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VAT in Bahrain

Updated on Wednesday 31st July 2019

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VAT-in-Bahrain.jpgBahrain introduced the value-added tax starting with January 2019 and it is the third country from the six member states of the Gulf Cooperation Council to implement this tax. The Unified VAT Agreement signed by the GCC members made it mandatory for these jurisdictions to implement this type of tax, in a harmonized manner across all of the states. Bahrain, along with the other members, have implemented the main principles of the VAT Agreement in their own VAT legislation. A certain degree of variation for the taxable supplies remains.
 
Investors who are interested in company formation in Bahrain are not deterred by the recent tax changes. The value-added tax rate remains a small one, with a zero range and reduced ranges for selected goods and services.
 
Because the Bahrain VAT law differs from that in the other GCC states, like the United Arab Emirates, it is advisable to reach out to our agents who specialize in company registration in Bahrain for updated information. 
 

How is VAT implemented in Bahrain?

 
The value-added tax in Bahrain has varying rates, starting with the standard one. These are as follows:
  1. the standard rate: this is 5% and it will apply to certain goods and services; it is the rate agreed among the GCC countries.
  2. the zero rate: when supplies are subject to VAT, but the charged rate of 0%; the input VAT can be deducted.
  3. the exemptions: some types of goods and services are exempted from VAT; these cannot deduct input VAT.
  4. others: some goods and services are out of the scope of the value-added tax altogether.
 
Investors who wish to know more about the category in which their business is included can reach out to our agents who specialize in company formation in Bahrain.
 

What are some examples of services that are subject to VAT?

 
To make it easier for investors who wish to set up a company in Bahrain, we list some types of services that are subject to VAT and the respective rates:
 
  • - Food: subject to a zero rate for basic foodstuffs and a 5 percent rate for restaurants and coffee shops.
  • - Healthcare: zero rate for most medical services (general and specialist) and 5 percent rate for cosmetic procedures, the supply of food and beverage to non-patients and other extra services, not related to the medical procedures or the patient. 
  • - Financial services: currencies trading, investment fund services, life insurance, and reinsurance contracts and others are exempt; the 5% rate applies to general insurance, brokerage, discretionary asset management, and others.
  • - Education: zero rate for kindergartens, primary, secondary and higher education institutions, for printed and digital books and others; the 5% rate for professional education, stationery, food and beverages, and others.
  • - Oil: gasoline and diesel for motor vehicles, motor oil, gas for ovens are zero-rates.
  • - Import and export: export services, import of basic foodstuffs and import of medicines and medical equipment are zero-rated.
 
In the import/export category, services provide in Bahrain by a foreign company are subject to the standard 5% rate and the following are exempt from VAT: the import of equipment used by individuals with special needs, the import of personal luggage and household items, the imports of gifts carried by passengers.
 
Our team of tax specialists can provide further details on the implementation of this tax according to the specific business field.
 

What are the VAT registration requirements?

 
Investors who set up a company in Bahrain will need to register for VAT purposes if their annual supplies exceed the mandatory threshold. A transitional period applies until a certain date, however, starting with December 2019, companies are expected to comply with the mandatory registration threshold on supplies greater than 37,500 BHD and a voluntary registration on supplies exceeding 18,750 BHD.
 
Investors who are interested in company formation in Bahrain will need to follow the guidelines issued by the National Bureau of Revenue regarding the VAT return. Upon registration, a company will be awarded a unique VAT account number, the TRN.
 
Bahrain is a jurisdiction that offers a number of advantages to investors. The commercial registration statistics are briefly highlighted below:
 
  • - in 2017, a total number of 42,835 individual establishments were registered.
  • - out of these, 24,883 were companies.
  • - the number of commercial registration renewals was 23,984.
 
The data was provided by the Ministry of Industry, Commerce, and Tourism of the Kingdom of Bahrain.
 
Contact our agents who specialize in company formation in Bahrain for more information about the tax requirements and the VAT regime.
 

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