The Kingdom of Bahrain introduced the Value Added Tax (VAT) law in 2019. VAT is an indirect tax charged on goods and services purchased and sold by businesses. The National Bureau of Revenue (NBR) is the VAT implementing authority in Bahrain.
This article explains the basics of VAT, including VAT registration, input VAT recovery, VAT returns, offences under VAT law and many more.
The GCC countries agreed to implement VAT at a standard rate of 5%. Accordingly, the Kingdom of Bahrain started charging VAT @5% w.e.f 1st January 2019.
However, from 1st January 2022, NBR revised the standard VAT rate in Bahrain to 10%.
The businesses must mandatorily obtain VAT registration in Bahrain if they fall into the following categories:
|S No||VATable supplies of goods and services in a year |
(Generating or expected to generate)
|VAT registration needs to be obtained by|
|1||More than BHD 50,00,000||20th December 2018|
|2||More than BHD 5,00,000 and not exceeding BHD 50,00,000||20th June 2019|
|3||More than BHD 37,500 and not exceeding BHD 5,00,000||20th December 2019|
Also, all entities and individuals generating over BHD 18,750 VATable supplies in a year can obtain VAT registration voluntarily.
There are different types of supplies under VAT in Bahrain. The VAT rates are decided based on the nature of the goods or services.
Businesses in Bahrain shall comply with the below conditions to recover the input VAT paid on the purchases:
A VAT-registered business in KSA or the VAT representative (if applicable) is required to retain the following documents:
A VATable person must keep the relevant records for five years from the end of the relevant VAT period. However, real estate businesses must keep the records for 15 years from the end of the relevant VAT period.
VAT-registered businesses shall submit the VAT return electronically to the NBR at the end of each VAT period with all the relevant data.
A VAT return summarises the value of sales and purchases of businesses made during a VAT period and shows the net VAT position. Net VAT position is the difference between the VAT charged on sales (output VAT) and the VAT paid on purchases (input VAT) for the same tax period.
If the output VAT exceeds the input VAT, the difference must be paid to the NBR. If the input exceeds the output VAT, a VAT payer will have excess recoverable input VAT. A VAT payer can request a refund of this excess from NBR or carry forward this excess to use it as a credit to offset VAT liabilities in future.
NBR has a right to impose penalties and fines on VATable persons whenever there is any violation of VAT rules. The below table explains the nature of the offence and its related penalties:
|Nature of Offence||Penalty or Fine|
|Failure to obtain VAT registration within 60 days from the date of expiry of the registration period||Maximum of BHD 10,000|
|Late submission of a VAT return |
(not exceeding 60 days)
|Between 5% to 25% of the value of the VAT declared or paid|
|Late payment of VAT due |
(not exceeding 60 days)
|Submission of incorrect data in the VAT return resulting in VAT liability||Between 2.5% to 5% of the unpaid VAT per month (or part of a month) where the VAT is not paid|
|Preventing the NBR’s staff from carrying out their duties||Maximum of BHD 5,000|
|Failure to notify NBR of any changes made in the VAT registration application or a VAT return|
|Failure to display prices of the goods or services at the business place (inclusive of VAT)|
|Non-submission of information requested by the NBR|
|Failure to issue VAT invoice as per provisions|
|Breaching any other provision of the Law or the Regulations|
Also, NBR can impose an administrative fine and collect it together with the VAT due, if any.