Zero-Rated Supplies under VAT in Bahrain

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Tally Solutions, Feb-04-2020

In our earlier article ‘VAT Rate in Bahrain’, we have discussed the structure of the VAT rate in Bahrain. In this article, we will understand zero-rated supplies under VAT in Bahrain.

What is Zero-Rated supply under VAT in Bahrain

By definition, zero-rated supplies are taxable supplies. Confused? Since the name say it is zero-rated but the definition says it is taxable.

Let us understand how zero-rated supplies are different from the one which is taxable?

Zero-rated supplies are taxable supplies on which VAT is charged at ‘0’ rate. The only difference is that taxable supplies attract a standard rate of VAT at 5% while on zero-rated supplies, VAT is levied at ‘0%’. And the reason why zero-rated supplies are included under taxable supplies bracket is to enable businesses to claim input Vat deduction on it.

You may read our article ‘Important terms under VAT in Bahrain’ to know about input VAT and output VAT.

What are the Zero-Rated supplies in Bahrain VAT?

In Bahrain VAT rate list, most of the taxable supplies are taxable at 5% and only a few notified supplies are categorized under zero-rated supplies. The following are the supplies on which 0% VAT is charged.

No.

Type of Supplies

Zero-Rated Supplies

1

Goods

Export of goods outside the implementing States  

2

Goods

The supply of goods to a customs duty suspension regime in accordance with the Unified Customs Law and the supply of such goods while under customs duty suspension.

3

Services

Transportation services of passengers and goods to or from the Kingdom, which begins or ends or passes through the Kingdom’s land. This also includes all associated services as well as the supply of related means of transport.

4

Services

The supply of preventive and basic healthcare services and goods as well as related services.

5

Goods

The supply or import of medicines and medical equipment in accordance with the concerned medical authorities in the Kingdom.

6

Goods

All re-exports of goods that were temporarily imported into the Kingdom for repairs, renovation, modification or processing, and the services added to it.

7

Services

The supply of services from a taxable supplier residing in the Kingdom for the benefit of a customer who is not residing in the Implementing States and is benefiting from the service outside the Implementing.

8

Goods

The supply or import of investment-grade gold, platinum and silver with a purity level of not less than ninety-nine percent (99%) publicly traded on the global market. This again is based on a certificate issued by the concerned Authority for testing precious metals and gemstones in the Kingdom.

9

Goods

The first supply after the extraction of gold, silver and platinum for trading purposes is zero-rated.

10

Goods

The supply and import of pearls and gemstones, after obtaining the certificate issued by the Authority for testing pearls and gemstones to determine their nature.

11

Goods

Construction of new buildings

12

Services

The supply of educational services and related goods and services including kindergarten, pre-basic education, basic, secondary and higher education.

13

Service

Local transportation sector

14

Goods

Oil, oil derivatives and Gas sector

15

Goods

Supply and Import of food items approved by the Financial and Economic Cooperation Committee

All the zero-rated supplies mentioned above subject to conditions prescribed in the executive regulation of VAT Law. The specific conditions and terms under which the above supplies are zero-rated will be known only when the regulations are released.