522 firms register for VAT

The first phase of VAT implementation in Bahrain is progressing fast with 522 firms already registering with the National Bureau of Taxation (NBT), said a top official. Rana Ibrahim Faqihi, the Assistant Undersecretary for the Development and Policy of Public Revenues at the Ministry of Finance and National Economy, said the first phase of VAT implementation concerns firms with annual revenues of BD5 million or more “Such firms have until 20 December 2018 to register with the NBT,” said Faqihi. The VAT implementation date will be 1 January 2019.

The VAT Law executive regulations, Faqihi said, include the exemption of 94 listed basic foodstuffs and other goods and services.  The executive regulations also include an explanation of the operational aspects of the VAT Law. Bahrain’s VAT regulation is in line with the unified VAT agreement approved by the Gulf Cooperation Council. The move follows the approval of the draft law by both the Upper and Lower houses after a Royal decree issued in this regard. When comes into effect, Bahrain will become the third country in the GCC after the UAE and Saudi Arabia to implement the framework as per the Unified VAT Agreement for the GCC states.

Introducing VAT at a 5 per cent rate was part of a Gulf Cooperation Council (GCC) agreement in 2018. Bahrain released the VAT Law on 9 October 2018 via the Official Gazette website. In accordance with the GCC VAT Agreement, Article 2 of the Law provides that the supply of all goods and services made in Bahrain, as well as imports, shall be subject to VAT. Article 3 of the Law provides for a standard rate of 5pc, while certain goods and services may be subject to a zero-rate or exempt from VAT, according to EY.

Article 53 of the Law sets out provisions where certain supplies and sectors are subject to the zero-rate of VAT. Article 51 provides that import VAT should be paid to the customs authority, where Bahrain is the first point of entry. Oman has announced that VAT would be introduced in 2019. The Kuwaiti parliament, however, is yet to vote on the VAT. According to EY, 5pc VAT is expected to produce revenues of over $25 billion per annum for the six GCC countries.