Supply Under VAT in Bahrain: FAQs

What is supply under VAT?

Supply under VAT describes any situation where there is an exchange of goods and services (including production, sales, purchases, and leasing transactions), and at least one of the parties is a registered taxpayer.

What are the different types of supply?

There are four different types of supply:

Supply of Goods: The selling of goods or transferring the rights of ownership is known as a supply of goods.

Supply of Services: Supply that does not involve goods is known as a supply of services.

Supplies Produced or Obtained on Behalf of Another Taxable Person: If a person supplies or receives goods on behalf of another taxable person, then the person supplying the goods will be considered to be the supplier.

Deemed Supplies: The following categories of goods are considered deemed supplies:

Goods that are a part of a person’s assets and that are used or given up for non-business purposes.

Goods that are used for making supplies that are not subject to VAT.

Goods that are owned on the date of deregistration even though the owning business has stopped all business activities.

Goods that are given for free. This does not include samples or gifts that are handed out to consumers for promotional purposes.

Services that a supplier offers for free.

What are sovereign supplies?

Sovereign supplies are supplies produced by governmental entities within their official capacity. This includes both goods that are put up for consideration and goods that are not put up for consideration.

What are the components of supply?

The components of supply are:

Place of Supply - The place of supply determines whether the supply is treated as inside or outside the Kingdom of Bahrain for VAT purposes.

Time of Supply - The time of supply helps business owners figure out when the tax is payable to the government.

Value of Supply - The overall value of the goods that are being supplied determines the amount of tax that will be charged.

What is the place of supply?

This is the component of supply that helps the Authority understand whether the supply was made within the Kingdom of Bahrain or outside it for purposes of VAT.

What is the time of supply?

The time of supply determines which tax period the supply belongs to and when the tax payable to the government is due.

What is the value of supply?

This component of supply determines the value of the goods that are taxable and the amount of tax that is to be paid for it.

How is the place of supply determined for goods?

Place of supply is determined differently based on whether the supply involves goods, services, or certain other categories:

Place of Supply for Goods:

The place of supply for goods will be the Kingdom of Bahrain if any of the following conditions are met:

• The goods are sold to customers within the Kingdom without the use of transportation or dispatch.

• The goods are transported or supplied within the Kingdom from the supplier to the customer.

• The goods are assembled or installed in the Kingdom of Bahrain.

• The goods are internally supplied by a registered supplier (or a non-registered supplier who is required to register) to a taxable recipient in the Kingdom of Bahrain.

• The goods are manufactured in the Kingdom and are supplied to a state where VAT is applicable. In this situation, the supplier must be a taxable person, and the customer must be non-taxable in the destination state. The value of the goods must not exceed BHD 37,500, the mandatory threshold, in any twelve consecutive months.

How is the place of supply determined for services?

Place of Supply for Services:

The place of supply will be the Kingdom if the supplier is a taxable resident of the Kingdom, unless the recipient is a taxable person from another VAT-implementing state. In that case, the recipient’s location will be the place of supply for the service.

Place of Supply for Services That Fall into Other Categories:

• If the supplier does not reside in the Kingdom of Bahrain, the place of supply will be the taxable customer’s country of origin.

• For a supply of transportation services, if a taxable supplier leases a vehicle to a non-taxable customer, the place of supply will be the location where the service is made available for the customer.

What is the place of supply for restaurants?

The place of supply for restaurant services will be the location of the restaurant.

How do I determine the place of supply for events?

The place of supply for an event (such as a concert, sport, or cultural event) will be the location where the event is happening.

How do I determine the place of supply for real state?

The place of supply for real estate will be the location of the real estate. Supplies of real estate and bare lands are exempt from VAT in Bahrain.

How do I determine the place of supply of transportation services?

The place of supply for transportation of goods or passengers will be the place of origin of the overall journey.

How is the value of supply calculated?

For all transactions where the purchase price can be determined, the value of supply is the purchase price itself. If the purchase price cannot be determined or the supply is not made in exchange for a monetary consideration, the value of supply is the fair market value of the product on that particular day.

How is the value of supply calculated for deemed supplies?

The value of deemed supplies is calculated based on the purchase price or the actual cost of goods and services. If these values cannot be determined, the fair market value or the estimated market value for the product on that day will be the value of supply.

How is the value of supply calculated for imported goods?

The value of goods imported into the Kingdom of Bahrain is determined by the Customs under the Unified Customs Law. It includes customs duties, excise taxes, and other duty taxes except VAT.

How is the time of supply for goods determined?

The following table explains certain scenarios in which goods are supplied and how the time of supply is determined:

What is the time of supply used for?

The time of supply determines the tax period under which the tax amount will be due.

What is the time of supply for services?

The time of supply for services is the date on which the services are fully completed.

What is the time of supply for goods under the reverse-charge mechanism?

The time of supply for goods under the reverse-charge mechanism is the earliest of the following dates:

The date the goods are supplied. The date of the issue of the invoice. The date on which the payment is received, either in full or partial.

What is the time of supply for general goods?

The time of supply for general goods is the date on which the goods were sold.

What is the point of entry?

VAT is imposed on all imported goods at their point of entry into GCC territory. There are two types of point of entry:

First Point of Entry - The first place that the goods enter GCC territory will be marked as the first point of entry.

For example, if the goods are being transported to the UAE, but enter the Kingdom of Bahrain first, the first point of entry will be the Kingdom of Bahrain.

Final Destination Point of Entry - This is the final place that the goods enter, that is under GCC territory.

For example, if the goods are being transported to India, but the goods were last seen under GCC territory in the Kingdom of Bahrain, the final destination point of entry will be the Kingdom of Bahrain.

How are the components of supply determined for imports?

The place, value, and time of supply for the importation of goods is determined by the Common Customs Law. Here’s how the three components of supply are determined for the importation of goods:

Place of Importation: The place of importation shall be the Kingdom in the following two cases:

If the first point of entry of the goods into the GCC is the Kingdom of Bahrain.

If goods under customs duty suspension are released from the Kingdom of Bahrain, then the place of importation shall be the Kingdom of Bahrain.

Time of Importation: For all goods that require customs duty to be paid, the time of supply of importation will be the date on which the customs duties are due.

Value of Importation: The value of the goods that are imported into the Kingdom of Bahrain is equal to the customs value that has been determined by the Common Customs Law, plus excise taxes, customs, and other duties, excluding VAT.

How are export supplies treated under VAT?

Goods and services that are supplied from the Kingdom to anywhere outside it are exports. Exports are generally considered to be taxable supplies, but they are zero-rated. This means that a 0% VAT will be imposed on all goods that are exported from the Kingdom of Bahrain.

What are inter-GCC supplies?

Inter-GCC supplies are made by a supplier who is situated in the Kingdom to a customer who resides in another GCC state, or from a supplier in another GCC state to a customer in the Kingdom.