Bahrain VAT Law-How to Deal with Businesses Not Registered For VAT in Bahrain Under Bahrain VAT Law?

Many of those registered businesses in Bahrain are confused about whether they can deal with unregistered persons/businesses or not. In this blog, we will learn what is the implication if we buy or sell goods or services to persons who are not registered under the Bahrain VAT law.

Who can be called an unregistered person/business?

Unregistered person/business can be a supplier or also a customer who is not registered under Bahrain VAT law.

Can you charge VAT to unregistered persons/businesses who have not registered for VAT in Bahrain?

If you are registered for VAT in Bahrain and if you are responsible to charge VAT for one specific transaction, it does not matter whether the customer is registered or not. As a VAT registered person/business it is your responsibility to charge VAT on them irrespective of the fact that they are registered for VAT in Bahrain or not.

Whether you can buy from unregistered persons or not?

There is no harm in buying from unregistered persons or businesses in Bahrain even though you are registered under Bahrain VAT law. If such a supplier has not charged VAT on you, you may assume that he is not registered for VAT in Bahrain. In such cases, you will not be paying VAT to the supplier and there is nothing to claim from the authority as input credit against such purchases.

In short or to sum up, if you are registered under VAT in Bahrain whether the customer is registered or not you should charge VAT. If the supplier is charging VAT on you and if other conditions are satisfied, then you can claim input credit on such supplies from the supplier.  If they are not charging VAT, there is nothing to claim as input credit.   

When should you register for VAT in Bahrain?

If you are residing in Bahrain and meet certain criteria by the Bahrain VAT Law to qualify as a taxable person, you should proceed with VAT Registration in Bahrain.

The VAT Mandatory registration criteria are as mentioned below:

• If the amount of your annual turnover during the previous 12 months exceeds the threshold of BHD 37,500/- or

• If the amount of your annual turnover to be provided in the next 12 months is expected to exceed the threshold of BHD 37,500/-

In case a person or businesses in Bahrain exceeds the mandatory registration threshold under one of the above criteria’s mentioned, it is your responsibility to must apply for VAT registration to the National Bureau of Revenue within 30 days starting from the last day of the month where you exceeded the mandatory threshold or within 30 days prior the first day of the month where you expect to exceed the mandatory threshold.

Please note that if there is any delay in applying for VAT Registration in Bahrain, it may result in the application of penalties as prescribed by the Bahrain VAT law. 

Do you have to register for VAT if you are a non-resident taxable person in Bahrain?

Yes, you should register for VAT in Bahrain even if you are a non-resident person, the moment you start making taxable supplies in Bahrain where no one is responsible to account for VAT on your supplies. This normally happens when you as a non-resident supplies taxable goods or services in the Kingdom of Bahrain to non-VAT registered businesses or end-consumers.

Please note for non-registered taxable persons in Bahrain, there is no minimum VAT registration threshold. Even if the non-resident taxable person is making a supply of BHD 1 to a non-registered customer it will result as an obligation to register for VAT in Bahrain.

Let us learn the scenarios with examples:

• A is a non-resident in Bahrain and supplying goods to the registered person in Bahrain

The buyer in Bahrain will be paying tax while importing in Bahrain and can claim input tax if he is registered under VAT.

• B is a non-resident in Bahrain came to Bahrain and sold goods in Bahrain

Mr. B has to register under Bahrain VAT law and pay tax to the authority.

• C is a non-resident in Bahrain and providing services to the registered person in Bahrain

The registrant in Bahrain will be paying tax while importing services through Reverse Charge Mechanism.

• D is a non-resident in Bahrain came to Bahrain and provided services in Bahrain

Mr. D has to register under Bahrain VAT law and pay tax to the authority for the services provided in Bahrain.

A non-resident taxable person should apply for VAT Registration in Bahrain with the National Bureau of Revenue within 30 days of his first supply in Bahrain for which he is required to pay tax. A late application may attract penalties as per the Bahrain VAT law.

A non-resident taxable person can apply to register for VAT with the NBR either directly or through a tax representative. The tax representative will represent the non-resident taxable person for all VAT related matters in Bahrain.

To know the Bahrain VAT Law-How to Deal with Businesses Not Registered For VAT in Bahrain Under Bahrain VAT Law through video here you go down

Emirates Chartered Accountants Bahrain offers an exclusive range of VAT Services in the Kingdom of Bahrain. The Tax Department has practical experience of implementing VAT in Bahrain & VAT in UAE  and are professionally well versed with the Bahrain VAT laws and its compliances.

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