- July 16, 2020
- Posted by:
- Category: Tax
All you need to know about imports under Bahrain VAT
The companies are liable to pay VAT at applicable rates when the goods are imported to the territory of Bahrain. Now let us look at the VAT treatment of imports and how to claim the VAT paid on imports.
What are imports as per the Bahrain VAT Law?
All the goods entering the territory of Bahrain that are cleared through the customs import for the purpose of VAT as per the Bahrain VAT Law.
Even if the buyer transfers such goods from a branch outside Bahrain or no consideration is payable for these goods, this transaction would be regarded as import as per the Bahrain VAT Law, and VAT would be applicable.
The place of supply of imported goods would be the point of entry of the goods in the territory of Bahrain. As a result, the import of goods comes within the scope of the Bahrain VAT Law.
What is the VAT rate applicable to the imported goods as per the Bahrain VAT Law?
Imported goods are subject to VAT based on the rates applicable when they are actually purchased within Bahrain.
That means that the goods qualify for the Standard rate except in the following cases:
- If the goods imported are subject to zero-rated in Bahrain or is specifically exempt as per the Bahrain VAT Law.
- If the goods imported are necessary equipment for persons with special needs and the importer has all the documents as stipulated by the customs Law to evidence the same.
- If the goods imported are exempt from customs duties as per the Bahrain customs Law under one of the following exemptions
- Diplomatic exemption
- Military exemption
- Returned goods
- Import of personal belongings and household appliances by a Bahraini citizen who is residing abroad or by a foreigner who is coming to reside in Bahrain for the first time.
- Import of personal effects and gifts accompanied by a passenger
When is the tax due date and who is liable to pay import VAT as per the Bahrain VAT Law?
In the case of imports, the date on which the VAT is due is the date on which the customs duties are due as per the Bahrain Customs Law. The custom duties are due in either of the following cases:
- When the goods arrive to the respective port in Bahrain
- When the goods are released from a customs duty suspension regime (For e.g., while the goods are transferred to a Bonded Warehouse the customs duties would be applicable when such goods are transferred by the buyer to their premise).
The person liable to pay import VAT is the importer of the goods as per the customs record.
What is the Value of the imported goods as per the Bahrain VAT Law?
The VAT rate is to be applied to the value of the goods as per the Bahrain VAT Law. The value of the goods would be the customs value declared in accordance with the Bahrain customs Law and also, the following needed to be added to the customs value to calculate VAT:
- Customs duties
- Excise tax
- The ancillary costs relating to importing of the goods such as:
- Transportation charges, commission expenses or other similar charges in relation to the goods until they arrive at Bahrain.
- Additional charges relating to insurance, storage, packing, surveillance etc until they arrive at Bahrain.
In case the goods are re-imported after being temporarily exported to outside Bahrain for repair, completion of manufacturing etc., then the value of such goods would be value declared by the customs at the time of the export.
In case the supplier grants a discount after the goods are imported to Bahrain, then such discounts will not have any effect in the value of goods unless the customs value itself is changed due to such a discount.
Also, if the goods cleared have been subject to an incorrect VAT amount (due to wrong classification or wrong calculation of value), then the taxpayer should raise such issues before making the payment of the import VAT.
In case such an issue arises and an amendment needs to be made to customs declaration after the clearance of goods then the taxpayer should notify the customs. The customs will issue a payment order in case such an amendment results in the underpayment of taxes originally.
If such an amendment results in an overpayment of taxes originally, then the customs would adjust the amount against other taxes payable. However, it will not refund the VAT payment but this can be claimed as input VAT in the VAT return of the taxpayer.
How to recover the import VAT paid in accordance with the Bahrain VAT Law and what are the records to be retained?
The import VAT amount paid by a taxable person at the customs can be recovered by the taxable person as Input VAT on imports in his VAT return provided the VAT paid should qualify for recovery in accordance with the Bahrain VAT Law (That is goods imported should be used to make a taxable supply, it should not be specifically disallowed by the Bahrain VAT Law to recover the Input VAT paid on these goods, etc)
However, it is mandatory that the taxpayer should document all the necessary evidence supporting the VAT paid at the customs. The following are the relevant documents to be retained to evidence the VAT paid and these documents should be in the name of the VAT payer who is claiming the Input VAT:
- Customs declaration showing the Customs value of the goods and all the applicable duties and taxes on the goods.
- Customs receipt evidencing the VAT being paid at the customs.
- Supplier invoices to evidence the particulars of the goods imported.
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- VAT Registration
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