Bahrain VAT Guide

Bahrain to introduce VAT from 1 January 2019

Bahrain VAT Guide: Bahrain is to become the third of the six Gulf Cooperation Council (GCC) member states to introduce VAT. This follows the 2016 Unified VAT Agreement for the GCC states, which established the basis of a harmonised VAT union across the member states. Bahrain, and the other states, agreed to implement the key principles of the Agreement into their domestic VAT legislation, although there is some scope for variations on taxable supplies.

VAT Transition guidelines

Over the implementation period, tax payers should observe the following guidance from the tax authorities on levying VAT:

  • Where invoices were issued, or payments made, prior to 1 January 2019 for post-implementation supplies, then VAT is still due. In this case, a debit note for the original invoice should be issued with the correct VAT indicated.
  • Initially, goods supplied to other GCC states that have also implemented VAT (Saudi Arabia and UAE) will be treated as exports. There are plans to introduce zero-rating with reverse charge supplies to eliminate import VAT, but this is dependent on the introduction of a Electronic Services System transaction reporting platform which has yet to be developed.
  • For pre-January 2019 contracts which are silent on the VAT treatment, then the price will be VAT inclusive. This presents a cash flow risk for the supplier.

Value Added Tax (VAT) Legislation for Bahrain

With Saudi Arabia being the first of the GCC states to publish its draft VAT legislation, the remaining states are all expected to issue a law, introducing Value Added Tax on Goods and Services in their countries within the coming months.

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