- December 18, 2023
- Posted by: admin@ecabahrain
- Category: Tax
Navigating VAT Due Dates and Deemed Supplies: A Comprehensive Guide for Retailers and Wholesalers in Bahrain
VAT due date for supplies in the Retail and Wholesale sector
Let’s discuss what is VAT due date and how it is determined according to the Bahrain VAT Law.
Why does the VAT due date need to be determined?
A VAT due date is the time when VAT becomes chargeable on a particular transaction. Having a clear understanding of the timeframe for charging VAT, and issuing VAT invoices, credit notes, and debit notes is very important in reporting the taxable supplies in the relevant VAT return.
Bahrain’s VAT Law clearly says the timeline for accounting invoices for VAT. Also, there is a set of guidelines that must be followed when determining the due date for VAT under the Bahrain VAT Law. The VAT due date is thus crucial to ensure that the VAT is recorded on time and that invoices are created within the deadline mandated.
According to the Bahrain VAT Law and Executive Regulations, the VAT due date for the supply of goods and services is defined by the general rules, along with some special rules for certain types of transactions. Generally, imports of goods have their own VAT due date rule.
The general VAT due date rules apply for all supplies of goods and services unless they fall under a special rule.
- The date of the supply of goods or services;
- The issue of a Tax invoice for that supply; and
- The receipt of full or partial payment for that supply
The date of supply of goods is:
- the date when the transport starts if the goods are supplied with transport and the transport is supervised by the supplier.
- the date when the goods are put at the disposal of the customer if the supply is without transport or with transport which is not supervised by the supplier, and
- the date on which the installation or assembly of the goods is completed, if the goods are supplied with installation and assembly.
For services, the date of supply is the date on which the services are considered as completed.
In the retail and wholesale sector, different commercial arrangements may be agreed between the parties involved and depending on these arrangements, different VAT due date rules may apply. For example, supplies of goods with payment by instalment generally follow the general VAT due date rules explained above. For consignment goods, the date of the supply of the goods by the consignor to the consignee is the date of the supply of the goods by the consignee to his customers.
Is the supply of gifts and samples to be considered as deemed supplies or not?
Considering the chance of final consumption of the goods or services without applying VAT, the goods and services which are provided for free, and the market value of such supply exceeds the prescribed limit, are treated as deemed supplies. Samples and gifts are free supplies and for that, there are some limits for which a company can give are laid down under the rules and when they exceed that limit, they will be treated as deemed supplies.
Samples and gifts must not exceed BHD 50 per recipient per calendar year and in total BHD 1,000 per calendar year, or any amount over BHD 1,000 will be considered as deemed supply.
We had discussed how we would treat the gifts and samples provided by the supplier, and everyone will doubt in their mind that the same provision applies for the free goods and services as part of a commercial offer, bundled supplies or for the buy one get one free offer provided.
Come let’s discuss in detail the treatment of transactions like free goods and/or services as part of a commercial offer, bundled supplies or the buy one get one free offer under VAT for retailers and wholesalers.
Free goods and services as part of a commercial offer/bundled supplies /“buy one get one free”
If the supply of goods and/or services for free with a supply made for a consideration (i.e. bundled promotions), and which is a part of marketing purpose by the supplier, then such supplies won’t count as a separate deemed supply for VAT purposes provided that they’re part of a commercial or promotional offer requiring the customer to buy some kind of supply to get them.
The free supply must satisfy the following three conditions to get itself considered as not a separate deemed supply for VAT purposes;
- Such free supply should be part of the marketing activity by the supplier,
- The free supply is to be given as part of a promotional or commercial offer with a documented policy; and,
- It requires the customers to buy a separate specific supply for consideration.
Here a separate specific supply should be purchased by the customer to get the free goods and/or services and the rules say that the consideration thus received can be treated as consideration for all the products. Hence it is not required by the supplier to treat the free supply as a separate deemed supply for VAT purposes.
It’s the same for “buy one, get one free” or similar promotions to the extent that they’re clearly defined by a commercial practice and backed up by a documented policy.
Goods and services provided to staff for no consideration
Now let’s check the situation where the supply is between an employee and an employer. It is mentioned in the Law and Regulations that an employer and its employees are considered to be related parties for VAT purposes.
A supply of goods and/or services from an employer to an employee for no consideration is a deemed supply, and the employer must account for VAT on these supplies based on the following rules:
- the actual cost of the goods, if purchased from a third party (in case of goods only),
- the total actual cost that is associated with the goods/service at the date of supply to the employer (the cost of raw materials, cost of making and packaging the goods, cost of labour/time together with an allocation of associated costs such as overheads, cost of purchasing services needed to provide the services to the employee etc),
- the market value of the goods/service in all other cases.
Further to that the supply of goods and/or services from an employer to an employee for no consideration may fall within the exception for low-value gifts.
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