BD600 earners may get VAT relief

TDT | Manama

Email: mail@newsofbahrain.com

Low-income Bahrainis earning less than BD600 a month could be exempted from value added tax (VAT) if Parliament approves a proposal set for debate on Tuesday.

The proposal originally sought to exempt low-income citizens from “taxes of all kinds”, but the Financial and Economic Affairs Committee has since narrowed its scope to VAT only.

Under the amended draft, the exemption would apply to Bahraini natural persons with a gross monthly income below BD600. The committee added the word “gross” to clarify that the threshold refers to total income before deductions.

The bill consists of three articles and a preamble. Article 1 provides for the VAT exemption for eligible Bahrainis. Article 2 a u- thorises t h e Minister of Finance and National Economy to issue the necessary implementing regulations. Article 3 assigns responsibility for enforcement to the Prime Minister and relevant ministers and states that the law would take effect the day after its publication in the Official Gazette.

The committee also amended the preamble, removing reference to the Excise Tax Law to keep the draft focused solely on the VAT Law issued by Decree-Law No. 48 of 2018, as amended by Law No. 33 of 2021, alongside the Constitution.

However, the government has urged MPs to reconsider the proposal. In a memorandum, it argued that linking VAT relief to personal income creates practical and legal difficulties because VAT is an indirect tax collected and accounted for by registered businesses, even though consumers ultimately bear the cost. Tying the exemption to a consumer’s income, it said, raises questions about how such relief would be applied in everyday transactions and who would legally qualify as exempt.

The government also noted that the original wording referring to “all taxes” highlighted broader drafting concerns, as different taxes operate under different rules and cannot be uniformly linked to a single income threshold.

It further argued that the proposal’s social objective is already addressed under the current VAT framework, which zero-rates or exempts many essential goods and services. Bahrain also does not impose a general income tax on individuals.

Another concern relates to regional obligations. The government said the proposal may conflict with the GCC Unified VAT Agreement and the Unified Excise Tax Agreement, which define exemptions without reference to personal income. It added that excise taxes are designed to discourage the consumption of harmful or luxury goods, and reducing their cost for lower-income consumers would undermine that objective.

Despite the objections, the Financial and Economic Affairs Committee recommended approval in principle and referred the revised VAT-only proposal to Parliament for debate.