Credit Note under Bahrain VAT

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Tally Solutions, Feb-03-2020

Businesses registered under VAT are required to issue tax invoice on supplying taxable goods or services in Bahrain. To know more about the Tax invoice and simplified tax invoice, please read our article ‘VAT Invoice in Bahrain’. Similarly, in certain situations, the taxpayer needs to issue a Credit note. In this article, we will understand the following:

  • What is Credit Note and when to issue it?

  • Mandatory details to be included in the Credit Note

What is Credit Note and when to issue it?

A credit note is a document which needs to be issued by the supplier in all those situations in which the VAT collected exceeds the VAT due on the supply.

The following are situations in which the Credit note needs to be issued by the supplier.

  • Goods sold are returned by the customer

  • Decrease in the taxable value of the supply

  • Decrease in the tax value

Let us understand Credit note with an example.

On 15-01-2019, Abdul & Co. supplies 10 Monitors @ 70 BHD each, to Ali Electronics. VAT charged on the supply is BHD 35. On the same day, Ali Electronics returns 1 monitor to Abdul & Co., as it was found to be damaged. In this case, Abdul & Co. should issue a credit note to Ali Electronics for the monitor returned and reverse the VAT charged on the monitor.

The issue of Credit note will impact the following:

  • Reduction in tax payable by the supplier on the supply

  • Reduction in input tax recoverable by the recipient on the supply

Mandatory details to be included in the Credit Note

The following are the mandatory details to be included in the Credit note:

  • The words “Credit Note” clearly stated on the document

  • The name, address and Registration Number of the Taxable Person

  • The name and address of the Customer

  • A sequential Credit or Debit Note number

  • The date of issue of the Credit or Debit Note

  • The number of the original Tax Invoice or original document subject to the adjustment

  • The adjusted value of the Supply and the Tax amount to be adjusted in Dinars

Time period to retain Credit Note

The taxable person should retain Credit note for a period of five years from the end of the tax period to which it relates.

Example: A Credit note issued on 25th April’ 19 relates to the tax period of January-December '19. Hence, it should be retained until 31st December '24.