VAT in Bahrain Updates | Is VAT a Cost to Your Business in Bahrain?
- November 24, 2019
- Posted by: Emirates CA
- Category: Tax
VAT in Bahrain Updates- In this blog, we will understand whether VAT in Bahrain is a cost to your business or not. Many people and businesses think that VAT is a cost to their business, but that is not true. The VAT is structured in such a way that there will be no cost to your business provided you comply with the Bahrain VAT Law within the time frame as specified.
To give you a few examples that VAT is not a cost to your business, first, you should complete your VAT Registration on time and secondly comply with the VAT regulations of Bahrain as per the requirement.
There are certain instances where VAT will be a cost as well to your business. But such cases are in a very limited area and the impact is meager/ very small.
Mainly there are five points to be drawn to your attention as to when VAT will be a cost to your business.
- If your business in Bahrain is in an Exempted category For example sale of bare land, certain financial activities and banking activities. In such cases of the exempted category, whatever expenses you have incurred cannot be recovered. So, the expenses you have made or incurred for the services you have rendered or the payment you have made to the suppliers will be a cost to your business.
Luckily in the Kingdom of Bahrain, there is a very limited number of categories of supplies that are exempted under Bahrain VAT law.
- If you have not registered for VAT in Bahrain on time, you will incur a penalty. If you do not comply with the provisions of Bahrain VAT law you will be penalized for non-compliance of the law. Hence, non-compliance with the law will be a cost to your business.
(Detailed explanation of Penalties of Non-compliance of Bahrain VAT Law is described below)
- If you incurred any expenses prior to your VAT Registration and you have incurred VAT for that. For example, you bought some products and sold those products prior to Registering for VAT in Bahrain, the VAT payment you have made for the goods or products will be a cost to your business.
- Any expense you incurred for your business where such expenses are non-recoverable expenses in nature under the Bahrain VAT law, then it will be a cost to your business. As per the Bahrain VAT Law, there are very limited cases where expenses as disallowed for claiming Input Credit.
- The cost you are incurring for training people, the software you buy or for other infrastructure development is an investment for your business and that you are streamlining your business which in return give you more savings in the near future than the amount what you are investing for such kind of developments within your organization. Your people will be trained, and the quality of the services given by your company will be more than you have an expense. The expenses you are incurring for your software is giving you in multiples for your business. However, in accounting terms, the expenses you are incurring for personal training & software are the cost to your business.
In short, because of VAT, there is a cost to your business in the above circumstances.
Penalties associated if you do not comply with Bahrain VAT Law:
Will your business in Bahrain attract penalties if you do not complete your VAT Registration on time?
If your business in Bahrain is having a turnover (taxable supplies) of more than 37,500/- BHD for the past 12 months or is expected to have a turnover (taxable supplies) of more than 37,500/- BHD in the coming 12 months, in such cases it is mandatory to register for VAT in Bahrain within the given time frame.
All the companies/entities including small, medium and micro-level entities having a turnover (taxable supplies) more than 37,500/- BHD for a period of twelve months should apply for VAT Registration on or before 20th December 2019 and get ready to collect VAT from 1st January 2020.
If businesses are not registered within 60 days after the registration period is completed, the National Bureau of Revenue (NBR) will levy administrative penalties of up to BHD 10,000/- as well as the business might as well qualify for tax evasion. In addition to that, if VAT Registration is not done within 60 days from the due date for VAT Registration in Bahrain, the penalty can be extended up to 3 – 5 years of imprisonment as well.
Issuing a Tax Invoice is mandatory as per Bahrain VAT Law – When does business have to issue a tax invoice?
Businesses registered for VAT in Bahrain must issue a tax invoice within 15 days of the following month in which the supply was made.
You should also keep in mind that if there is any delay in issuing the tax invoice within the stipulated time, businesses will be subject to penalties.
Failure to comply with the conditions and procedures of issuing a tax invoice will be left with a fine not exceeding BHD 5,000/-
Filing your VAT Return once you have registered for VAT in Bahrain is mandatory.
The VAT Return period for those businesses who have registered for VAT will either have to file for VAT Return on a monthly basis or a quarterly basis. Businesses who have annual supplies up to 3 Million BHD may file VAT Return on a quarterly basis. For businesses whose annual supplies is over and above 3 Million BHD may have to file their VAT Return on a Monthly Basis.
In case of there is a delay in submission of the Tax Return (not exceeding 60 days) & delay in payment of the Tax due (not exceeding 60 days) there will be a fine between 5% and 25% on the value of the Tax declared or paid. Further, if such delay happened even after 60 days from the due date there can be imprisonment of 3 – 5 years for non-compliance of the law.
VAT Return Filing is an online process and can be filed using the NBR’s online portal. The VAT payment should be made not later than the last day of the month following the end of the tax period.
Even in cases if there are no transactions for any particular Tax Period, it has to be reported in a given tax period and should still submit a tax return showing no output or input tax.
If you would like to learn VAT in Bahrain Updates through video, please listen below detailed explanation done by CA Manu CEO Emirates Chartered Accountants Group
Emirates Chartered Accountants offer an exclusive range of VAT Services in the Kingdom of Bahrain. The Tax Department has practical experience of implementing VAT in Bahrain & VAT in UAE and are professionally well versed with the Bahrain VAT laws and its complianes.
Looking for VAT Services in Bahrain are:
- VAT Registration
- VAT Training
- VAT Implementation
- VAT Return Filing Service
- VAT Consultancy
- Accounting for VAT Compliance
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