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BAHRAIN VAT CALCULATOR

Since January 1, 2022, the Kingdom of Bahrain has implemented a standard 10% Value Added Tax (VAT). The National Bureau for Revenue (NBR), the government authority, oversees the implementation and collection of VAT in Bahrain.

1 : VAT Introduction Date: VAT was first introduced in Bahrain on January 1, 2019.

2 : Standard Bahrain VAT Rate:
The standard VAT rate in Bahrain is 10%. However, certain goods and services are subject to a zero VAT rate (0%), while others are fully exempt from VAT.

3 : Bahrain VAT Registration:
Any individual or entity conducting an economic activity that exceeds the mandatory threshold of BHD 37,500 in annual supplies is required to register for VAT. This includes businesses of all sizes, from small to large enterprises

Whether you’re running a small business or a large corporation, VAT registration is mandatory if your business exceeds the annual supply threshold of BHD 37,500. Registering with the NBR allows you to receive your VAT registration certificate and dedicated VAT account number, enabling you to start collecting VAT and reclaiming input VAT with our Bahrain VAT Calculator.

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Kingdom of Bahrain Value Added Tax (VAT)

The Value Added Tax (VAT) in Bahrain was first introduced on January 1, 2019, at a rate of 5%. This move was part of Bahrain’s efforts to diversify its revenue sources. On January 1, 2022, the VAT rate increased to 10%, becoming one of the highest in the region. VAT registration is mandatory for businesses with annual supplies exceeding BHD 37,500, ensuring compliance with the government’s tax regulations.

With the introduction of the 10% VAT in Bahrain, businesses must now adhere to new VAT return requirements. Companies registered for VAT can reclaim VAT paid to suppliers through the VAT refund process, helping them manage cash flow. The National Bureau for Revenue (NBR) oversees the collection of VAT, ensuring businesses comply with tax regulations. Whether you’re filing a VAT return or applying for a VAT refund, understanding Bahrain’s VAT system is essential for smooth business operations.

Bahrain Currency Notes

How is Value Added Tax Applied in Bahrain?

Value Added Tax (VAT) is applied at each stage of the supply chain, starting from the production process to the final sale of goods or services. At each stage, businesses charge VAT on the value added to the product or service. The final consumer ultimately bears the cost of VAT when purchasing goods or services subject to VAT. For example, a manufacturer charges VAT on the raw materials they purchase and pay VAT on the sale of the finished product. This process continues as goods move through wholesalers and retailers.

How Bahrain VAT works

At each step, businesses are required to collect VAT from the end consumer, which is then remitted to the National Revenue Agency. Businesses can also recover VAT paid to their suppliers through the input VAT mechanism, allowing them to offset the VAT they’ve paid on business-related purchases against the VAT collected from customers. This ensures that VAT is only applied to the value added at each stage, avoiding double taxation and improving business cash flow.

VAT Registration in Bahrain: Requirements and Thresholds

In Bahrain, businesses are required to register for VAT if they meet certain criteria. As of the latest regulations, the VAT registration requirements are as follows:

  1. Over BHD 50,000,000 in VATable supplies per year: VAT registration must be completed by December 20, 2018.
  2. Over BHD 5,000,000 but not exceeding BHD 50,000,000: VAT registration should be completed by June 20, 2019.
  3. Over BHD 37,500 but not exceeding BHD 5,000,000: Businesses must register by December 20, 2019.
Bahrain VAT Registration Threshold

Additionally, any business or individual generating over BHD 18,750 in VAT able supplies annually can voluntarily register for VAT.

Supplies Under Kingdom of Bahrain VAT Law

In Bahrain, there are various types of VAT supplies, and the applicable VAT rate depends on the nature of the goods or services. These include:

  • Standard-Rated Items: The standard VAT rate of 10% applies to most goods and services.
  • Zero-Rated Items: These supplies are subject to VAT, but at a 0% rate, meaning VAT is not charged to consumers. However, businesses can still claim related input VAT on these items.
  • Exempt Items: Businesses cannot charge VAT on these supplies, nor can they claim input VAT.
  • Out-of-Scope Items: Certain items are kept out of the VAT scope by the National Bureau for Revenue (NBR).

Input VAT Recovery in Bahrain VAT

To recover input VAT on purchases, businesses must meet specific conditions:

  • Be a VAT-registered person.
  • Expenses must be for economic activities and not fall under disallowed categories.
  • The expenses should relate to VATable supplies, not exempt supplies.
  • Original VAT invoices or relevant import documents must be retained.
  • Input VAT claims should be made within five years of the relevant VAT period.

VAT Records in Kingdom of Bahrain

VAT-registered businesses in Bahrain must maintain detailed records, including:

  • Accounting books in chronological order.
  • Sales and purchase records, including VAT invoices and credit/debit notes.
  • Profit and loss accounts, balance sheets, and inventory records.
  • Customs documents for import/export transactions.

Records must be kept for five years unless related to real estate businesses, which must retain them for 15 years.

VAT Returns in Bahrain

VAT-registered businesses are required to submit VAT returns electronically to the NBR at the end of each VAT period. A VAT return summarizes:

  • Sales and purchase values during the VAT period.
  • Net VAT position: The difference between output VAT (charged on sales) and input VAT (paid on purchases).

If output VAT exceeds input, the business must pay the difference to the NBR. If input VAT is higher, businesses can request a VAT refund or carry forward the excess for future VAT liabilities.

Penalties for VAT Offences in Bahrain

The NBR imposes penalties for various VAT violations, including:

  • Failure to obtain VAT registration: Up to BHD 10,000.
  • Late VAT return submission: Fines ranging from 5% to 25% of the declared VAT.
  • Late VAT payments: Between 2.5% to 5% per month of unpaid VAT.
  • Preventing NBR staff from duties: Up to BHD 5,000.

Other offences, such as failure to issue invoices or display inclusive prices, also incur penalties.

Customs Duty in Bahrain

The general customs duty rate in Bahrain is 5% of the cost, insurance, and freight (CIF) value of imported goods. However, tobacco products attract a 100% duty rate. Certain goods, including paper and aluminums products, are subject to a 20% duty.

Stamp Duty in Bahrain

Stamp duty in Bahrain is levied at 2% on the transfer or registration of real estate. If the stamp duty is paid within two months of the transaction date, the rate is reduced to 1.7%.

Registration and License Fees in Bahrain

Businesses in Bahrain are required to pay registration and license fees, ranging from BHD 25 to BHD 1,000, depending on the type of activity conducted.

Payroll Taxes in Bahrain

Bahrain does not have payroll taxes beyond social insurance contributions for employees. This includes contributions for both Bahraini and expatriate workers.

Social Insurance Contributions in Bahrain

Employers must contribute 15% of Bahraini workers’ monthly salaries to social insurance (previously 12%), and 3% for expatriates, with a ceiling of BHD 4,000. Social insurance contributions also apply to GCC nationals working in Bahrain, based on their home country regulations.

Municipality Taxes in Bahrain

A 10% municipality tax is levied on the rental income of commercial and residential properties rented to expatriates. This tax is paid by the property owner.