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The first compliance activity for all businesses in Bahrain is to register under VAT. The window for obtaining a VAT registration in Bahrain is opened for business to enrol. Businesses must know about who is obligated to register under VAT. Certain businesses are mandatorily required to obtain a VAT registration in Bahrain. At the same time, there is also a provision to voluntarily register under VAT. In addition, certain businesses are exempted from registering under VAT. Let us understand the rules on who should register under VAT in Bahrain.
A person who is resident in Bahrain should obtain a VAT registration in the following 2 cases:
The threshold for mandatory VAT registration in Bahrain is BD 37,500.
Note: A non-resident person in Bahrain must register under VAT, regardless of the value of supplies, if he/she makes supplies for which VAT is liable to be charged. The person can take registration either directly or through a tax representative.
A person can voluntarily seek a VAT registration in Bahrain in the following 2 cases:
The voluntary registration threshold under VAT in Bahrain is BD 18,750, i.e. 50% of the mandatory VAT registration threshold.
The threshold for Voluntary VAT registration in Bahrain is BD 18,750
Businesses who take voluntary VAT registration in Bahrain generally do so for the benefit of input tax deduction, i.e. the facility to deduct input tax (tax paid on purchases) from the output tax (tax collected on sales) and only remit the balance tax payable to the Government. This is a major benefit of taking a VAT registration. Businesses which don’t have a Bahrain VAT registration will not be able to claim an input tax deduction and the VAT paid on purchases or expenses becomes a cost. There are other benefits of registering under VAT, such as the ability to issue a VAT invoice and the credibility that comes with a Bahrain VAT registration. Businesses whose turnover exceeds BD 18,750 but does not exceed BD 37,500 can decide on whether they would like to voluntarily opt for a Bahrain VAT registration.
A person who makes only zero-rated supplies can request to be exempted from Bahrain VAT registration. Some examples of zero-rated supplies are the supply of newly constructed buildings, the export of goods to a non-GCC VAT implementing State, etc.
Exemption from VAT registration in Bahrain: Persons making only zero-rated supplies
While the Bahrain VAT law clearly states the business, who should register under VAT, the VAT authorities have introduced a phased manner of VAT registration and accordingly, the VAT registration due dates are different for different businesses. This is been done to ensure smooth Vat implementation in Bahrain. The phased manner of VAT registration in Bahrain mandates the larger business to register first and remaining businesses later.
The larger businesses with the annual supplies exceeding BHD 5,000,000 are mandated to register in the first phase of Bahrain VAT registration with the due date of 20th December, 2018. In the second phase of VAT Registration in Bahrain, the business with the annual supplies value exceeding BHD 500,000 should register within 20th June, 2019. In the third phase of Bahrain VAT registration, all the remaining business whose annual supplies exceeds BHD 37,500 should register by 20th December, 2019.
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Businesses in Bahrain must evaluate the value of their supplies and check whether they are required to register under VAT. If the value of supplies exceeds BD 37,500 in the previous 12 months or will exceed BD 37,500 in the next 12 months, it is required to obtain a VAT registration in Bahrain. Non-resident businesses in Bahrain must note that they must register under Bahrain VAT, irrespective of the value of their supplies, in case they make supplies for which VAT is liable to be collected. Further, an option of voluntary VAT registration in Bahrain has been given to businesses. To voluntarily register under VAT, the value of supplies in the previous 12 months should exceed BD 18,750 or the value of supplies in the next 12 months should be expected to exceed BD 18,750. Also, an exemption from registering under VAT has been given to persons who only make zero-rated supplies.
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