Value Added Tax was introduced in the Kingdom of Bahrain on 1 January 2019 at a standard rate of 5% on all supplies and imports, with limited exceptions (such as zero-rated supplies and exempt services).

With effect from 1 January 2022, the standard rate of VAT is 10%.

In compliance with this Government mandate and Bahrain VAT Law, GFH Financial Group B.S.C. (‘GFH’) has been registered with The National Bureau for Revenue (‘NBR’) for VAT purposes – with an effective date of VAT registration 1 January 2019.

Therefore, effective from 1 January 2019, GFH will be charging VAT on supplies of goods or services (where applicable) in line with the Bahrain VAT Law and its Executive Regulations.

For more information regarding the introduction of VAT in Bahrain, please refer to the NBR’s website, which may be accessed here.

1- What is Value Added Tax (VAT)?
VAT is an indirect tax collected on supplies of most goods and services as well as on imports of goods and services into the Kingdom of Bahrain.

 

2- Why has VAT been introduced in Bahrain?
VAT has been introduced in Bahrain as part of Bahrain’s commitment to 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.

 

3- Who is responsible for the collection and administration of VAT in the Kingdom of Bahrain?
The National Bureau for Revenue (NBR) is responsible for the collection and administration of VAT in the Kingdom of Bahrain.

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

 

4- Does VAT apply on all goods and services?
All goods and services will be subject to VAT at a standard rate of 10%, unless it is specifically subject to VAT at zero-rate or exempted under the Bahrain VAT Law and its Regulations.

 

5- Will VAT be applicable to all GFH services in Bahrain?
VAT at 10% will be applicable on supply of services by GFH which are remunerated by way of an explicit fee or commission such as placement fees. While profit on margin-based products such as Murabaha profit will generally be exempt from VAT, however such income may qualify for VAT at zero rate as exports of services provided the related conditions are met.

However, any dividends from investment in securities are outside the scope of Bahrain VAT.

 

6- What is the VAT treatment of Islamic finance products?
Islamic finance products, that are Shariah compliant, and which are intended to achieve the same result as conventional financial products, are subject to the same VAT treatment as conventional financial products.

 

7- If I am not resident in Bahrain, will I still be charged VAT?
Supply of financial services to a non-resident customer is subject to VAT at zero rate as exports of services (subject to meeting certain conditions).

 

8- Where can I get more information about the introduction of VAT in Bahrain?
For more information, please visit the following links:

• The National Bureau for Revenue website
• VAT General FAQs
• Sector-specific Inquires