original invoice should be issued with the correct VAT indicated for cases in which invoices were issued and/or payments made prior to 1 January 2019 for post-implementation supplies.
- Price will be VAT inclusive for pre-January 2019 contracts which are silent on the VAT treatment.
5. Crucial Points You Ought to Know About VAT in Bahrain.
- Firstly, remember that the VAT rate for Bahrain is 5%, the standard GCC rate.
- Nonetheless, a zero rate is applicable for exceptional cases which will be mentioned later in this article.
- Note that VAT can also be suspended if the imported goods are under a customs suspension.
- Businesses in Bahrain supplying taxable goods or services are mandated to register for VAT, as mentioned by the GCC unified Agreement.
- These businesses earn annual revenue of than USD 100,000 or more.
- Businesses with annual revenue between USD 50,000 and 100,000, have the choice of voluntary registration.
- Whereas for other businesses, voluntary registration is possible if expenses exceed the threshold. (The voluntary registration option was added with start-up businesses with no turnover in mind, to enable them to register for VAT).
- Contracts authorized only to provide taxable supplies to the public sector should be treated as zero-rated supplies. Even if they are fully or partially submitted after the start of VAT in Bahrain in January 2019.
- This zero-rating should continue until the contract renewal date, or 31 December 2022.
Zero Rate Category
Through a zero rating, businesses in Bahrain can recover any VAT they paid on costs. A Taxable entity which makes only zero-rated supplies and goods may request to be excluded from the Mandatory Registration requirement for VAT purposes in accordance with the conditions that will be stated in the Executive Regulations.
In Bahrain, the following are the zero-rate categories:
- Cross-border transportation of goods and passengers within the GCC and from/to the GCC
- Local transport
- Exports of goods or services out of implementing GCC states or non-implementing GCC states
- Gold, silver, and platinum for investment purposes
- First supply after the extraction of gold, silver or platinum
- Supply of goods to areas under customs suspension system
- Re-export of temporarily imported goods for the for the purpose of repair, maintenance or processing
- Medicines, main medical services, and medical equipment
- Education services
- Newly constructed buildings
- Petroleum, petroleum derivatives, and Gas
- Essential food items as stated under the GCC unified agreement.
Exemptions from VAT in Bahrain
The VAT regime is extremely meticulous and has left no stones unturned, identifying the few business categories which shall be exempted from VAT. They are:
- Financial services (except for fee-based services)
- Supply of Peer Land
- Supply of Real estate
- Imports of personal items and gifts carried in travelers' personal luggage and with foreign people coming to the Kingdom for the first time
- Importation of goods if the final destination country is exempt from VAT or subject to a zero-rate
- Diplomatic exemption as per GCC customs law
- Goods and services in the Kingdom for Military services
- Importation of requirements for people with special needs.
Penalties for Non-compliance with VAT in Bahrain
Failing to adhere to the new VAT Law, businesses will be addressed for foul play with penalties. Following are the cases in which penalties will be imposed for non-compliance and the respective penalty.
- Failing to register within the required period for more than 60 days will be penalized a maximum 10,000 BHD.
- Failing to submit a VAT return or not making a payment within the required period for more than 60 days will be subject to penalties between 2.5% to 5% of the due tax amount.
- Providing incorrect information will be subject to penalties between 5% to 25% of the due tax amount.
- Tax evasion offenses where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation will face prison for a period between three to five years and a penalty equal to the due tax, but no more than three times the due tax.
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