VAT in Bahrain – Rate, Registration, Filing and Penalties

Bahrain VAT: The Current Framework

The Kingdom of Bahrain introduced Value Added Tax on 1 January 2019 under the GCC Common VAT Agreement, becoming the third GCC member state after the UAE and Saudi Arabia to implement the tax. Bahrain’s VAT framework is administered by the National Bureau for Revenue (NBR), the government authority responsible for implementing, enforcing, and collecting VAT in the Kingdom.

The standard VAT rate in Bahrain is currently 10%, following an increase from 5% that took effect on 1 January 2022. The rate increase was introduced as part of a broader fiscal reform programme. Zero-rated and exempt supplies were not affected by the rate change and continue to apply under the original framework.

VAT Rate Structure in Bahrain

The key practical distinction is between zero-rated and exempt supplies. A business making zero-rated supplies charges 0% VAT on those supplies but can still recover input VAT paid on its related costs. A business making exempt supplies cannot charge VAT on those supplies and cannot recover input VAT attributable to them. Understanding which category each supply falls into is essential before determining VAT liability.

Zero-Rated Supplies Under Bahrain VAT

The following categories of supply are zero-rated for VAT in Bahrain, meaning VAT is charged at 0% and input VAT on related costs is recoverable:

• Export of goods to countries outside Bahrain
• Export of goods to other GCC VAT-implementing states
• International transportation services and local transportation
• Healthcare services and directly related goods and medicines
• Educational services and directly related goods
• Supply of oil, gas, and their derivatives
• New residential building construction
• Gold, silver, and platinum supply after first extraction
• Pearl and gemstone supply (where certified by the relevant authority)
• Re-export of goods that were imported for processing or renovation
• Supply of certain customs duty goods

Exempt Supplies Under Bahrain VAT

The following supplies are exempt from VAT in Bahrain. No VAT is charged and no input VAT on related costs is recoverable:

• Financial services (except where a specific fee is charged for the service)
• Supply and leasing of real estate (with certain exceptions)
• Importation of personal effects and gifts in travellers’ personal luggage
• Importation of goods destined for a country where the supply is exempt or zero-rated
• Importation of goods and equipment for people with special needs

Who Must Register for VAT in Bahrain

VAT registration in Bahrain is required in the following circumstances:

• Mandatory registration (resident businesses): where annual taxable supplies equal or exceed BHD 37,500, or are expected to exceed this amount in the next 30 days. Registration must be completed within 30 days of reaching or expecting to reach the threshold
• Voluntary registration (resident businesses): where annual taxable supplies or taxable expenditure equal or exceed BHD 18,750. Voluntary registration allows the business to recover input VAT on its costs, which can be commercially advantageous for businesses making zero-rated supplies or with significant taxable expenditure
• Non-resident businesses: required to register for VAT upon making their first taxable supply in Bahrain. There is no minimum threshold for non-resident businesses. A non-resident business without a fixed establishment in Bahrain must appoint an NBR-approved fiscal representative who is resident in Bahrain

Registration is completed through the NBR online portal at nbr.gov.bh. Upon successful registration, the business receives a VAT registration certificate and a dedicated VAT account number. This registration number must be quoted on all tax invoices issued by the business.

Tax Groups

Two or more legally separate taxable persons may apply to register as a VAT Tax Group in Bahrain. The Tax Group is treated as a single taxable person for VAT purposes: supplies made between members of the group are generally disregarded for VAT, and a single consolidated VAT return is filed by the representative member on behalf of the group. All members of the Tax Group are jointly and severally liable for the group’s VAT obligations. The NBR approves Tax Group registrations and may register or deregister a Tax Group based on the conditions set out in the Executive Regulations.

VAT Return Filing Periods and Deadlines

VAT-registered businesses in Bahrain file VAT returns through the NBR online portal on either a monthly or quarterly basis, depending on their annual taxable turnover:

The NBR may change a taxable person’s filing period and will provide at least three months’ notice before any such change takes effect. Where a business wishes to change its own filing period, a request must be submitted to and approved by the NBR. Even where no VAT activity occurred during a period, a nil return must still be filed by the deadline. VAT payment is due to the NBR at the same time as the return is filed.

Record Keeping Requirements

VAT-registered businesses in Bahrain must maintain accurate and complete records of all VAT transactions and supporting documentation. In February 2024, the NBR announced an extension of the record retention period, requiring businesses to retain VAT records for a minimum of 10 years from the end of the relevant tax period (the initial 5-year period having been extended by five additional years for records from 2019 onwards). Records must be available for review by the NBR at any time and must be maintained in Arabic or English.

Tax Invoice Requirements

Every taxable supply made by a VAT-registered business in Bahrain must be supported by a valid tax invoice. A compliant Bahraini tax invoice must include:

• The word “Tax Invoice” in Arabic and/or English
• A unique sequential invoice number
• Date of issue
• Supplier’s name, address, and VAT registration number
• Customer’s name and address (and VAT registration number where the customer is VAT-registered)
• Description of the goods or services supplied
• Quantity or volume of goods supplied
• Unit price excluding VAT
• Total net amount before VAT
• Applicable VAT rate and the VAT amount charged
• Total amount payable including VAT

A simplified tax invoice may be issued for supplies below BHD 500 to non-registered customers, but must still contain the minimum mandatory fields required under the simplified invoice format.

E-Invoicing in Bahrain

The NBR has been working towards implementing a mandatory e-invoicing regime. Following a public survey and a tender process, Bahrain is expected to introduce structured electronic invoicing requirements similar to the framework implemented in Saudi Arabia. Businesses with significant transaction volumes should begin reviewing their invoicing systems for e-invoicing readiness, as mandatory adoption is anticipated in the near term.

Penalties for VAT Non-Compliance in Bahrain

The NBR imposes administrative penalties for non-compliance with Bahrain’s VAT requirements. The principal penalty categories are:

• Failure to register by the deadline: an administrative penalty of up to BHD 10,000 applies where a business fails to register within 30 days of reaching the mandatory threshold or within 60 days where the NBR has issued notice
• Late filing or late payment (within 60 days): a penalty of 5% to 25% of the value of the VAT that should have been declared or paid. The precise rate within this range depends on the severity and circumstances of the non-compliance
• Providing falsified information: providing false or misleading information on imports, tax returns, or any other submission to the NBR attracts significant penalties
• BHD 5,000 administrative penalty applies for each of the following violations: failure to notify the NBR of changes to registration details or return information within the specified timeframe; failure to display the price of goods or services inclusive of VAT; failure to provide information or data requested by the NBR; failure to comply with the conditions for issuing a tax invoice; and any other breach of the VAT Law or its Regulations

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co. advises UAE businesses and GCC-operating companies on Bahrain VAT compliance, including registration with the NBR, VAT return preparation and filing, tax invoice compliance, and the VAT implications of cross-border supply of goods and services between the UAE and Bahrain. Our team supports businesses navigating VAT obligations across multiple GCC jurisdictions.

Contact Farahat & Co. today to discuss your Bahrain VAT compliance requirements.