All About e-Invoicing in Bahrain

The National Bureau for Revenue (NBR) of Bahrain has invited comments through the Bahrain Tender Board to support the review and enhancement of the legal framework to launch e-invoicing in Bahrain. It can be understood that Bahrain would be following other countries that have implemented e-invoicing.

The neighbouring country, the Kingdom of Saudi Arabia (KSA) recently introduced e-invoicing and implemented phase 1 w.e.f 4th December 2021. Also, Zakat, Tax and Customs Authority (ZATCA) has notified the businesses that should implement phase 2 of e-invoicing in Saudi. You can onboard ClearTax to get ZATCA phase 2 compliant e-invoicing software in Saudi Arabia.

Let’s read all about e-invoicing in Bahrain.

What is e-invoicing?

e-Invoicing converts the process of issuing paper invoices and related Credit or Debit Notes (CDNs) into an electronic process. However, a paper invoice converted into an electronic format through scanning or copying is not considered an e-invoice.

The electronic process will allow the exchange and processing of invoices and related CDNs in a structured electronic format between the supplier, customer, and the tax authority. e-Invoices shall be generated using an integrated electronic solution.

Also, e-invoice issued cannot be amended, and to rectify any errors, the taxpayer has to issue a debit note or credit note.

Why is e-invoicing being introduced?

The revenue tender document described three core objectives for introducing e-invoicing in Bahrain. They are as follows:

1. To support businesses by creating a level playing field and reducing their compliance burden.
2. To develop and track economic policies by creating more granular economic data.
3. To address tax leakages with limited disruptions to economic activity and ultimately support Bahrain’s fiscal balance program.

Also, e-invoicing increases Value Added Tax (VAT) compliance and leads to better data collection, reconciliation and transparency.

Applicability of e-invoicing in Bahrain

e-Invoicing in Bahrain applies to:

• VAT-registered businesses and 
• Third parties issuing tax invoices on behalf of other taxable persons

The applicability may vary depending nature of the business, annual turnover, number of transactions etc. Also, NBR may adopt a phased approach to make the largest businesses or certain industries comply with e-invoicing.

When would e-invoicing be implemented in Bahrain?

NBR has not announced any formal implementation timeline. However, it is expected that NBR will implement e-invoicing in Bahrain in the next 18 months.

What are the technical requirements for an e-invoicing solution?

The revenue department has not issued any specific requirements. However, the following minimum technical requirements are expected for an e-invoicing solution:

• It shall be connected to the internet to communicate with an invoicing portal to be announced by Revenue for sharing invoices.
• It must prevent modification or tampering and be able to record and detect any tampering attempts.
• It shall be compatible with any other Bahrain legal requirements and data/information security controls.

What are the challenges of e-invoicing in Bahrain?

Below are a few challenges faced by businesses to implement e-invoicing in Bahrain:

• Access to high-speed and secure internet connectivity to integrate with Revenue’s platform.
• Integrate Point of Sale (PoS) and ERP systems to integrate with Revenue’s platform.
• Businesses shall implement systems security measures to provide recording of time stamps and restrict anonymous user access.
• Restrictions on system/document modification, i.e., an e-invoice, cannot be modified once issued. Taxpayers need to cancel the invoice by issuing a credit note, even for a small error on the invoice.
• A prescribed e-invoice format would have more fields than the current tax invoice, and systems would need to be assessed to cater for this.

How can businesses prepare for e-invoicing in Bahrain?

Businesses in Bahrain need to undertake the following steps in advance for a smooth transition even though they await a formal announcement from National Bureau for Revenue:

• Conduct a gap analysis to find out the affected systems and processes
• Map all e-invoicing applicable transaction flows
• Assess the capabilities of existing systems and determine how these systems could integrate with external systems
• Conduct a gap analysis from a cybersecurity and system integrity perspective
• Update existing records, including customer and vendor information
• Provide proper training to staff to handle e-invoicing