- June 4, 2020
- Posted by: Emirates CA
- Category: Tax
VAT Treatment in Bahrain
Often, we come across the situation when more than one product is being sold. What will be the VAT Treatment In Bahrain for such supplies? The Bahrain VAT Law urges the application of the VAT treatment of such transactions depending upon the nature of the goods being sold as bundled supply.
Bundled supply (the supply of more than one component at a time) could be a single composite supply or multiple supplies. The Bahrain VAT Law explains that to conclude the VAT Treatment in Bahrain of a bundled supply the first step is to identify whether the supply is a single composite supply or multiple supplies.
Let us look into the VAT Treatment in Bahrain to be applied in case of bundled supply and the relevant provision of Bahrain VAT Law explaining the same.
What is a single composite supply under the Bahrain VAT Law?
When the supplier provides more than one good or service to the customer as a single transaction and each of the components so provided complements the use of the other it is referred to as a single composite supply. A single fee is charged from the customer in case of a single composite supply.
Usually, in a single composite supply transaction, there is a main product or services which is actually sorted by the customer. This is the principal supply. Such principal supply is provided along with ancillary products which are useful or might be necessary or might help in making better use of the principal product or service.
For example, the Supply of machinery with installation is BD 150. In this case, though the supply has two components, Machinery is the principal supply and the installation are essential for making the machinery ready for use. This is an example of Single composite supply.
Also, a single composite supply is triggered when it is not possible to separate the values, or it would be artificial to separate the values of the individual components of a bundled supply. This might be because the transaction is completed only by connecting various products or services together.
For example, at a beauty parlour the facial treatment consists of many services like cleansing, blackheads removal etc. and the facial treatment is completed only after the completion of each of these supplies and a single fee is charged on it. Hence a facial treatment is a single composite supply.
What is the VAT Treatment in Bahrain to be applied on a single composite supply as per the Bahrain VAT Law?
In case of the single composite supply with a main product or service and ancillary supplies, the VAT treatment in Bahrain to be applied for the supply is the VAT treatment applicable for the main supply.
In the above example of machinery, as the main supply is the machinery. The VAT treatment in Bahrain is applicable for this single composite supply would be the VAT treatment applicable for machinery and not the VAT treatment of the installation.
In case of those supplies whose values cannot be distinguished, the VAT treatment in Bahrain to be applied is the VAT treatment considering the supply as a whole. In the above example of facial treatment at the beauty parlour, the VAT treatment to be applied would be analyzed based on the VAT rate applicable for facial treatment as a whole.
What is multiple supplies under the Bahrain VAT Law?
When a supplier provides multiple goods or services to the customer and when each of these goods or services so provided can be distinguished. Also, it can be used individually without each other, then such a supply is called multiple supplies.
In the case of multiple supplies, it is possible to identify the value of individual items. Each component of multiple supplies can be split and used separately. The presence of one component is not necessary for the usage of the other.
For example, ABC supermarket provides special combo offer for dry fruits in the month of Ramadan. It provides figs, apricots, dates, almonds and cashew nuts together for BD 6.250. This is an example of multiple supplies as each of the components of the supply can be separately identified and is each of them is not necessary for the use of the other.
Even if a single fee is charged for the bundled supply, it is possible to break down this fee and separately identify the value of each of the items.
What is the VAT treatment in Bahrain for multiple supplies as per the Bahrain VAT Law?
In the case of multiple supplies, the VAT treatment in Bahrain of each product or service supplied has to be separately identified and applied respectively.
In case a single fee is charged together for the entire supply, then this fee will have to be split and the value of each of the product or service in the supply should be identified. VAT rate to be applied separately on the value of each of the product or service given under multiple supplies.
In the above example of dry fruits, ABC supermarket is liable to separate, BD 6.250 and identify the value of each of the product in the combo offer. Also, the VAT treatment in Bahrain applicable for each of the dry fruits supplied by them as a part of the combo offer should be separately identified and applied.
In case the amount invoiced cannot be split and allocated to each product or service of the multiple supplies separately then the rate of VAT applied on the supply would be the highest rate of VAT applicable after comparing the VAT rate of each supply. That is, if the supply consists of the product with VAT rate 0% and VAT rate 5%, then the VAT rate of 5% should be applied to the total value of the multiple supplies.
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