VAT on International Transportation in Bahrain:
What is International Transportation?
VAT on International transportation in Bahrain is the supply of transportation services of passengers and/or goods using a qualifying means of transport which involves one of the following:
- Transport of passengers or goods from Bahrain to a final destination outside Bahrain
- Transport of passengers or goods from outside Bahrain to Bahrain as the final destination
- Transport of passengers or goods carried out in Bahrain where it is part of the international transport of goods or passengers.
What is the VAT treatment in the case of International Transportation?
VAT on International Transportation in Bahrain of passenger or goods is taxable at Zero rates provided:
- The place of Supply is in Bahrain
- The supply is by means of a qualifying means of transport.
In case, if the place of supply is outside Bahrain, then such transaction is out of the Scope of Bahrain VAT Law.
How is the Place of Supply determined?
The following table elaborates on how to determine the place of supply:
| Transport begins | Transport ends | Place of supply |
| Bahrain | Outside Bahrain | Bahrain |
| Outside Bahrain | Bahrain | Outside Bahrain |
| Outside Bahrain | Outside Bahrain | Outside Bahrain |
What is a qualifying means of Transport?
A qualifying means of transport means any vehicle, ship or aircraft requiring a driver, pilot or crew, whatever the case may be, where the main purpose is the International transportation of at least ten passengers or goods on a commercial basis.
Please note that any means of transport converted or used for recreational or personal purposes will not be a qualifying means of transport and hence will be taxable at Standard rate (which is 5%)
Accordingly private jet/plane (generally an aircraft which does not operate on a commercial route by an airline on a scheduled basis) or private yacht or similar vessel will be treated as being used for personal or recreational purposes and hence will not be a qualifying means of transport and such transportation service would be taxable at 5%.
What is the rate of tax for services provided by a travel agent?
With effect from 1st August 2019, the services provided by a travel agent such as the ticketing services that are directly related to the international transportation of passengers and any commission charges, service charges or administration fees charged by the travel agent, whether to the airline, shipping company etc or to the passenger will be zero-rated for VAT purposes if the place of supply of such ticketing services in Bahrain.
Is it necessary for the travel agent to show service charges separate from the cost of a ticket in The Tax Invoice?
There is no requirement to separately identify the travel agents\' service charges on the Tax invoices provided by them to the customers.
Therefore, the travel agent may show the total payable amount by the customer (including the service charges and ticket cost) as one charge on the tax invoice.
The tax agent, however, should specify that the tax invoice includes a zero-rated supply. And also, where the tax invoice includes supplies subject to VAT at the standard 5% rate, the tax invoice must specify which line items include supplies subject to the zero-rate.
What is the VAT treatment on Bundle Travel Packages?
A bundle tour packages may include flight tickets, accommodation charges, local transportation charges, etc. In such a case each supply must be identified separately and VAT must be charged wherever relevant.
- For any travel packages or tours that relate to travel within Bahrain, supplies such as hotel accommodation will be taxable at the standard rate.
- For any travel packages or tours that relate to travel outside of Bahrain, supplies such as accommodation and local transportation will be outside the scope of Bahrain VAT.
- The commission charged by the travel agent for bundle travel packages must be split into two components, i.e., for arranging tickets for international transportation and other parts of the package.
- The commission for the ticketing services for international transportation will be zero-rated if the place of supply in Bahrain
- the commission for all other supplies will be taxable at the standard rate when the place of supply of the travel arrangement services is in Bahrain.
What is the VAT treatment on Supplies directly or indirectly associated with a supply of international transportation of passengers and goods?
The following supply of goods and services directly or indirectly associated with a Supply of international transportation of passengers and goods shall be taxed at Zero rates:
- A Supply of Goods and Services for use or consumption on board a qualifying Means of Transport,
- Loading and unloading of machinery and equipment used for the transport of goods, loading of products, unloading, transporting, storing, packaging, weighing, measuring, monitoring, expertise (including expert Services, commissions closely related to export transactions and equipment intended for export),
- Rental of containers and equipment for the protection of goods intended for export,
- Rental of machinery and equipment that is used to transport goods intended for export,
- Security and storage of goods intended for export,
- Packaging of goods that are intended for export,
- Transactions necessary for export transactions which are carried out by an approved clearance agent of the Customs Department,
- Visa transactions and related Services and insurance transactions for passengers.
VAT on Local Transportation:
What is local transportation?
Local transportation means the transportation of passengers and/or goods by land, air, or water from a place in Bahrain to a place in Bahrain.
E.g., Local Taxi, public Buses, School Buses, etc.
The place of supply for local transportation services will always be Bahrain as it always begins and ends in Bahrain.
What is the VAT treatment for local transportation?
Local transportation Service will be subject to VAT at zero rates. But in the following cases the transportation service will be subject to the standard rate:
- The person providing such transport Services does not meet the regulatory or licensing requirements from an authorized body in Bahrain.
- The vehicle is rented without a driver.
- Such a transportation service is provided for sightseeing or leisure purposes.
- Relate to food delivery Services provided by a person supplying food. (But if the customer does not use the restaurant delivery service and engages a third-party delivery company only to deliver food and where there is a separate invoice for the food and the delivery charge, such service of the third-party delivery company will be zero-rated).
- The transportation service is ancillary to a principal supply that is subject to VAT at the standard rate and where such transportation service is not priced separately.
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