BAHRAIN - Second phase of VAT implementation to kick in

June 2019

The introduction of VAT has been a significant step forward for the Kingdom of Bahrain (Bahrain). Taxpayers in Phase I (registration threshold of BHD 5 million) filed their first VAT return which was due by 30 April 2019. The National Bureau for Revenue (NBR) accepted VAT liability payments through various means, such as via the internet, mobile banking, and bank payments. Eligible taxpayers claimed refunds of excess input tax at the time of filing their returns. The NBR has already initiated enquiries of Phase I taxpayers with respect to producing requisite information in support of their VAT refund claim.

The NBR has clarified various nuances that arose during the implementation of Phase I by issuing copious guidance notes for various sectors including real estate, financial services, the digital economy, healthcare, and so on. In addition, the NBR has offered a series of clarifications through workshops. For the most part, information provided by the NBR has set out the authority’s expectations and helps clarify grey areas.

The NBR has also clarified that for the first filing period, it will allow some relaxation with respect to non-compliant tax invoices (to the extent of incorrect addresses). However, they are not expected to grant further leeway on this front.

The tourist refund facility is now operational. It allows tourists to claim back VAT paid on purchases made in the country. For this purpose, a dedicated desk has been setup at Bahrain International Airport for tourists.

Phase II

With less than one month to go, the countdown to the next VAT implementation phase has begun. Effective 1 July 2019, Phase II (registration threshold of BHD 500,000) will be introduced in Bahrain. We expect Phase II to apply to a significant number of Bahraini businesses.

The NBR recently organised a workshop for leading audit firms in Bahrain to highlight various implementation issues businesses should be mindful of. Based on our experience during Phase I, we advise businesses to pay particular attention to the following issues as soon as possible:

Meeting the VAT registration deadline
Concluding an impact assessment study of various identified transactions
Organising VAT awareness and training programs for employees, including assigning defined roles/responsibilities
Reviewing IT systems and accounting codes from a VAT compliance perspective
Generating proper VAT reports for timely filing of VAT returns
Designing an operating model to meet routine compliance requirements

Smita Roy
smita.roy@bdo.bh

Devina Ogale
devina.ogale@bdo.bh