Value Added Tax (VAT) in the Kingdom of Bahrain

VAT was first introduced in the Kingdom on 1 January 2019.

A standard rate of 10% Value Added Tax (VAT) has been applied in the Kingdom of Bahrain with effect from 1 January 2022.

The National Bureau for Revenue (NBR) , the government entity responsible for implementing and collecting VAT in Bahrain.

Certain goods and services will be subject to a zero-rate (0%) of VAT and others will be exempt from VAT.

Who is Required to be Registered?

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 are required to register for VAT purposes are required to be registered with the National Bureau for Revenue (NBR) to obtain a VAT registration certificate and a dedicated VAT account number to start collecting the 10% VAT.

The end consumer bears the cost of VAT when purchasing any goods or services from the business registered for VAT (VAT payer). In return, the VAT payers pays VAT collected from the end consumer to the NBR and recovers the VAT paid to the suppliers.

Small and Medium Businesses:

Small and medium businesses are defined as businesses with annual VATable supplies that do not exceed 3 million Bahraini Dinars.

These businesses are recommended to follow the three steps below to ensure that they are ready for VAT implementation.

Details of the readiness steps:

?Understand the VAT treatment of your goods and services:

• Build an extensive understanding of VAT through various resources on the website, namely the Kingdom of Bahrain VAT Law and Regulations , the VAT General Guide and sector specific guidelines
• ?Define the VAT treatment of all goods and services sold by your?subject to VAT entity through the laws and regulations or VAT treatments and policies pages of the website
• Identify contracts subject to VAT; negotiate and update relevant contracts to comply with VAT laws and regulations
• Determine the VAT treatment of all items supplied and collect VAT information of all suppliers
• Additionally, you may contact NBR via the following channels for further information

Address Point of Sale (PoS), invoicing and recording requirements

• Download the VAT Registration Certificate, reflect the VAT Account Number in all relevant systems, and display the certificate in a visible place at your establishment
• Provide a consistent way of displaying the VAT-inclusive price of goods and services
• Establish appropriate systems for VAT compliant issuing, recording and archiving of?VAT invoices. Further information on correct invoicing and record keeping can be found on the laws and regulations page or through NBR’s media channels

Ensure correct VAT filing through appropriate accounting systems

• Establish accounting systems that can generate all relevant inputs for the VAT Return Form
• If applicable, adjust your current accounting or enterprise resource planning (ERP) systems to address VAT filing requirements
• Ensure the ability to settle VAT balance with NBR, whether it is a refund or payment request

?Large Businesses

Large businesses are defined as businesses with annual VATable supplies that exceed 3 million Bahraini Dinars.

These businesses are recommended to follow the eight steps below to ensure they are ready for VAT implementation.

Details of the readiness steps:

Organisational readiness, employee roles and training

• Assign roles and responsibilities for VAT related activities to employees within the organisation; including a dedicated point of contact for communication with NBR Relationship Managers (RMs)
• Create awareness on VAT amongst employees and its implementation in the organisation

Accounting

• Categorize all transactions related to goods and services according to the associated VAT treatment
• Approach NBR to discuss the treatment of special cases not covered by the Executive Regulations

Data Management

• Put in place appropriate mechanisms for comprehensive reporting audit trails; which can be reconciled to accounting records

Supplier Management

• Identify suppliers subject to VAT and record their VAT registration number and certificates
• Include a VAT clause in purchase orders and contracts with suppliers

VAT Return Filing and payment

• Generate regular VAT reports, including both input and output VAT reports

Customer Management and POS

• Include a VAT clause in customer contracts
• Calculate and display VAT inclusive prices at ‘Point of Sale’ (POS), (if applicable)
• Produce VAT invoices that include all fields required by VAT laws and regulations
• Have dedicated processes in place for treatment of customer bad debts (including associated accounting practices)

Compliance and Control

• Set up processes to manage VAT regulatory updates; and to review new transactions from a VAT treatment perspective
• Ensure correct transaction recording through appropriate controls
• Incorporate VAT compliance in the risk management framework and ensure audit covers VAT related processes

System and IT

• Update IT applications based on new technology requirements needed to support VAT processes
• Update data architecture and associated tools to align with VAT data requirements

VAT returns & filing

As a VAT registered business, you are required to submit a VAT return with details of your business transactions subject to VAT sales and purchases. A VAT Return summarizes the value of the supplies and purchases a VAT payer has made during the VAT period and shows the VAT payer’s Net VAT position.

Registered VAT payers need to file and submit their VAT returns through NBR online portal.

• National Bureau for Revenue eService Portal

?For detailed steps on filing, please refer to the "VAT return filing 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

You can easily settle your business outstanding VAT dues online via the VAT Bill Payment Service , or through Fawateer service . For any suggestions & inquiries you may reach out to the National Bureau for Revenue (NBR)

• Contact the National Bureau for Revenue

Reference:

https://www.bahrain.bh/new/en/business-vat_en.html

https://www.nbr.gov.bh/VAT/large_businesses/get_ready

https://www.nbr.gov.bh/VAT/sme/get_ready