The Kingdom of Bahrain (“the Kingdom”) has published Decree-Law No. (48) promulgating the Value Added Tax (“VAT”) Law on 10 October 2018. The Law governs the application of VAT in the Kingdom of Bahrain and consists of 79 Articles. The Law shall come into force on 1 January 2019.
The main purpose of VAT in the Kingdom is to diversify the Government’s income via taxation. As a result of this, the Kingdom aims to build a diversified and robust economy in addition to securing high quality services for both the citizens and residents of the Kingdom.
It is mandatory for registered businesses in the Kingdom to levy VAT on the goods and services provided. As a general rule, the supplies of goods and services are taxable at the standard rate throughout the supply chain, unless the VAT legislation specifically provides that such supplies are either zero-rated, exempt or out of scope.
Bahrain National Gas Company (“BANAGAS”) is obligated to comply with the requirements of the Law and its Executive Regulations, which are regulating the VAT and its application in the Kingdom.
Accordingly, from 1 January 2019 and onwards, all products and services supplied by BANAGAS shall have VAT applied upon them at the applicable rate.
What is VAT?
VAT is a consumption tax that the end user is obligated to pay, and BANAGAS will only be acting as a collection agent on behalf of the Government.
When will the VAT go into effect and what will the rates be?
VAT has been introduced in the Kingdom of Bahrain on 1 January 2019 at the standard rate, unless the Law specifically provides that such supplies are either zero-rated, exempt or out of scope of VAT.
How can a business register for VAT and receive a Tax Registration Number (“TRN”)?
Registration is the process by which a taxable person is enrolled for VAT. Upon registration, a taxable person will be assigned a dedicated VAT account number.
For reference, businesses can register for VAT through the National Bureau for Revenue
Once the VAT registration is processed and approved, the NBR will issue a VAT registration certificate to the taxable person. This certificate will display the name of the taxable person, the appropriate VAT Account Number (i.e. the TRN for VAT—to be shown on the tax invoice), and the effective date of registration. Each certificate has a unique VAT certificate number.
Is it compulsory to pay VAT?
Exceptions to VAT are only by Law, and these are published by the National Bureau for Revenue (“NBR”).
Generally, VAT-registered businesses:
VAT-registered business report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. This can be done through a formal online submission and reporting.
If businesses charge more VAT than what they have paid, the difference must be paid by them to the government. If businesses pay more VAT than what they have charged, they can reclaim the difference from the government.
For further details, please visit the National Bureau for Revenue
What is the company’s Tax Registration Number?
In accordance with the requirements set out in the Law and the Executive Regulations, the Company’s TRN will be included on every tax invoice.
Article (79) of the Bahrain VAT Law stipulates that oil, petroleum and the gas sectors are subject to VAT at the zero-rate. More specifically, the Executive Regulations provides that the zero rate applies to the following: Import and supply of processed or unprocessed oil, gas and other hydrocarbons. Granting the permission to use, explore, or exploit any part in Bahrain to search for, extract or produce oil, gas or other hydrocarbons. Supply of oil and gas exploration services. Supply of services related to oil and gas fields such as design, drilling, installation of drilling rigs, extraction, recovery, separation, evaluation, feasibility analysis, tests, seismic surveys and repair & maintenance services. Supply of specialized professional services, when such services are needed for the exploration or exploitation of actual and potential oil and gas sites. Supply of oil refining or gas processing services, such as reconversion to liquefied natural gas. Distribution, transport or storage of oil, gas or other hydrocarbons. Import or supply of consumables used directly and exclusively for the purpose of carrying out the supply as stated above. Import, purchase or rental of equipment used directly and exclusively for the purpose of carrying out the supply as stated above. Notwithstanding the aforementioned, the import and supply of goods produced from oil, gas or other hydrocarbons including fertilizers and plastics will not be subject to VAT at the zero rate, as indicated in Article (79) Paragraph (B) of the Executive Regulations.