VAT Rate in Bahrain

Tally Solutions | Updated on: March 20, 2023

Bahrain is all set to join the league of VAT implementing States in GCC from 1st January, 2019. It will be the third GCC member state after UAE and KSA to implement VAT. While the authorities are working in full swing to implement VAT on 1st January, 2019, it is very important for businesses to understand the VAT concepts and accordingly prepare towards it. In this article, we will understand the structure of VAT Rate in Bahrain.

The standard VAT rate in Bahrain is 5%, levied on all taxable supplies. The following is the structure of the VAT rate in Bahrain.

As mentioned in the above table, broadly the VAT rate in Bahrain is classified into Standard Rate, Zero-rate and Nil rate. The standard rate of VAT at 5% will be levied on all the supplies barring few which are either zero-rated or exempt from the VAT. The businesses registered under Bahrain VAT are responsible to levy VAT at 5% on all taxable supplies and remit the VAT collected to the government.

In order to levy the right rate of VAT on the supply of goods or services, it is important for the businesses to identify the type of supplies and determine the VAT applicability. The following steps will help you to determine the VAT applicability and help you to charge the right rate of the VAT.

• Understand the type of supplies you are making – Supply of Goods or Services
• Know the supplies which are notified in law as zero-rated or exempted from the VAT
• Identify whether any of your supplies are under zero-rated or exempt supplies list.
• If none of your supplies are under zero-rated list and exempt list, it is understood that all your supplies are taxable supplies and you need to charge VAT at 5%.
• If few of your supplies are under zero-rated list or exempt list, except those, all others will be taxable supplies and you need to charge VAT at 5%.

Supplies such as export of goods or services, notified transportation service of passengers, basic healthcare services etc. are zero-rated. Certain notified supplies such as financial services, bare land, building etc. are exempt from Bahrain VAT. However, these are subject to the conditions prescribed in Bahrain VAT regulation which is yet to be released.

In our next article, we will discuss on Zero-rated supplies and exempt supplies in Bahrain VAT.

Conclusion

The VAT is transaction-based tax i.e. VAT is levied on every single transaction which is taxable. Thus, it is very critical for businesses to understand the goods or services they are supplying and determine the VAT applicability. With just 6 weeks to go for VAT implementation on 1st January, 2019, it is important to start this activity such that you are prepared in advance and avoid unnecessary confusion or consequence of non-compliance.

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