Bahrain Guide: What is VAT in Bahrain for Export of Goods and Services?
Export of goods is the transport of goods from Bahrain is to a country outside its territory. VAT in Bahrain requires the actual supply of the goods.
- Only supplies of goods with shipping starting from a place in Bahrain to a country outside the territory of the Implementing States fall within the scope of the VAT Law. It qualifies as zero-rated exports of goods, subject to meeting certain conditions.
- Supplies of goods with shipping starting from a place outside Bahrain to a country outside Bahrain do not fall within the scope of the Bahrain VAT Law.
Export of services are services meeting the following criteria:
- Services supplied by a supplier from his place of residence in Bahrain.
- Only supplies of services with a place of supply in Bahrain, applying the general place of supply rule in Article 16 of the VAT Law in Bahrain.
Exports of services in Bahrain are subject to VAT in Bahrain at the rate of 0%. The zero-rate allows Bahrain businesses offering services at export to remain competitive.
What are the conditions to apply VAT in Bahrain at zero rates for the export of goods?
For a supply of goods to qualify as an export of goods and to be subject to VAT at zero rates, meeting all of the following conditions must:
- The goods shipped from a place in Bahrain to a destination outside the Implementing States. It is within 90 days from the date of their supply;
- The goods must not have been changed, used, or sold to a third party before leaving Bahrain; and
- The supplier must retain the commercial and official documents evidencing the shipment.
The responsibilities of suppliers are:-
- To check meeting all of the conditions to apply VAT at zero rates.
- To retain the necessary supporting evidence.
If he does not have the required documents within that timeframe, he must adjust the VAT treatment and consider the supply as a domestic supply for VAT purposes. It requires the supplier to account for VAT at the standard 5% rate, and the supplier would be required to issue a new VAT invoice evidencing a domestic supply.
The responsibilities of suppliers (if shipping is organized by the purchaser of the goods or by a third party acting on his behalf) are:-
- To obtain all the required documentation from the purchaser to support that the goods.
- To ensure goods shipped to outside the territory of the Implementing States within the 90-day timeframe; and
- To assure goods are not used or sold by the purchaser before their shipping.
If the evidence provided by the purchaser is not satisfactory. The supplier needs to treat a supply of goods as a local supply of goods.
What are the Documents for proving the export of goods for VAT in Bahrain?
To apply Bahrain VAT at zero rates, the supplier of the goods must own valid export documents proving that the goods left the territory of Bahrain for a destination outside the place of the Implementing States within 90 days of their date of supply. The documents required include the following:
- The documentation issued by the Customs Affairs at the Ministry of Interior to confirm the export. This documentation must be in the name of either the supplier or the purchaser or a third party acting on one or the other’s behalf;
- The commercial document which identifies the supplier, the customer, and the place of delivery of the goods;
- The transportation documents confirming the delivery of the goods outside the territory of the Implementing States; and
- For sales of goods in a departure area of an airport or port, details of the boarding pass of the purchaser (name, flight number, destination) evidencing that the individual is traveling to a destination outside the territory of the Implementing States.
What are the other transactions at the export of goods subject to VAT in Bahrain at zero rates?
The zero rates also apply to the following transactions:
- The supply of goods to a customs duty suspension regime provided moving the goods within 90 days from their date of supply and meeting the conditions of the agreement.
- The supply of goods within a customs duty suspension regime provided the conditions for the customs suspension regime are all met.
- The re-export of goods temporarily imported into Bahrain for repair, conversion, restoration, and processing. The zero rate VAT in Bahrain applies to the repair, transformation, restoration, and processing supplies. It also applies to the goods used and goods that became unusable or worthless in the above use. It is relevant provided meeting the conditions for temporary import under the Customs Law. The retaining of supporting documentation evidencing the re-export of the temporarily imported goods by the supplier.
What are the conditions to apply VAT in Bahrain at zero rates for the export of services?
The taxable person must ensure that four conditions are met for the zero-rate to apply to the exports of services, specifically:
- The customer receiving the service has no place of residence in Bahrain or any Implementing State – The assessment of the customer and his place of residence has to be made based on the actual nature and substance of the supply performed. The supplier must keep evidence of such assessment.
- The customer must not be present in Bahrain while the performance of the services – Presence in Bahrain does not mean having a place of residence in Bahrain. It means physically present in Bahrain.
- The services do not relate to tangible goods or real estate located in the territory of the Implementing States at the time of performance of the services.
- The enjoyment of services outside the territory of the Implementing States – Services must not be used by the customer for specific operations that he carries out in Bahrain or another Implementing State. The receiving of services must not be by a person resident in Bahrain or an Implementing State.
The meeting of all of the above conditions qualifies the services as export of services. The taxable supplier resident in Bahrain will be entitled to apply Bahrain VAT at zero rates. The supplier must keep evidence meeting all the above conditions to support the application of Bahrain VAT at zero rates on his services. The supplier will also be required to issue VAT invoices for these services by the 15th day of the month following the month of supplying exported services.
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