Bahrain Guide: What is VAT in Bahrain for Import of Goods and Services?
Import of goods is the entry of goods in the territory of Bahrain from a place outside that territory. Clearing of goods through customs. Until Bahrain recognizes one or more GCC Member States as the Implementing States, all goods entering into Bahrain cleared through customs will be regarded as imports of goods for VAT purposes. The mere fact that goods enter Bahrain and are customs cleared is enough for an import of goods to have taken place for VAT purposes. The importation of goods does not require an actual supply between two separate parties for consideration.
Imports of services are services meeting the following criteria:
- Performed by a non-resident supplier to a resident recipient who is a taxable person,
- Place of supply for VAT is the place of residence of the recipient taxable person, and
- The recipient of the services (a taxable person in Bahrain) is liable to account for VAT with the reverse-charge mechanism.
What is the Place of Supply of Goods for VAT in Bahrain?
VAT Law in Bahrain requires the importation of goods must take place into the territory of the Kingdom of Bahrain. The VAT Law defines the area of Bahrain as including its lands and the territorial waters and where Bahrain practices its rights of sovereignty.
- For importation of goods, it is the first point of entry of the goods in the territory of Bahrain.
- Goods placed under a customs duty suspension regime upon entering the territory of Bahrain – The place of supply of these goods is in the Implementing State, where the goods are released from their customs duty suspension regime and imported.
It means that the VAT Law is applicable when the goods arrive in Bahrain. It is imported at Bahrain Customs after being released from a customs duty suspension regime, where applicable.
What is the VAT treatment of import of goods into Bahrain?
Import VAT at the standard rate
Imports of goods taking place in Bahrain are subject to VAT at the standard rate of 5% unless they are exempt from VAT at importation. Goods that benefit from a customs duty exemption remain subject to VAT at importation at the standard rate unless they specifically fall within the VAT exemptions list.
Exemption of import VAT – specific cases
Imports of goods are exempt from VAT in Bahrain in the following circumstances:
- Goods imported into Bahrain which is either zero-rated or VAT exempt when they are supplied locally in Bahrain.
- Import of necessities and equipment for persons with special needs, where the importer possesses the relevant documentation by the conditions and controls stipulated in the Customs Law.
- Goods imported that are exempt from customs duties include:-
- Diplomatic exemption,
- Military exemption,
- Returned goods,
- Importation of personal belongings and household appliances by Bahraini citizens residing abroad and foreigners who are coming to stay in Bahrain for the first time, and
- Import of personal effects and gifts accompanied by a passenger.
What is the Place of Supply of Services for VAT in Bahrain?
Place of supply rule applies to all the supplies of services by a supplier who is not a resident in Bahrain to a customer who is a taxable person resident in Bahrain. These supplies of services are subject to VAT in Bahrain at the standard rate of 5%. The person liable to account for VAT is the customer taxable person.
Place of Supply of Imported services below follows their specific rules, which differs from the place of residence of the taxable person. That is the reason why these supplies are usually not considered imported services.
- Transport of goods, passengers, and relating services to such transportation – Location of Commencement of Transportation
- Restaurant, hotel, catering, cultural, artistic, sporting, or recreational services – Location of Performance of Service
- Related to Real Estate – Location of Real Estate
If the place of supply of these services is in Bahrain, the supplier is, in principle, liable to account for VAT at the standard rate. However, when the supplier is not a resident in Bahrain and the customer is a taxable person in Bahrain, the liability to apply the correct VAT treatment shifts to the customer, who becomes liable to account for VAT under the reverse-charge mechanism. It is under this scenario that these services may be considered as imported services.
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