Country Overview

Kingdom of Bahrain is a signatory to the GCC VAT Framework and has been proactive in this
regard. It has already announced to implement VAT from January 1, 2019.

Schedule of Implementation

Probable Dates Activity
08 th October 2018 Draft law approved
Fourth Quarter 2018 Registration of Businesses
January 1, 2019 Implementation
April 2019 Filing of First Return.

The tax authority will keep business informed about VAT implementation in Bahrain through its
website. https://www.nbr.gov.bh

Many business and professional associations have start organizing awareness seminar in a bid to
prepare for the VAT regime in Bahrain.

Tax Rates

  • Bahrain will have 3 rates for VAT
    • Standard Rate: 5%
    • Zero Rate: 0%
    • Exempt : -%

Bahrain will follow the GCC VAT Framework for applying the rates to different sectors but may have
discretion to declare changes for Zero and Exempt categories.

BAHRAIN List – Zero Rated

  • Direct or indirect exports outside Implementing States
  • International transport of passenger and goods incl services related to such transport
  • Supply of sea, land and air means of transportation meant for international transportation of
    passengers and goods
  • Supply of preventive and basic healthcare Services
  • Supply or import of medicines and medical equipment
  • Re-export of goods that were temporarily imported into the Kingdom for repairs, renovation,
    modification or processing, and the Services added to it.
  • The Supply of Services from a Taxable Supplier residing in the Kingdom for the benefit of a
    Customer who is not residing in the Implementing States and is benefiting from the service outside
    the Implementing States subject to the provisions of Article (17) of this Law
  • The Supply or Import of investment grade gold, platinum and silver with purity level of not less than ninety-nine percent (99%)
  • The first Supply after the extraction of gold, silver and platinum for trading purposes.
  • The Supply and Import of pearls and gemstones
  • Construction of new buildings
  • The Supply of educational Services and related Goods and Services
  • Local transportation sector
  • Oil, oil derivatives and Gas sector
  • Supply and Import of food items referred to in Article 31 of the GCC Agreement.

Tax Exempt – BAHRAIN list

    • Financial services
    • Supply of bare land/buildings through sale or lease
      • Following Imports are exempt:
        • Import of Goods if the Supply of such Goods in the final destination is exempt from Tax or zero- rated.
        • Import of Goods that are exempted from custom duties in accordance to the terms and conditions specified in the Unified Customs Law, these are as follows:
          a) Diplomatic exemptions
          b) Military exemptions
          c) Import of Personal effects and used household items brought in by citizens residing
          overseas or foreigners entering the Kingdom for the first time to reside.
          d) Import of returned Goods
        • Personal items and gifts in traveler’s Personal luggage
        • Special needs equipment

The Regulations shall specify the terms and conditions for the above exemptions.

Standard Rated – BAHRAIN list

The standard rate imposed is (5%) of the value of the Supply or Import unless specified in this law
as exempt or zero-rated.

Reverse charge mechanism under BAHRAIN VAT

What is RCM:
Reverse Charge Mechanism is the mechanism by which the Taxable Person is obligated to pay the
Tax due on behalf of the Supplier and is liable for all the obligations provided for in this law.

Taxation under RCM:
Tax is imposed on all Taxable Supplies by a Taxable Person in the Kingdom. It is also imposed on
Goods and Services received by the Taxable Customer in instances where Reverse Charge Mechanism applies.

Value of supply under RCM:
On the Tax accounted for by way of Reverse Charge Mechanism, the value of the Supply is the
purchase price. Where the purchase price cannot be ascertained, the fair Market Value on the date
of Supply is used.

Tax Payment:
Normally the taxable person will have to pay the VAT on import of goods. However the Authority
may allow deferment of tax payment through the periodic return in accordance to the Reverse
Charge Mechanism.

Registration:

A Resident Taxable Person is obliged to register for Tax purposes in the following cases:

  • If the value of the Supplies made in the Kingdom in the period of 12 months prior to the end of any month in the year exceeds the mandatory threshold of BD 37,500.
  • If it expected at any point in time that the Supplies made in the Kingdom in the next 12 months will exceed the mandatory threshold of BD 37,500

Please click here to view the document in English

Please click here to view the document related to Executive Regulations of the Value Added Tax Law