Bahrain introduced VAT from the 1st of January, 2019, onwards. A welcome move for business development in Bahrain, VAT is an indirect tax charged on selected goods or services that are bought and sold by businesses. The GCC countries unanimously consented to implement a standard 5% VAT rate, with a few exceptions. Once you register for VAT as a taxable entity, you will be assigned a dedicated VAT account number. You will have to apply for Bahrain VAT registration once the turnover has surpassed the threshold as specified.

There are specific categories for VAT in Bahrain. These are given below:

  1. Standard-rated supplies
  2. Zero-rated supplies
  3. Revers charged services received
  4. Imported goods

Can non-residents register for VAT?

Yes. In fact, non-residents have to register for VAT in Bahrain within 30 days from the first taxable supply to non-taxable individuals in Bahrain, irrespective of the thresholds. They can apply for registration with the National Bureau of Taxation (NBT) directly or by appointing a tax representative on their behalf. The NBT can rightfully request and obtain the necessary documents from the taxable entity as a proof that the registration requirements have been satisfied.

Steps for VAT registration in Bahrain:

  • In order to register for VAT, you will first have to create NBT profile
  • Populate the NBT form and furnish the required information including taxpayer details (legal name, legal form, address, contact details, VAT eligibility date, etc.), commercial registration details, financial information, registrant details, documentation which comprises certificates pertaining to commercial registration and customs registration, along with audited financial statements, copy of registrant ID, etc.)
  • Next, the taxpayer has to submit the profile creation request. You can create the NBT profile online.
  • If the profile is approved, you will be provided with login details to access the registration form, which can be completed in a single click.

Once NBT reviews and approves the submission, the taxpayer will get the VAT certificate on his/her NBT profile.

Other information required to register for VAT in Bahrain:

  • The company’s business activity
  • Figures of previous 12 months’ turnover
  • Projected sales
  • Previous 12 months’ expenses figures
  • Projected expenses
  • Expected values of imports and exports
  • Customs identification number
  • Bank account details, etc.

Understanding how VAT functions in a business transaction:

If you are having a hard time trying to grasp the concept of VAT in Bahrain, the example below should simplify it for you.

Suppose a wholesaler purchases a product from the manufacturer, he pays 5% VAT on the product price. Say for example, if the product cost set by the manufacturer is BHD100, he has to pay BHD105. The manufacturer will collect and submit the extra BHD5 to NBR.

In the following stage, when the wholesaler adds his profit margin and raises the product price to BHD200 for the retailer, the retailer will have to pay BHD210, with the extra BHD10 being submitted to NBR by the wholesaler.

At the final stage, the retailer adds his profit margin and raises the price to BHD300 for the consumer, and consequently, the retailer has to shell out BHD315 for the product. The retailer will collect and submit this extra BHD15 to NBR.

Thus, through this multi-levied taxation process, the NBR collects VAT at every stage of the transaction in the supply chain before it reaches the buyers.

Categories of VAT rates:

The National Bureau for Revenue in the Kingdom of Bahrain (NBR) has structured different VAT rates for various goods and services. To simply promote business and commerce, VAT rates have been structured in the following categories:

  • Standard rate: This encompasses regular items such as clothes, makeup, car, electronics, etc. NBR has fixed a 5% tax rate for these consumer goods and services. Also known as input tax, it can be collected and submitted to NBR by a VAT registered business establishment/owner.
  • Zero rates: this category includes basic food and grocery items, education costs, health fees, pharmaceutical items, construction equipment, etc. For such items, the NBR at Bahrain has not set any tax, thus, neither the end-buyer nor the business establishment/owner needs to pay tax on these.
  • Tax Exempt: The NBR has kept items such as sales or lease of real estate, fees of a few financial institutions and so on, under tax exemption. The business establishment/owner with VAT registration will get the tax breaks for these goods and services and the end-buyer will not pay any tax on these items.

GCC Fillings boasts of a team of experienced professionals offering accounting services, VAT auditing services, tax consulting- filing and returns and so on. If you need help with VAT in Bahrain and also in the UAE, you should reach out to the firm.

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