E-Commerce VAT in Bahrain and its Applicability

E-commerce VAT in Bahrain and its application case studies in the different scenario; An e-commerce transaction relating to goods involves the sale of goods via an online platform, such as the purchase of dress or groceries through a website. Let us look into the applicability of VAT on e-commerce goods.

If the goods are in Bahrain          

If the goods are located in Bahrain, the sale of goods by a registered company to a customer in Bahrain via an online platform (e.g., a website) will be subject to VAT at the standard rate, unless the supply is specifically exempt from VAT or zero-rated.

If the goods are exported from Bahrain

If the goods are exported from Bahrain, the sale of goods by a registered company to a customer outside Bahrain using an online platform (e.g., a website) will be zero-rated as an export of goods if it satisfies the zero-rating condition for export.

If the supplier is outside Bahrain

If the goods are located outside of Bahrain, the sale of the goods through an online platform (e.g., a website) by a person located outside of Bahrain (i.e., a non-resident supplier) to any customer in Bahrain will be out of scope from Bahrain VAT, the importer of records will be the customer or clearing agent who is acting on behalf of the customer who has purchased the goods.

Import VAT will be paid by the importer to the Customs Affairs Department on the goods at the point of entry if it is subject to vat at the standard rate in Bahrain.

Example 1:

Company ABC is established in the Kingdom of Bahrain and is registered for VAT in Bahrain, purchases new laptops from Company XYZ’s website. Company XYZ is a Korean company and has no presence in Bahrain. When the goods are imported into Bahrain, Company ABC is the importer of record.

The supply by Company XYZ of the laptops to Company ABC is outside the scope of Bahrain VAT. Company ABC will pay the import VAT at the time of importation as the importer of record. This VAT can be claimed by Company ABC if it is related to their business activities.

Example 2

Mr. Raj (A Bahrain resident and who is not registered for VAT) purchases shirts from an online retailer who is based in UAE (Company A). Company A has no presence in Bahrain and is not registered for VAT in Bahrain. Company A uses a delivery company (Company B) to deliver the goods from UAE to Raj’s home in Bahrain. They will also clear the goods through Bahrain Customs Affairs as a clearing agent.

Company B will be the importer of record and will be responsible to pay the import VAT. Under the commercial arrangements, they will be reimbursed for this VAT directly from Company A. Company B will not be entitled to claim the import VAT paid through its VAT return as it does not relate to its business activities.

VAT Due Date

The VAT due date is important for ensuring that VAT is accounted for in the correct period and that VAT invoices are raised within the timeframes specified in the VAT Law and Regulations.

The VAT due date for a supply of goods will be the earliest of:

• The date of the supply of goods;
• The issue of a TAX invoice for that supply; and
• The receipt of payment for that supply

The date of the supply of goods is:

• If the goods are supplied with transport and the transport is supervised by the supplier, On the date when the transport begins;
• If the supply is without transport or with transport which is not supervised by the supplier, On the date the goods are placed at the disposal of the customer;
• If the goods are supplied with installation and assembly, On the date on which the installation or the assembly of the goods was completed.

 Example

Company ABC is registered for VAT sells cosmetics on its website. On 15 January 2021, Fathima ordered cosmetics that cost BHD 50. When placing the order online, Fathima also makes payment through the website (which was received by Company ABC on the same day) and a Tax Invoice is sent to Fathima on 16 January 2021. It is expected that the goods will be delivered on 20 January 2021. The VAT due date of the supply is 15 January 2021 as the payment is received by Company ABC on this date.

Bundled Supplies

When a supplier provides a free good or service in connection with a supply made for a consideration (bundled promotions), it may not be considered a separate supply for VAT purposes if it is clearly provided as part of a promotional or commercial offer requiring the customer to purchase a specific supply in order to receive the free good or service.

The same applies for businesses that run “buy one, get one free” or similar promotions, as long as the terms of the promotion are clearly defined by a commercial practice and supported by a documented policy.

Refunds or Return

The VAT implications of a product return or refund are determined by the VAT treatment of the original supply. If the original supply was taxable and a Tax invoice was issued, then a Tax credit note need to be issued against it.

Our Tax Experts in Emirates Chartered Accountants Group Bahrain believe in a proactive approach to tax advisory services with a cost-effective and tailor-made option that is preferred by businesses all over. Our team of professionals is well versed with the Bahrain VAT Law as well as the UAE VAT Law  They are also equipped with practical experience of implementing VAT in UAE and VAT in Bahrain.

Our wide range of services includes:

• VAT Registration
• VAT Training 
• VAT Implementation 
• VAT Return Filing Service
• VAT Consultancy 
• Accounting for VAT Compliance

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