VAT General FAQs

VAT is indirectly charged on consumer spending. It is collected on supplies of goods and services as well as on imports of goods and services into Bahrain.

Bahrain introduced VAT on 1 January 2019. The standard rate will be 5%. Certain goods and services will be subject to a zero-rate (0%) of VAT and others will be exempt from VAT.

To find the VAT Treatment and Policies relating to goods and services in Bahrain, please follow the link.

VAT is paid and collected at every stage of the supply chain, starting from when a supplier purchases a product until a retailer sells the product to a consumer, with the end consumers of goods and services bearing the cost of the VAT.

A VAT registered person who supplies goods or services subject to VAT, must charge VAT on their supplies, and pay it to the NBR. This is their “output VAT”.

The same will apply to purchase transactions, VAT will be added at the standard rate of 5% to purchases of goods or services made from suppliers registered for VAT in Bahrain (on the assumption that the standard rate applies to those supplies). The VAT a business pays to its suppliers is called “Input VAT”.

Output VAT refers to the VAT amount charged by a VAT registered person in Bahrain on his VATable supplies (sales), including deemed supplies, and on the supplies received that are subject to the reverse charge mechanism.

Input VAT is the VAT charged by the suppliers on the business expenses of the VAT payer, and the VAT that the VAT payer pays on their imports of goods and services.

VAT was introduced in Bahrain on 1 January 2019.

GCC countries agreed to implement VAT under the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf (the Framework), which contains the VAT general principles and rules agreed at GCC level. The Framework was ratified in Bahrain by Decree-Law No. (47) for the year 2018.

For more information on The Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, please see the link.

The National Bureau for Revenue (NBR) is responsible for the collection and administration of VAT in Bahrain.

Customs Affairs are responsible for collecting VAT on the import of goods where VAT is due at the time of importation.

The Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf (the GCC VAT Framework) can be accessed at this link.

Bahrain VAT Law can be accessed at this link.

Bahrain VAT Executive Regulations can be accessed at this link.

All goods and services will be subject to VAT set at a standard rate of 5%, unless it is specifically subject to the zero-rate or exempted under the Law and Regulations.

As a VAT registered person, you will need to consider each of the goods and services that you supply. In principle, a supply of goods or services in Bahrain will be subject to VAT at the standard rate of 5% unless it is specifically identified as zero-rated or VAT exempt in the VAT legislation in Bahrain.

There will also be some operations that are outside the scope of VAT, for example penalty and indemnity payments.

1. Standard rate (5%):
   1. If the goods or services that you supply are subject to VAT at the standard rate of 5%, this means that VAT at 5% should be accounted for on the supply.
   2. The VAT you incurred on costs related to these goods or services can be recovered in full, from the NBR and will not be a cost to the supplier.
   3. Examples of goods or services that will be subject to VAT at the standard rate of 5% include stationery, office supplies, legal services meals at restaurants, hotels, clothes and cars.
2. Zero rate (0%):
   1. If the goods or services that you supply are subject to VAT at the zero rate, this means that you effectively charge 0% VAT on those goods or services. The final consumer will not pay any VAT on these goods or services.
   2. The VAT incurred on costs related to supplies of goods or services that are subject to VAT at the zero rate can be recovered in full, from NBR and will not be a cost to the supplier.
   3. Some examples of goods and services that are subject to VAT at the zero rate include:
      1. Basic food items
      2. Private education services
      3. Private preventative and basic healthcare services
      4. Specific medicine and medical equipment
      5. Oil and gas
      6. Local transportation
      7. International transportation
      8. Construction services of new buildings
      9. Precious stones
      10. Investment gold, silver, and platinum
      11. Export of goods and services
3. VAT Exemption:
   1. If the goods or services that you supply are VAT exempt, this means that they will not be subject to VAT. Therefore, no VAT will need to be charged on these supplies and the final consumer will not pay any VAT.
   2. However, any VAT that you incur on costs relating to the supply of VAT exempt goods or services cannot be recovered.
   3. Some examples of goods and services that are VAT exempt include:
      1. Sale and rental of commercial real estate
      2. Sale and rental of residential real estate
      3. Some financial services (for example, interest income generated by the granting of a loan and the sale of shares)

To find the VAT Treatment and Policies of goods and services in Bahrain, please follow the link.

For more details, please refer to Chapters 14 and 15 of the VAT Executive Regulations

If you are interested in learning more about VAT, you can register for introductory workshops on this link.