VAT in Bahrain and Other GCC Countries

The Unified Gulf Cooperation Council Value Added Tax framework agreement was released on 3 May 2017 Member states are expected to pass their individual laws relating to VAT.
UAE and KSA planned to implement VAT in their countries by the first quarter of 2018. Other GCC countries are expected to implement VAT by January 2019.

When will VAT be implemented?

The UAE and KSA have already implemented VAT from 1 January 2018.  Bahrain, Qatar, Kuwait, and Oman are expected to implement VAT in January 2019.

Will all business sectors be affected?

Yes, but there will be exempt sectors such as health, education, and financial services.

Is there a threshold turnover at which companies must register for VAT?

The limit for compulsory registration for taxation is expected to be USD 100,000 or its equivalent in the Member State's currency.

In the case of a start-up business where the revenue flow takes time, the registration is expected to be compulsory if the total expenses are more than USD 100,000 or its equivalent in the Member State's currency.

Are there any VAT exemptions?

The following businesses are exempt from VAT in order to reduce the impact on the population:

  • Educational institutions, pharmaceutical supplies, financial services, including both banks  and life insurance companies; and

  • Sale or lease of residential property;

  • The place of supply of gas, oil, and water through the distribution grid of pipelines and the supply of electricity to a non-trader person subject to tax is the actual place of consumption.

Could there be different rates for different products/services?

At the initial stage, VAT will be charged at 5% on all services consumed and goods purchased.  VAT can also be zero rated for certain businesses.

The difference between VAT registered businesses and unregistered businesses

If you are a VAT-registered business, in most cases you charge VAT on the goods and/or services you supply/provide. The rate at which you charge VAT will depend on your type of business.
If you are not a VAT registered business then you cannot reclaim the VAT you pay when you purchase goods and services.

What are the key commercial impacts of implementing VAT?

  • Pricing Policy      
  • Invoicing – inclusive or exclusive of VAT Cut-off procedures
  • Inventory as at 31st December 2018
  • Identify the inputs and assess VAT implications Identify intercompany transactions
  • Educate customers
  • Deal with existing contracts
  • Prepare to implement VAT
  • Awareness within the organisation Maintenance and retention of records

How RSM can assist with the implementation of VAT at your business?

Phase I Impact Assessment

  • Identify taxability on inputs and outputs
  • Review contracts
  • Identify taxability on inputs and outputs
  • Review contracts
  • Review information systems
  • Assess training needs

Phase II Implementation

  • Set up VAT policies and procedures
  • Advise on the system and reports to be generated
  • Testing of the VAT IT system
  • Staff training

Phase III Support

  • Ensure VAT compliance and efficiency
  • Monitor new developments
  • Ensure that VAT books are well maintained for audits
  • Ongoing training of staff

How can we help you?

Contact us by phone +973 1753 7787 or submit your questions, comments, or proposal requests.

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