The FAQs intend to assist VAT payer in understanding the implementation of VAT in Bahrain. The content is simplified to effectively summarize complex legal content covered in the VAT Law and the VAT Executive Regulations (together referred to as the ‘VAT legislation’). In the event of any conflict between the content of this document and the provisions of the VAT legislation, the VAT legislation shall prevail.
VAT is indirectly charged on consumer spending. It is collected on supplies of goods and services as well as on imports of goods and services into Bahrain.
Bahrain introduced VAT on 1 January 2019. The standard rate will be 5%. Certain goods and services will be subject to a zero-rate (0%) of VAT and others will be exempt from VAT.
To find the VAT Treatment and Policies relating to goods and services in Bahrain, please follow the link.
VAT is paid and collected at every stage of the supply chain, starting from when a supplier purchases a product until a retailer sells the product to a consumer, with the end consumers of goods and services bearing the cost of the VAT.
A VAT registered person who supplies goods or services subject to VAT, must charge VAT on their supplies, and pay it to the NBR. This is their “output VAT”.
The same will apply to purchase transactions, VAT will be added at the standard rate of 5% to purchases of goods or services made from suppliers registered for VAT in Bahrain (on the assumption that the standard rate applies to those supplies). The VAT a business pays to its suppliers is called “Input VAT”.
Output VAT refers to the VAT amount charged by a VAT registered person in Bahrain on his VATable supplies (sales), including deemed supplies, and on the supplies received that are subject to the reverse charge mechanism.
Input VAT is the VAT charged by the suppliers on the business expenses of the VAT payer, and the VAT that the VAT payer pays on their imports of goods and services.
VAT was introduced in Bahrain on 1 January 2019.
GCC countries agreed to implement VAT under the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf (the Framework), which contains the VAT general principles and rules agreed at GCC level. The Framework was ratified in Bahrain by Decree-Law No. (47) for the year 2018.
For more information on The Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, please see the link.
The National Bureau for Revenue (NBR) is responsible for the collection and administration of VAT in Bahrain.
Customs Affairs are responsible for collecting VAT on the import of goods where VAT is due at the time of importation.
All goods and services will be subject to VAT set at a standard rate of 5%, unless it is specifically subject to the zero-rate or exempted under the Law and Regulations.
As a VAT registered person, you will need to consider each of the goods and services that you supply. In principle, a supply of goods or services in Bahrain will be subject to VAT at the standard rate of 5% unless it is specifically identified as zero-rated or VAT exempt in the VAT legislation in Bahrain.
There will also be some operations that are outside the scope of VAT, for example penalty and indemnity payments.
To find the VAT Treatment and Policies of goods and services in Bahrain, please follow the link.
For more details, please refer to Chapters 14 and 15 of the VAT Executive Regulations