Bahrain Guide: What is VAT for Real Estate Services in Bahrain?
VAT in Bahrain exempts the sale and lease of real estate, including residential, commercial real estate, and land. It does not include the following:-
- Supply of hotel accommodation, car parking for less than one month, provision of serviced office space on a non-exclusive basis, rental of the function room, hall, or facility,
- Services which are charged separately from a supply of real estate,
- Serviced apartments, and
- Storage services
VAT in Bahrain state that the construction of new buildings will be subject to VAT in Bahrain at zero rates. It does not include the following:-
- Restoration, refurbishment, or reconstruction work on an existing building,
- Demolition services,
- Architects’ and interior design fees,
- Landscaping, and
- Construction of swimming pools, saunas, and steam rooms
The VAT Law in Bahrain state that goods supplied by a person making a supply of construction services, in the course of providing construction services for a new building, will also be zero-rated in Bahrain. It does not include the following:-
- Fixtures and fittings not permanently attached to a new building and removal without damaging the buildings or the goods,
- The supply, installation, or assembly of furniture (not affixed) to the building,
- The installation or supply of decorative lighting, carpets, or movable partitions,
- The provision or installation, hanging of artwork,
- The hiring of equipment to be used by a person supplying construction services, and
- Supply of goods in Bahrain to a person supplying construction services
What is Real Estate for VAT in Bahrain?
Real estate for VAT in Bahrain includes:
- Create rights, interests, or services on any land. It includes partially developed land.
- Any building, structure, or engineering work permanently attached to the land.
- Any fixture or equipment which makes up a permanent part of the land or is permanently attached to a building, a structure, or engineering works.
Real estate in Bahrain does not include any furniture, fittings, plant, and apparatus. It is not attached to the land or a building and removal without damaging the property. Residential accommodation in the form of furnished or semi-furnished accommodation, the consideration entirely will be considered as a supply of real estate, unless a separate charge for the furniture.
What are Real estate-related services for VAT in Bahrain?
Real estate-related services are those services directly connected with real estate. These include, but are not limited to, the following:
- Services by real estate experts or agents,
- Services that involve the preparation, coordination, and performance of construction, destruction, maintenance, conversion, and similar work,
- Accommodation services, and
- Supply of Services by auctioneers, architects, interior designers, surveyors, and engineers.
The place of supply of real estate-related services in Bahrain will be the location of real estate. If the real estate is in Bahrain, Bahrain VAT at the standard rate of 5% applicable, unless the supply is exempt from VAT or zero-rated.
What are Construction and Building for VAT in Bahrain?
Construction for VAT in Bahrain generally means building something such as a house, office, factory, warehouse, road, bridge, etc. Construction may involve demolition, refurbishment/reconstruction of existing buildings or structures, and site clearance activities. It also includes providing a building service and providing goods as part of such a service.
Building for VAT in Bahrain generally means a residential, commercial, or industrial building. The building will be an immovable structure that has walls and a roof. Structures such as bridges, elevated roads, and flyovers are not buildings for the zero-rate in Bahrain. Pre-fabricated structures are not a building for VAT in Bahrain. Structures using pre-fabricated components such as pre-fabricated concrete or steel components, bathroom pods, and modular walls (exterior and interior) are building eligible for zero-rating in Bahrain. Provided the end product is not substantially built or assembled away from the location.
The following are examples of building under VAT in Bahrain
- A dwelling (such as a villa, house, apartment)
- Retail stores
- Multi-story car parks
- Power stations
- Oil refineries
- Liquefied natural gas stations
- Oil fields
What is the VAT treatment in Bahrain for Real Estate by Taxable Person for self-usage?
A taxable person engaged with a construction company for the construction of a new building for his use. It may incur some VAT on costs, such as architects’ fees, landscaping, and the purchase of furniture and fittings that are not affixed or incorporated into the building. The treatment depends on the business activities for using the new building by the taxable person. Any VAT incurred on construction costs of a new building for a taxable person’s use will be recoverable depending on the taxable person’s business activities.
The VAT treatment for different situations in Bahrain is:-
- A taxable person using the building for fully taxable activities can recover the VAT on construction costs of the new building in full.
- A taxable person using the building for fully exempt activities cannot recover the VAT on construction costs of the new building.
- A taxable person using the building for taxable and exempt activities can recover the VAT according to the apportionment method.
What are Retention payments for Real Estate in Bahrain?
What is the VAT Due Date of Retention payment for VAT in Bahrain?
The VAT Law in Bahrain does not contain specific provisions dealing with the VAT due date for retention payments. The VAT due date for retention payments will be as follows:
- One-off supply – If the construction service is a one-off supply and the works are complete by the rules of the contract. The VAT due date will be the date of completion of the services or the date of payment or issue of the VAT invoice showing the retention amount if earlier.
- Continuous supply – The rules for VAT in Bahrain will apply in determining the VAT due date for the retention amount. Hence, the VAT due date will be the earliest of:- the date of the retention payment, the date of a VAT invoice issued about the retention amount, the due date for payment as specified on the VAT invoice about the retention amount, and Twelve months from completion of the services.
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