Bahrain Guide: What is VAT Law?

VAT in Bahrain
VAT Law in Bahrain

In October 2018, Bahrain Ministry of Finance (MoF) has released the Executive Regulations of VAT law. The regulation clarifies some details regarding VAT implementation and includes:

  1. Compliance Matters.
  2. The scope of zero rated supplies.
  3. The scope of Exempt supplies.

Important take-away from the regulations issued are:

  1. Non-residents may appoint a tax representative for all their tax related requirements and duties in Bahrain.
  2. For telecommunications and electronic services, if the customer is unregistered, the place of supply is determined by the place of use and enjoyment of services, at the date of supply
  3. Details provided on the exemption for financial services.
  4. Life insurance, transfers of equity and debt securities will be exempt.
  5. General insurance and all other services where there is an explicit fee will be taxed at 5%.
  6. Large businesses will file tax returns on a monthly basis and all other businesses will file quarterly.
  7. The mandatory VAT registration threshold is BHD 37,500 and the voluntary registration threshold is BHD 18,750. Only businesses with turnover exceeding BHD 5 million are required to register with effect from 1 January 2019.
  8. VAT on imported goods will be payable to Customs prior to the release of goods.
  9. The zero rating for new buildings applies to construction services and certain goods and services supplied as part of the construction contract.
  10. Exporters meeting certain conditions may apply for a domestic reverse charge on certain supplies received from taxable persons in Bahrain.
  11. The zero-rating applies for the oil and gas sector.

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