Following an agreement by the GCC countries to implement a 5% VAT, Bahrain applied this rate to goods and services on January 1st, 2019. This was later raised to 10% on January 1st, 2022. However, certain goods and services are subject to 0% VAT rate, while others are exempt (National Bureau for Revenue, n.d.).

2. Basics of VAT in Bahrain

2.0 How does VAT work?

VAT is collected at every stage from the initial production to the sale of the supply chain as illustrated below:

Figure 1: VAT Process - NBR

When purchasing selected goods and services, consumers pay businesses the VAT cost. Businesses then pay the National Bureau for Revenue (NBR) the total amount of VAT collected from all their customers’ purchases. The businesses also recover the VAT they paid to their suppliers (National Bureau for Revenue, n.d.).

2.1 VAT Treatments and Policies

The VAT treatments and policies vary depending on the nature of the

goods and services (National Bureau for Revenue, n.d.).

● Standard Rated Items: A rate of 10% VAT is applied on these goods and services

● Zero-Rated Items: Supplies are subject to VAT, however the VAT rate applied is 0% and the Input VAT may be deducted

● Exempt Items: Input VAT may not be deducted and no VAT is charged on these supplies

● Out of Scope Items: Supplies are kept out of the scope of VAT

2.1.0 Examples

Figure 2: VAT Rates Examples

2.1.0.1 Explanations

● Food Industry:

○ Food items included in the GCC list of basic food items are subject to a VAT rate of 0%.

● Education:

○ Educational services provided free of charge at Government schools are out of VAT scope.

○ Student accommodation provided by educational institutes are subject to a VAT rate of 0% (National Bureau for Revenue, n.d.).

For more examples refer to the NBR's website

3. VAT Registration in the Kingdom of Bahrain

VAT Registration is the process through which a VATable individual or entity requests enrolment for VAT. This individual or entity will later on be assigned a VAT account number (National Bureau for Revenue, n.d.).

Only individuals and entities that successfully register with the National Bureau for Revenue (NBR) will be permitted VAT refunds (National Bureau for Revenue, n.d.).

3.0 Registration of Residents

Any individuals or entities engaged in an economic activity in the

Kingdom of Bahrain, regardless of whether the activity is conducted through an establishment, social media or any other means, irrespective of whether they have a commercial registration (CR).

The registration of residents with NBR is mandatory or voluntary based on the annual VATable supplies (National Bureau for Revenue, n.d.).

● Mandatory Registration: Required if annual VATable supplies (including standard and zero-rated) exceed BHD 37,500 (National Bureau for Revenue, n.d.).

● Voluntary Registration: Available for individuals or entities with annual supplies over BHD 18,750 (National Bureau for Revenue, n.d.).

3.1 Registration of Non-Residents

Non-residents have different registration requirements and they are as follows (National Bureau for Revenue, n.d.):

● Non-residents (without a fixed place of business or establishment) must register for VAT within 30 days of their first VATable supply to non-VAT entities in the Kingdom of Bahrain

● Non-residents supplying goods and services to VATable entities in the Kingdom of Bahrain are not obligated to register for VAT with NBR. Instead, VATable entities receiving those goods and services must report the VAT due under the reverse charge mechanism in their VAT return.

3.2 Deregistration

If a person no longer meets the criteria to be registered for VAT, they must deregister. This is done through the submission of a request of deregistration on the NBR’s portal.

3.3 How to register for VAT?

Figure 3: VAT Registration - NBR

For more information refer to the NBR’s VAT Registration Page

4. VAT Return

A VAT return is an electronic form submitted to the NBR by a VAT payer at the end of each VAT period. The form shows the VAT payer’s Net VAT position and summarises the value of the supplies and purchases made by a VAT payer during the VAT period. The VAT periods are monthly, quarterly and yearly. These periods depend on multiple factors outlined on the NBR VAT Returns Page.

5. Penalties of VAT offences in Bahrain

Figure 4: Penalties of VAT offences

For more information refer to Summary of VAT Executive Regulations

6. Tax Invoices

A VATable person is required to issue VAT invoices of supplies of goods and services made in Bahrain, including the case of a deemed supply. Below is an example of a VAT invoice:

Figure 5: VAT Invoice

6.0 Due Date of VAT invoice

A VAT invoice must be issued by the 15^th of the month following the month during a VAT due date was triggered.

6.1 Simplified VAT invoice

An individual may issue a simplified VAT invoice, which requires less detailed information, when the supply is provided to an individual un-registered for VAT in the Kingdom of Bahrain or when the supply does not exceed BHD 500 (including VAT).

Figure 6: Simplified VAT Invoice

6.2 Requirements of VAT invoice

The information that must be included in a VAT invoice is as follows (National Bureau for Revenue, 2018):

· The label “VAT invoice” or "Tax Invoice"

· Name of supplier

· Address of supplier

· VAT Account Number of the supplier

· Name of customer

· Address of customer

· Sequential VAT invoice number

· Date of issue of VAT invoice

· Date of supply or date of payment, if different from the date of issue of the VAT invoice

· A description of the supply

· Quantity of the goods provided

· Value of the supply and unit price in BHD (exclusive of VAT)

· Value of discount, if any, and the net value in BHD (exclusive of VAT)

· Total amount due in BHD (inclusive of VAT)

· VAT rate and amount of VAT due in BHD (per line item where the VAT rate is different per line item)

· Exchange rate applied when a foreign currency is used

· Where a transaction is exempt from VAT, it should be clearly stated

· Where the profit margin scheme is used, a reference that VAT has been charged based on the profit margin mechanism

For more information refer to the VAT General Guide Version 1.11 by NBR (Page 79)

6.3 Designing your tax Invoice

The checklist below could be used to verify that a tax invoice has all the required details:

Figure 7: VAT Invoice Checklist Template

Figure 8: VAT Invoice Sample Labelled

The image above illustrates a VAT invoice that includes all the necessary labelled

details.

7. Appendix: Types of Supply under VAT

The NBR defines “Supply” as any form of goods or services in exchange for consideration in accordance with provisions of the VAT Law (National Bureau for Revenue, n.d.).

7.0 Deemed Supplies

It is when a person supplies goods or services for free. For VAT purposes, these supplies are not considered as supplies of goods and services. Certain conditions must be met for a VATable person to be considered as making a deemed supply of goods or services and they are as follows:

1. The goods are no longer used for the purpose of the individual’s economic activity or to make non- VATable supplies. This is only applicable when the input VAT was recovered on the goods in the past.

2. An individual de-registers for VAT and is still in possession of goods on which VAT has already been recovered in the past. The person is regarded as making a deemed supply of goods at the time of de-registration.

3. The individual provides services for no consideration (free of charge) and has recovered the VAT charged on the expenses. As long as the individual provides these services for free, they are considered to be making a deemed supply of services.

4. A person provides goods for free and has recovered the VAT charged on acquiring these goods. The VATable individual is making a deemed supply of goods when he supplies the goods for free.

However, there are some exceptions, such as low value samples for commercial purposes, which are specimens intended to promote sales.

8. Index

1. VATable

○ It is goods or services on which VAT has to be paid (Cambridge Dictionary, n.d.).

2. Commercial Registration (CR)

○ A legal document issued to investors when they register their establishment in the Kingdom of Bahrain with the Ministry of Industry & Commerce (Information and eGovernment Authority, n.d.).

9. References

1. Cambridge Dictionary (n.d.). VATable. In: Cambridge Dictionary. [online] Available at: https://dictionary.cambridge.org/dictionary/english/vatable.

2. Information and eGovernment Authority (n.d.). Commercial Registration (CR). [online] bahrain.bh. Available at: https://bh.bh/new/en/business-cr_en.html.

3. National Bureau for Revenue (2018). KINGDOM OF BAHRAIN VAT GENERAL GUIDE VAT General Guide -Version 1.11. [online] Available at: https://s3-me-south-1.amazonaws.com/nbrproduserdata-bh/media/Vp8xEnJ1ACFiAnBuza9HEsWWcYvuD9WRKl566jH2.pdf. (Updated: August 6, 2024)

4. National Bureau for Revenue (n.d.). VAT Registration. [online] National Bureau for Revenue. Available at: https://www.nbr.gov.bh/vat_registration.

5. National Bureau for Revenue (n.d.). VAT Treatments and Policies. [online] National Bureau for Revenue. Available at: https://www.nbr.gov.bh/VAT/vat_treatments_and_policies.

6. National Bureau for Revenue (n.d.). What is VAT? [online] National Bureau for Revenue. Available at: https://www.nbr.gov.bh/VAT/what_is_vat.