Bahrain NBR publishes imports and exports VAT guide

The Bahrain National Bureau for Revenue (NBR) has published the first edition of its Value Added Tax (VAT) guide on imports and exports. The guide addresses the applicability of VAT on the import and export of goods and services into/from Bahrain.

The guide, albeit not legally binding, is important as it provides some insights into the likely approach of the NBR on the VAT treatment, place of supply, liability for payment, VAT recovery, and documentation requirements that any business importing into/exporting from Bahrain is subject to.

The guide broadly sets out the following:

Import of goods, will be:

  • Standard rated in most cases
  • Zero-rated, if the supply would be zero-rated locally
  • Exempt in the following cases:

    • The supply would be exempt if supplied locally
    • Import of necessities and equipment for persons with special needs, where the importer possesses the required import licences
    • Goods exempt from customs duties as per the Customs Law under certain specific exemptions
    • Import of personal baggage and used household appliances, under certain conditions
  • The importer of record for customs purposes is liable to pay the VAT on the importation of the goods
  • Import VAT can be recovered as input tax in the tax period during which the importation took place, on the basis that import VAT was paid to Bahrain Customs Affairs, and all conditions for input tax recovery have been met

Export of goods

  • Zero-rated if all the following conditions are met:

    • The goods are shipped from Bahrain to outside the implementing states* within 90 days from the date of supply;
    • The goods have not been changed, used, or sold to a third party before leaving Bahrain; and
    • The supplier retains commercial/official documents providing evidence of the shipment as detailed in the guide.

*Bahrain does not currently recognize any of the GCC states as implementing states; thus a supply to/from a GCC state is considered to be to/from outside the implementing states.

Import of services

  • Services are considered to be imported if they meet the following conditions:

    • They are supplied by a non-resident supplier to a recipient resident in Bahrain who is a taxable person;
    • The place of supply for VAT is in Bahrain; and
    • The recipient (who is a taxable person) is liable to account for VAT on the supply under the reverse charge mechanism.
  • VAT is applicable only if the place of supply is Bahrain (i.e. if the customer is a taxable person in Bahrain and not a private individual)
  • If VAT is applicable, the customer is liable to account for VAT under the reverse charge mechanism.

Export of services

  • The following conditions will need to apply for the zero-rating services from Bahrain:

    • The customer has no place of residence in Bahrain or any implementing state;
    • The customer must not be present in Bahrain on the date the services are performed;
    • The services do not relate to tangible goods or real estate located in any implementing states when the services are performed; and
    • The services are enjoyed outside the territory of the implementing states.

While the above are general provisions, there are many complexities and special rules in the Bahrain VAT legislation which apply to only certain types of import and export transactions. It is very important that businesses with any import/export activity into/from Bahrain ensure that they are fully aware of and compliant with the legislation.

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