FAQs on Bahrain VAT Law
Updated: Nov 27, 2018
1. For whom VAT Law is applicable
Applicability of VAT:
a.For Suppliers,Taxable Supplies made by Taxable Person in the Kingdom
b. For Receivers,In certain cases basis of Reverse Charge Mechanism Taxable Customer
c. Import of Goods Rate - 5% in General. Exemption (Zero Rated) for certain supplies.
2. I am going to sell Land & Building to another Bahrain citizen after 01st Jan 2019? What is the tax implication? Is VAT applicable for the transaction?
No. Article 55 exempts Supply of Bare land and Building. (subject to Terms & Conditions in Regulations)
3. Is providing a service falls under supply?
Yes. Article 1 definition of Bahrain VAT law states that supply means any form of supply of goods or services for consideration.i.e manufacturing and sale of goods, trading or providing services.
4. I'm selling packaged drinking water to businesses. What is VAT implication?
Yes. Water is considered as Goods for the purpose of VAT .Article 1- Definition states that Goods includes all a.material assets b.Water c. Energy d.Gas e. Lighting heating cooling and AC.
5. What is RCM?
In general business scenario, a supplier is obligated to collect and pay VAT. However Article1 Definition states Reverse charge mechanism means a method by which tax shall be paid by receiver / customer directly to authority and liable for other procedural obligations
6. Is residential status has an impact on tax?
Yes. Article 1 explains the Place of residence of as Person which is location of Place of business or any Fixed establishment or place of usual residence(for natural person).
7. I am not registered for VAT. Am I taxable person?
May be. Article 1 states that, a person conducting economic activity for generating income is a taxable person whether registered or ought to get registered. So, a person who is ought to get registered but not registered could be treated as 'Taxable person'.
8. What is considered as Economic activity under Bahrain VAT Law?
Any activity which is recurring and consistent including commercial or industrial or agricultural or professional activities or services or any use of material or immaterial activity or any other incidental or similar activity.
In common trade parlance , a business entity , recognized by Law as such.
9. Is transfer of business as a whole treated as supply?
No. Article 11 of Bahrain VAT Law states that cessation of Economic activity (in general terms , business as a whole) for consideration or not is not treated as Supply.
In simple terms, whether a business is taken over for consideration or without consideration, say by way of inheritance, such transaction shall not be treated as supply.
10. I am supplying goods at discounted price to customers? How do I design my Tax Invoice? What is the impact of VAT on it?
Article 24 states that
a) When, a supply is made with discount, value of supply shall be considered after applying discount. In simple terms, VAT shall be applicable on Discounted price.
b) When supply is subject to subsidies granted by Kingdom, then value of supply shall be
discounted for VAT purposes.
c)Payments made by Taxable supplier on behalf of customer (for which balances would be adjusted in books of accounts):
In such cases, taxable supplier shall reduce such expenses for considering taxable value of supply. An important point to be noted that, no tax deduction (Input tax credit) shall be allowed for such expenses.
11. How to determine ‘Time of Supply’ in common business parlance ?
1. Goods -The date on which goods are transferred (if supplier is in charge of transfer)
2. Goods - The date on which customer received goods, (if supplier is not incharge of transfer)
3. Goods – When goods supplied are subject to assembling , installation and commission then date on which such installation gets completed.
4. Services – Date on which services are completed
Time of Supply is an important criteria, for assessing tax liability for a particular tax period since the tax is due on
a) the date of supply of goods or services or
b) the date on which tax invoice is issued or
c) Consideration is received in part of full
whicher is earlier
12. What is Voucher ? What are the implications of Bahrain VAT Law on issue of vouchers?
Article 2 defines - A voucher is a printed or electronic instrument giving the holder the right to purchase goods or services with or without discount (however voucher doesn’t include postal stamps issued by Kingdom)
Article 7 states that the issuance of voucher is not treated as supply unless consideration received for sale or issue exceeds the nominal value recorded on it. Supplying of goods or services in exchange for vouchers is subject to tax according to rules prescribed
13. How to determine Time of Supply in continuous Supply?
Article 13 states that where there is a continuous or periodic due then the Time of Supply shall be earlier of
a. Date on which invoice is issued or
b. Date on which Payment is received. (if payment is made thru vending machine, then date of collection of funds from machine)
c. Date of Deemed Supply shall be date as per Regulations
14. What is Deductible Tax & Net Tax
Deductible Tax – Article 2(38)
Tax paid by supplier for his purchases (input items) generally called input tax borne by the supplier is deductible against Output tax due in the Kingdom for each tax period.
Net Tax – Article 2(39)
Tax payable after setting off the output tax and deductible tax (input tax) which is due to the Kingdom for the tax period. Net Tax may be either payable or refundable.
15. What are treated as Internal Supplies?
Article 2(49) states that
Supply of Goods and Services by the Supplier to the Customer and both resides in a member state. In other words supplies between GCC states implementing VAT (member states) shall be treated as internal supplies and not exports / imports. Supplies made out of member states shall be treated as exports and receipts made from out of member states shall be treated as Imports.
16 What is the difference between Tax representative and Tax Agent ?
Article 2(51) states that A Person Licensed by the Tax authority to represent the Non-Resident Taxable person is a Tax Representative whereas
Article 2(52) states that A Person Licensed by the Tax authority to represent the Resident Taxable person is a Tax Agent.