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In the previous article ‘Reverse Charge Mechanism in Bahrain VAT’, we understood the concept of the reverse charge mechanism. In this article, we will discuss the Domestic Reverse Charge in Bahrain VAT.
As the name suggests, the domestic reverse charge is a concept in which VAT needs to be paid on reverse charge by the recipient on the domestic supplies. Exporters meeting certain conditions may apply for a domestic reverse charge on certain supplies received from taxable persons in Bahrain.
Under Domestic Reverse charge concept, the supplier of goods or services will not charge VAT though he is registered under VAT. The recipient will be liable to account and pay the VAT on reverse charge basis as shown in the below illustration.
The registered business primarily engaged in making ‘Intra-GCC Supplies or Exports of Goods’ can apply for domestic reverse charge mechanism by submitting an application to the Nation Bureau of Taxation (NBT) in the prescribed format.
If all the conditions are met, the application will be approved by NBT and a certificate granting rights to apply for domestic reverse charge will be issued. In order to purchase goods or services under this concept, the exporter should issue a copy of the domestic reverse charge certificate to his supplier.
In order to apply for a domestic reverse charge, the exporter has to meet the following conditions:
The concept of Domestic reverse charge is introduced in Bahrain VAT to mitigate the risk of potential cash flow impact on the exporters. If you are primarily engaged in export of goods or services, opting domestic reverse charge will bailout you from cash flow blockage.