Value Added Tax (VAT) in the Kingdom of Bahrain

Value Added Tax (VAT) in the Kingdom of Bahrain (Bahrain VAT)

VAT was first introduced in the Kingdom on 1 January 2019 with standard rate of 5%. Businesses are liable to comply with VAT laws and regulations. The recommendation is to plan for it, consult internally and if required externally with professionals by keeping in mind a reasonable lead time is required to assess, design and implement the changes.

Today the standard VAT rate is10% in Kingdom of Bahrain with effect from 1 January 2022. The National Bureau for Revenue (NBR) is the responsible government entity for implementing and collecting VAT in Bahrain. Certain goods and services are subject to a zero-rate (0%) and some others are exempt from VAT.

All entities or individuals conducting an economic activity independently for the purpose of generating income and making annual supplies exceeding the mandatory threshold of BHD 37,500 (USD 100,000) are required to register for VAT with the National Bureau for Revenue (NBR) to obtain a VAT registration certificate and a dedicated VAT account number. Once a business is registered for VAT, it can start collecting VAT @ 10% on vatable supplies.

Prepare your Business for VAT

VAT is already effective in the Kingdom of Bahrain from Jan 2019. Businesses which are reaching to voluntary or mandatory thresholds of taxable supplies are required to prepare well to fulfil Bahrain VAT Law and Regulations. The readiness of your business depends on the size and volume of taxable (vatable) annual supplies. The National Bureau for Revenue (NBR) provided guidelines for SMEs, replicated below for your ready reference.

Business with annual Vatable supplies less than 3 million Bahraini Dinars (< 3million BHD) are categorized are SME while businesses with vatable supplied greater than 3million BHD are categorized as large businesses.

SMEs (Small and medium businesses) are required to follow below 3 simple steps:

1.    Understand the VAT treatment of your goods and services

·       Understand the NBR VAT law and regulations, its impact on your business. Seek support from professional VAT Consultants in Bahrain. It is also recommended to surf through various publications by the Ministry, available at Bahrain VAT Law and Regulations, the VAT General Guide and sector specific guidelines.

·       Conducting a VAT assessment of the business contributes towards successful compliance. It includes analysis of business revenue cycle, portfolio (goods and services of offer). In absence of a qualified inhouse accountant, it is recommended to consultant Accounting firms in Bahrain for a thorough impact analysis.

·       Review the business contracts, study the implications due to VAT law and regulation, renegotiate and update relevant clauses, if required, to comply with VAT requirements.

·       Ensure to communicate to customers and supplies to incorporate VAT Registration number of all invoices and update such database in master files.

·       For any clarification related to VAT or any other information, NBR can be reached at:

Domestic hotline: 80008001

International hotline: +973 77777333

Email: vat@nbr.gov.bh

2.    Invoicing and Documentation requirements

·       Reflect the VAT Account Number in all relevant systems, and display the certificate in a visible place at your office.

·       Ensure all displayed prices of goods and services are VAT Inclusive.

·       Maintain a proper business records of all business transactions, VAT returns and any communication with NBR.

3.    Ensure correct VAT filing

·       It is recommended to use a simple accounting system (Zoho Books, Quick Books, Xero, Sage), it ensures accuracy and completeness of recording and archiving of VAT invoices, both incoming and outgoing including other vatable expenses.

·       Accounting system also helps in preparing and filing accurate input and output vat via predefined VAT return form as per NBR.

·       Ensure to file the VAT return on timely basis  as per size of the business, usually the SMEs are required to file VAT returns on quarterly basis. Pay or adjust the payable VAT amount with in the time define timeframe to avoid any penalties.

·       In case a VAT return requires an amendment, make sure the amendment is filed within prescribed timeframe.

How to file VAT return in Bahrain

All registered persons, individuals or incorporated, are required to submit a VAT return, also called filing of VAT return, with details as required in the form, it includes details of sales, purchases and expenses. It also includes some other details like zero rates supplies, exempt supplies or supplies under RCM. A VAT return is a summary of taxable supplies (sales and purchases) a business has made in the VAT period. It also shows the net position of VAT amount payable or receivable. NBR online portal can be accessed through below link.

Portal Access: National Bureau for Revenue eService Portal  

VAT Return Manual: VAT return manual page.

If the NBR has not received your VAT return within the specified filing period, NBR has the right to estimate your VAT return in accordance with the provision of Article (36) of the VAT law (PDF, 56 Pages, 821KB). You can easily settle your business outstanding VAT dues online via the VAT Bill Payment Service, or through Fawateer service.

How to determine VAT filing period:

VAT return is due to be filed in the month following the end of each VAT period. VAT returns period after December 31, 2019 (during 2019, there was transitional VAT period) are as follows:

·       If the value of a vatable supplies exceeds BHD 3 million, the VAT period is a complete month and VAT return is due on monthly basis.

·       In case the vatable supplied are less than BHF 3 million, the VAT period is a complete quarter.

How Bens can help:

A qualified and experience team of professional accountants and tax consultants is working with clients across industries in Bahrain, UAE and other GCC countries. Bens Chartered Accountant is a leading Tax Consultancy Firm in Bahrain.

We will carefully study the business model, revenue structure and impact of VAT on business transactions, we not only ensure compliance but also make sure the tax liability is optimized with least impact of cash flow.

Reach us at:

Email: info@bensauditors.com

Website: www.bensauditors.com

Bens Chartered Accountants

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