Bahrain Guide: What is VAT for Transportation Services in Bahrain?
VAT Law in Bahrain sets out the VAT treatment of local transportation. The supply of goods and passengers transport services, within Bahrain, by land, water or air is zero-rated. Transportation services will not be zero-rated unless the supplier is regulated or licensed by the relevant body in Bahrain. The following services do not qualify for the zero rates:-
- A rental vehicle without a driver,
- A rental driver without a vehicle,
- Transportation services for sightseeing or leisure purposes include bus tours, a limousine or similar provided with a driver to bring passengers on a pre-agreed sightseeing trip, transportation by boat to an island which primarily caters for tourists, a boat restaurant. This exclusion does not apply to hire a regular taxi or limousine by a person who directs the driver to certain tourist attractions. The taxi/limousine business or driver does not provide any guidance or input into the itinerary or provide any ancillary services,
- Food delivery services when supplied by the person and also supplying the food. For this exclusion, food comprises ready meals with minimal further preparation required from the customer. The supply of food and the transport services are a single composite supply where the supply of food is the main supply while the transport services are ancillary to that main supply, and
- Transportation services are ancillary to a main taxable supply of a good or service, where these transportation services are not priced separately from the main supply. The same logic as for supplies of food with delivery applies here. However, where transportation services are separately priced and can be considered a separate supply from the supply of the goods or services. The transportation services will be subject to VAT at a zero rate.
VAT Law in Bahrain sets out the VAT treatment of international transportation and certain associated goods and services. In summary, the following are zero-rated:
- The supply of an international transportation service of goods and passengers through means of transport,
- Certain services are directly or indirectly associated with a supply of an international transportation service of goods and passengers, and
- The supply of a means of transport and maintaining, repairing, and converting a means of transportation.
What are local transportation services for VAT in Bahrain?
Local transportation is a supply of transportation services of goods and passengers by land, water, or air from a place in Bahrain to another place in Bahrain. It includes local taxi services, public buses, and school buses.
What is Treatment for the supply of goods and services related to domestic transportation in Bahrain?
The zero-rating provisions for the supply of goods and services will not apply when these supplies relate to a means of transport used mainly for domestic transportation. Consider the VAT liability on a case-by-case basis. It depends on the nature of each supply.
What are international transportation services for VAT in Bahrain?
International transportation in Bahrain is the supply of transportation services of passengers and goods using a qualifying means of transport that involves one of the following:
- Transport of passengers or goods from Bahrain to a final destination outside Bahrain.
- Transport of passengers or goods from outside Bahrain to Bahrain as the final destination.
- Transportation of passengers or goods carried out in Bahrain is part of the international transport of goods or passengers.
Hiring or chartering a plane, vessel, or another vehicle is not generally regarded as a transportation service in Bahrain for passengers and goods unless the agreement effectively operates as a transportation service for passengers and goods.
What is Treatment for the supply of goods and services related to international transportation in Bahrain?
The zero rates of VAT apply on supplies of services or goods directly or indirectly associated with international transportation of passengers or goods. The services or goods can be provided by the supplier of the transportation service such as an airline, shipping company, hauler (directly associated with the international transport service), or by a third party (indirectly associated with the transport service), whether that third party is:
- A subcontractor of the supplier of the transportation service; or
- Hired directly by the person receiving the transportation service.
What are qualifying means of transport for VAT in Bahrain?
A qualifying means of transport is any vehicle, ship, or aircraft requiring a driver, pilot, or crew, depending on the circumstances. It is intended for at least ten persons or for carrying goods on a commercial basis, where its main purpose is to carry out international transport. Any means of transport converted or used for recreational or personal purposes will not be a qualifying means of transportation.
What is the main purpose test for VAT in Bahrain?
Any vehicle, ship, or aircraft supplies an international transport service. The “main purpose” of that vehicle, ship-vessel or airplane will automatically be deemed to be carrying out international transport for that international transport service. The use of that vehicle, ship, or aircraft does not need to be considered over a long period to assess whether the “main purpose” test applies. The mere fact that using it to supply an international transport service will mean meeting that test for that service.
What VAT treatment in Bahrain of bundle travel packages?
A bundle travel package or tour may include flights, accommodation, local transportation, and other similar services.In such cases, the supplies will need to be considered separately from a VAT perspective, and VAT should be accounted for, where relevant.
- For any travel packages or tours relating to travel within Bahrain, supplies such as hotel accommodation will be taxable at the standard rate.
- For any travel packages or tours that relate to travel outside of Bahrain, supplies such as accommodation and local transportation will be outside the scope of Bahrain VAT.
- The commission for the travel agency is split into two components with one relating to ticketing services and that relating to all other parts of the package. The commission for international transportation will be zero-rated if the place of supply is ticketing services Bahrain. The commission for all other supplies will be taxable at the standard rate when the place of supply of the travel arrangement services is in Bahrain.
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