Bahrain has also joined the league of VAT- implementing States in GCC starting from the 1st of January, 2019. It is the third GCC member state after UAE and KSA to implement VAT. While the authorities are working in full swing to implement, it is very important for businesses to understand the VAT concept and accordingly prepare towards it. In this article, we will understand the structure of VAT in Bahrain.
The standard VAT rate in Bahrain is 5%, levied on all taxable supplies. The following is the structure of the VAT rate in Bahrain:
|Taxable supplies||5% (standard rate)|
As mentioned in the table above, the standard rate of VAT registration in Bahrain is at 5% and will be levied on all supplies barring few which are either zero-rated or exempt for VAT. A business registered under Bahrain VAT is responsible to levy VAT at 5% on all taxable supplies and remit the VAT collected to the government.
In order to identify the right rate of VAT on the supply of goods or services, it is important for a business to identify the types of supplies wherein VAT is applicable.
To determine VAT applicability and charge VAT at the right rates, here’s what you should do:
- Understand the type of supplies you are making;
- Know the supplies which are notified in law as zero-rated or exempt from VAT;
- Identify whether any of your supplies are under zero-rated or exempt supplies list;
- If none of your supplies is under zero-rated list and exempt list, it is understood that all your supplies are taxable and you need to charge VAT at 5%.
Persons eligible to pay VAT
The following persons are required to pay tax:
- A taxable person who sells goods or services in the Kingdom of Bahrain.
- A taxable customer who buys goods or services in the Kingdom of Bahrain from a non-resident supplier under the reverse charge mechanism.
- All importers who are declared by the Unified Customs Law.
- Every person who issues invoices with tax amounts in the Kingdom of Bahrain.
Registration of Tax group in Bahrain
Two or more legal taxable individuals can apply for registration as a tax group. The members of the tax group will be liable for all tax obligations that arise from the group’s activities. The Authority can REGISTER or de-register a tax group based on the terms, conditions and procedures mentioned in the Regulations.
Penalties for Noncompliance for VAT in Bahrain
An administrative penalty will be imposed on those taxpayers who commit any of the following acts:
- Failing to register for VAT within 60 days from the registration deadline, or within 60 days after reaching the mandatory registration threshold limit. The penalty, in this case, may go up to BHD 10,000.
- Providing falsified information on the import of goods and services that lead to an increased or decreased value declared in tax returns.
- Delayed submission of VAT returns or delayed payment of tax, for a prescribed period not exceeding 60 days. The penalty rate, in this case, would be between 5% and 25% of the tax value to be recognized or paid.
For any person who commits the following offenses, a Penalty of BHD 5000 will be imposed:
- Not informing the Authority of changes in a registration application or changes in VAT return information within specified dates.
- Not displaying the price of goods or services inclusive of tax.
- Failing to provide the information requested by the Authority.
- Not complying with the rules relating to issuing a tax invoice.
- Violating any rules or regulations of VAT law.
VAT is levied on every single transaction which is taxable. Thus, it is very critical for businesses to understand the goods or services they are supplying and determine VAT applicability. It is important for a business to be prepared in advance to avoid unnecessary confusion or the consequence of non-compliance.
Farahat & Co. VAT teams based in the Middle East can help you prepare your business for the introduction of VAT, and assist with ongoing compliance.
Contact Us for: VAT Training in Bahrain
What are the services that are exempt from VAT in Bahrain?
A number of categories are exempt from VAT in Bahrain such as:
- Financial services (except for fee-based services)
- Supply of real estate
- Imports of personal items and gifts carried in travellers’ 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
- Importation of requirements for people with special needs.
How many years are VAT records to be maintained in Bahrain?
VAT records must be kept for a minimum of five years from the end of the year to which they are related, and made available for review at any time. VAT returns must be filed with the tax authority on a regular basis.
What are zero-rated supplies for VAT in Bahrain?
A zero rating allows businesses to reclaim any VAT they have paid on costs. A Taxable Person who makes only zero-rated supplies may request to be excluded from the Mandatory Registration requirement for VAT purposes in accordance with the conditions that are stated in the Executive Regulations.
Zero-rated VAT supplies
According to article 53, the following are things that are exempted from VAT in Bahrain;
- Export of stuff to other VAT-implementing states in the GCC.
- Sectors of local transportation.
- Healthcare services and their suppliers.
- Oil, its derivatives and gas.
- Educational services and goods related to this sector.
- Custom duty supplies.
- Medicinal supplies and their import.
- Gold, silver and platinum supply after the first extraction.
- Pearl, gemstones supply. Note that the supply of different gems and stones will be exempted from VAT if and only if the certificate is obtained from the nature determining the authority of gems and pearls.
- New building constructions
- Transportation Services.
- Re-exports of goods that get imported to other countries for renovation, or any other kind of processing and more
VAT ADVISORY SERVICES
To avoid VAT penalties in Bahrain and keep up with your company’s record, take the VAT consultancy services from Farahat & Co. as they have the best vat consultant in Dubai, UAE offering the best services your business needs. This international firm knows how to deal with VAT and how to make companies learn about VAT and its complex procedures. Noob companies would definitely love to have their services because, without them, companies will lack behind so much.
Here are the VAT Services you can get in Farahat and Co.
- VAT Registration
- Compliance to VAT
- VAT return filing
- VAT application
- VAT advisory services and so much more.
Do not wait to miss out on benefiting from the VAT-related services of Farahat and Co. in time to avoid any issues for your business Related to VAT in Bahrain. With their experience and professionalism, they will relieve you of any worries related to VAT to allow you to focus on the success of your business.