A blog about local and foreign VAT matters, best practices, and tips from practioners.

Bahrain parliament has approved the introduction of VAT at the expected standard rate of 5%, effective from January 1st, 2019. Bahrain’s VAT laws slightly differ in some key areas from the corresponding legislation introduced in UAE and Saudi Arabia, where it emphasizes  on more exemptions and broader zero-rates, with the intention of balancing a range of unique socio-economic objective pertaining to their country.

If you have an establishment in Bahrain or are involved in cross-border economic activities with Bahrain, you should start assessing the potential impact that VAT in Bahrain could have and check the available option to mitigate this. You are likely to have additional VAT consideration, if you operate in any of the following sectors:

  • Real Estate
  • Financial Services
  • Technology, Media and Telecommunications
  • Retail and Consumables


Also, as per the VAT agreement, the non-residents of the GCC may be allowed to apply for a refund of VAT incurred based on the provisions in the VAT law, and the refunds are granted to a few selected entities, including:

  • International organisations
  • Foreign governments
  • Diplomatic and military bodies and missions.


What does this mean for you?

All economic sectors in Bahrain are going to be affected by the introduction of VAT and businesses will need to make considerable effort to update people, processes, contracts, system and stakeholders for VAT given the limited time between the announcement and the implementation. If you have business activities in Bahrain then you need to start an early preparation and maybe take the learnings from the UAE and Saudi Arabia to help ensure first-day compliance and readiness.