VAT Refunds in Bahrain: A Comprehensive Guide

What is a VAT refund?

When the input VAT on a tax return is greater than the output VAT, the taxpayer can request the NBR (National Bureau for Revenue) to refund the excess amount.

• Input VAT is the tax payable for the goods or services purchased by the taxpayer.
• Output VAT is the tax collected on the goods or services sold by the taxpayer.

Eligibility to obtain VAT refunds

The following people are eligible to receive VAT refunds:

• A taxable person who has paid excess VAT
• Foreign governments, international organizations, institutions, consular and military bodies that have paid VAT for goods and services supplied inside the Kingdom of Bahrain.
• Tourists

Timeline for VAT refunds

Once the taxpayer submits their request, the NBR will review their accounts to check the validity of the refund request. The NBR officials will notify the taxpayer whether the request is approved within 60 days of reviewing the accounts.

Obtaining tax refunds

1. Tax refunds for taxable individuals

The taxpayer applying for the VAT refund must do so within 5 years after the end of the year in which a qualifying condition has taken place.

A taxpayer can obtain a tax refund if any of the following conditions are met:

• In case of excess deductible net tax per tax return: The excess tax can be carried forward by the taxpayer to the next tax period.
• When a taxpayer’s tax payment exceeds the net tax payable amount.
• If there’s excess recoverable net tax when the taxpayer has applied for deregistration.

Offsetting the payable VAT against refunds

The NBR will offset the taxpayer’s VAT refund against the VAT amount (and administrative penalties, if any) to be paid until the excess amount has been exhausted.

Timeline for VAT refunds

The NBR officials will respond to the refund request within 60 days (the request can be renewed for the same 60 days) from the date on which the taxpayer submitted the request and provided the required documents.

Once the form is approved by the NBR, the tax refund will be made via a bank transfer to the taxpayer’s account within 30 days from the date of approval.

2. Tax refunds for non-residents

Non-residents can claim VAT refunds for tax paid in the Kingdom of Bahrain by submitting a refund request. The following people are eligible for refunds as non-residents:

• Taxable individuals who are residents in any of the GCC member states
• A non-resident of any GCC member state who meets the following conditions:
• They must not have supplied goods or services that would make them liable to pay VAT in the Kingdom of Bahrain or any other GCC member state during the tax period to which the refund request relates.
• They must be registered for VAT purposes or other business purposes in their country of residence.
• The VAT incurred must be for their business activity.

Timeline for VAT refunds

If you’re a non-resident, the NBR will verify your refund request and notify you regarding your approval status within 3 months from the date of submission.

Information to be included in the refund request

The refund request should contain the following details:

• The name and address of the applicant
• A description of their business activities
• The applicant’s tax registration details (as provided to the relevant authority in their country of residence)
• The reasons why the applicant bore the costs named in the refund request
• A description of the costs related to the requested tax refund

Special VAT refund scheme

What is the special refund scheme?

The VAT legislation permits business owners to obtain VAT refunds based on the expenses they incur and the goods they import. These refunds can be obtained irrespective of whether they’re taxable people or whether they meet the conditions for input tax recovery. This is called the special refund scheme.

Who can benefit from the special refund scheme?

The following people can benefit from the special refund scheme:

• Taxable people from other GCC states
• Business visitors from non-GCC states
• Foreign governments, international organisations, institutions, consular and military bodies, and diplomatic missions.
• Tourists

1. Refunds for tax paid by individuals in other GCC states

These conditions are applicable to residents of Bahrain who are citizens of other GCC member states and have paid VAT in those GCC member states.

To be eligible for refunds, the tax paid should meet the following conditions:

• These individuals should be residents of the Kingdom of Bahrain, and they should NOT be registered under the VAT regime.
• The goods purchased from the other GCC state must have entered the Kingdom of Bahrain.
• The total value of the goods purchased must be greater than BHD 1,000.

Note: If there’s no proof of purchase from the other GCC member state, the NBR will impose tax on the goods upon their entry into the Kingdom of Bahrain.

2. Tax refunds for foreign governments, international organisations, institutions, consular and military bodies, and diplomatic missions

An initial VAT refund request must be submitted using a form issued by the Bureau. NBR officials may request copies of tax invoices or other related information to verify the validity of the request.

The applicant must submit the form within 30 days from the date of placing a refund request. The NBR will inform the applicant regarding their approval status within 60 days of receiving the form.

Once the refund is approved by the NBR, the tax refund will be made via a bank transfer to the applicant within 30 days from the date of approval.

Note: The refund request for applicants of this category cannot be made for an amount less than BHD 100.

3. Tax refunds for tourists

Under the VAT regime, tourists can request refunds for tax paid in the Kingdom of Bahrain on goods that are transported outside the GCC.

To claim a tourist VAT refund:

• The supply of goods must be made during the tourist’s stay in the Kingdom of Bahrain.
• The goods must be purchased for personal use.
• The goods must be supplied by an authorised supplier (the NBR will issue a list of suppliers authorised to implement the refund scheme)
• The tourist must leave the Kingdom of Bahrain within 2 months from the date of supply of the goods they purchased.

A tourist must include the following along with their refund application:

• A tax invoice or any other proof of tax payment
• A description of the goods purchased in the Kingdom of Bahrain
• A copy of the tourist’s passport and travel ticket