GCC Indirect Tax Weekly Digest

Bahrain VAT Law and Regulations published in English

The Bahrain National Bureau for Taxation (NBT) has published the bilingual versions of the Bahrain Value Added Tax (VAT) Law and Executive Regulations (the Regulations), which were both previously published in Arabic.

Further, the NBT has published a document summarizing the Regulations in Arabic and English. The Regulations provide the implementing guidelines for the VAT Law and provide rules which detail and expand upon its provisions.

The VAT Law and Regulations will take effect on 1 January 2019, when VAT is expected to be implemented in Bahrain.

These documents will form the basis of Bahrain’s VAT regime. As sufficient information has been available since the publication of the VAT Law and Regulations in Arabic, the NBT will expect liable businesses to be fully VAT compliant from the implementation date or risk significant penalties.

The Bahrain government is adopting a significantly more stringent penalty regime than the United Arab Emirates (UAE) or Kingdom of Saudi Arabia (KSA) did when they implemented VAT on 1 January 2018. Businesses must therefore take rapid action to achieve compliance with the VAT Law and Regulations by the implementation date.

Bahrain NBT publishes list of zero-rated food items

The Bahrain NBT has published a list of food items which are to be zero-rated when VAT is introduced on 1 January 2019.

This will make Bahrain the first Gulf Cooperation Council (GCC) country to apply Article 31(I) of the GCC VAT Treaty, which allows Member States to zero-rate certain agreed upon food items.

The list, which is currently only available in Arabic, includes 94 items, the majority of which are in the meat/fish and fruit/vegetable categories.

The list is notable for the degree of specificity of the food items contained in it. For example, certain items will be zero-rated only in a fresh or chilled state, roosters and chickens will be zero-rated only if they weigh more than 185g, and coffee will be zero-rated only if it is not decaffeinated.

Businesses in the agriculture, wholesale, grocery, or restaurant industries will face a significant compliance burden as many of their supplies will need to be carefully assessed for the appropriate VAT treatment according to the criteria in the list.

Deloitte is currently in the process of producing an unofficial English translation of the list, and this will be circulated once available.

Media reports regarding a potential delay in implementation of VAT in Bahrain

Some 38 Bahraini MPs have apparently signed a document asking for a postponement of the VAT law. At this time, there has been no official confirmation of any change to the scheduled implementation of VAT in Bahrain on 1 January 2019 and it would be very late in the day if this were to be the case. Therefore, we would suggest that businesses should continue their preparations in order to ensure that they are fully compliant with the VAT Law and Regulations by the implementation date.

This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.