Value Added Tax (VAT) Registration in Bahrain

Value Added Tax (VAT) Registration in Bahrain

On January 1, 2019, Bahrain introduced the Value Added Tax (VAT) to incentivize businesses. 

Like other GCC (Gulf Cooperation Council) countries, Bahrain Kickstarter VAT at a standard rate of 5% with few exceptions. The move has been instrumental for many Bahrain business owners

The VAT system is excellent for small businesses as it allows them to come off as more significant and more established. This, in turn, aids them in successful ventures. Moreover, foreigners also identify the VAT system with a strong economy.

Taxable entities in Bahrain need to enlist with the National Bureau of Revenue (NBR) to register for VAT. Following registration, a VAT number is assigned to the business.

Read on to learn more!

What is VAT? 

The Value Added Tax, levied by the Bahrain government, is a type of consumption tax placed on a product every time a value is added at any stage of the production chain. VAT helps increase the revenue of a government without imposing any limitations upon anyone’s success or wealth.

In the facilitation of the Gulf Cooperation Council (GCC) Framework Agreement on VAT, Bahrain became the third GCC country to introduce this consumption tax. It was implemented on the first day of 2019 in a phased manner.

Since its inception, VAT has come to many business owners planning on company registration in Bahrain. The value-added tax rate is only 5%, and zero rates and tax exemptions are also available for several goods and services.

Implementation of VAT in Bahrain 

The kingdom of Bahrain has paved the way for VAT introduction in three categories to inspire business set up in Bahrain. 

  • Standard Rate

Bahrain applies a standard rate of 5% VAT to goods and services, barring a select few.

  • Zero Rate

 Certain goods and services such as grocery items, health fees, construction pieces of equipment, etc., are subject to zero rate VAT. 

  • Tax Exemptions

 Certain goods and services such as sales and lease of real estate at a specific location, fees for few institutes, etc., are exempted from value-added tax. 

There are many other goods and services which are out of the scope of VAT.

How to Register for VAT in Bahrain in 2021? 

Bahrain business owners will have to register for VAT in 2021 if their annual turnover exceeds a certain threshold. Investors who intend on starting a business in Bahrain will have to follow the guidelines set by NBR for filing a VAT return.

The five main steps for VAT registration are as follows:

  • First, you will need to create a company profile with the National Bureau of Revenue (NBR) in Bahrain. The NBR is a government agency that is responsible for applying and managing VAT in Bahrain.
  • You will have to fill in the details about your company. These details include taxpayer information, registration information, financial details, personal identification information of the registrant, and so forth.
  • Next, the registrant will have to submit a request for the creation of a profile. If the application is successful, he or she will receive a notification on their email.
  • The applicant will also receive login details.
  • Finally, the taxpayer has to log in to the virtual portal using the available details and finish the registration form.

After completion of the previously mentioned steps, the company will receive a certificate confirming the VAT registration. They will also receive a VAT number, which is also known as a Tax Registration number.

Companies must display the VAT certificate in their business establishment so that it is visible. The certificate includes registration information, date of registration, and other information about the taxpayer.

If any changes occur in the details about the company, it must notify the NBR about the same. If they fail to do so, the NBR can set de-registration in motion.

What Are the Different VAT Categories? 

Upon registration with the NBR, the business owner receives a unique VAT number. Even if an owner possesses control of three different businesses, he will receive three unique VAT numbers.

Any person planning on setting up a company in Bahrain can enlist the following VAT categories:

Mandatory VAT

If a business reaches or is expected to reach an annual turnover between BHD 37,500 and BHD 500,000, it will have to enlist with the NBR for mandatory VAT.

Voluntary VAT

This VAT system applies to those businesses whose annual turnover reaches or is expected to reach over BHD 18,750. These business entities can register voluntarily.

Non-Resident VAT 

Any person who is not a resident of Bahrain but intends on company registration in Bahrain will have to enlist with the NBR.

Tax Group VAT Registration 

Tax group VAT registration is also allowed in Bahrain. However, all the companies of the tax group shall be involved in some economic activity. Also, the companies shall be Bahrain residents for taxation purposes.

Bahrain is touted to become the new global business hub, thanks to its business-friendly laws and accommodating taxation system. If you are planning on setting up a company in Bahrain, we can help. Get in touch with us today!

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