How do I calculate the total VAT payable to the Government?
The VAT amount payable to the government can be calculated with the following formula:
VAT Amount Payable = VAT Received During Sale of Goods – VAT Paid to Incur Goods
This is illustrated in the following example:
| Entities | Cost in BHD | VAT Amount (5% Standard Rate) | Selling Price |
|---|---|---|---|
| Raw Materials Supplier to Manufacturer | BHD 5,000 | BHD 250 | BHD 5,250 |
| Manufacturer to Business Owner | BHD 6,000 | BHD 300 | BHD 6,300 |
| Business Owner to Customer | BHD 7,000 | BHD 350 | BHD 7,350 |
In the example shown above, the manufacturer sells goods to the business owner for BHD 6000, and the business owner pays the VAT of BHD 300.
In the next phase of the supply chain, the business owner sells the goods to the customer for BHD 7,000, plus the VAT of BHD 350.
Here, the business owner’s VAT amount payable to the Authority is calculated using the formula mentioned above:
VAT Amount Payable = 350 - 300
here, the VAT Amount Payable = BHD 50
For the manufacturer, the VAT amount payable to the Authority is calculated using the same formula, but with different values.
VAT Amount Payable = 300 - 250
here, the VAT Amount Payable = BHD 50