VAT Group as per the Bahrain VAT Law

As per the Bahrain VAT law, two or more persons can form a VAT group and act as a single entity for the purpose of VAT. But there are certain conditions to be met before forming a VAT group.

Those taxable entities registered under a single Tax group will be treated as a single entity for the purpose of VAT as per the Bahrain VAT Law and hence the transactions between the members of a Tax group will not be regarded as supplies for the purpose of VAT.

What are the conditions to be met to form a VAT group as per the Bahrain VAT Law?

The National Bureau for Revenue can register two or more persons as a VAT group provided the following conditions are met:

1. All the applicants should be a legal person and also a resident in Bahrain who conducts an economic activity.
2. The persons applying to be registered as a VAT group should be “related”.
3. All the applicants should be individually registered for VAT in Bahrain.
4. The applicants should not be a member of any other VAT group.

Once, a VAT group is approved by the NBR each member becomes jointly and severally liable for all the VAT related obligations such as filing of the VAT return, payment of any VAT amount outstanding to the NBR, payment of any penalties to the NBR etc.

What does “related” means for the purpose of formation of the VAT group under the Bahrain VAT Law?

You might have noticed in the conditions to apply for Tax group that all the applicants to form a Tax group should be “related”. This means:

• One of the applicants has the authority to control (that is direct and supervise) all other applicants.

OR

• All of the applicants should be controlled by the same person, that could be one of the following:
  1. A legal person
  2. A natural person
  3. A group of persons under a formal agreement such as shareholder’s or partners acting under a shareholders agreement or partnership agreement. Such a formal agreement should be notarized by the Ministry of Justice.

Such a controlling person may not be a member of the VAT group. Also, it is not necessary that the controlling entity is a legal person or a resident in Bahrain.

There is no requirement of direct control between two entities who is applying for VAT group formation. Only thing is that there should be a common person controlling these entities.

Who is a Tax group representative under the Bahrain VAT Law?

The persons who want to apply for the formation of a tax group shall appoint one of its members as the tax group representative by way of Power of Attorney. The tax group representative shall comply with all the VAT obligations of the tax group (even then all the member of the VAT group will be jointly liable) including the following:

1. The tax representative of the tax group shall submit an application to form the tax group to the NBR.
2. The tax representative shall notify the NBR to add new members to the tax group or withdraw any member from the tax group.
3. The tax representative shall notify the NBR to disband the tax group in case of any reason or if the conditions to form a tax group are no longer met.

How to register as a tax group under the Bahrain VAT Law?

In order to register for Tax group, the tax group representative should apply to the National Bureau for Revenue in the specified form for forming a tax group.

The application form shall include the following information:

1. Name and VAT registration number of the tax group representative.
2. Name and VAT registration number of all the applicants to form the Tax group.
3. Details on how each member of the tax group is related to each other.
4. The power of attorney issued for the appointment of the Tax group representative.
5. A written consent from the tax group representative to act as the Tax group representative.

The above information provided should be evidenced by documents which should be provided to the NBR within 30 days of making the request.

The NBR might accept or reject the application within 30 days and shall notify the Tax group regarding the same.

Once the tax group is approved by the NBR, it shall give a new VAT registration number and VAT registration certificate, which shall include the effective date of registration of the Tax group.

The NBR might reject the applications under the following circumstances:

1. If the information provided in the application appears to be incorrect or if the conditions to form the tax group as per the provision of the Bahrain VAT Law is not met.
2. If NBR finds that the registration of the tax group shall poses risk to tax revenues.
3. The application will be rejected if any one member of the tax group is a government body.

Is it possible to withdraw from a Tax group as per the Bahrain VAT law?

Yes, member of a Tax group shall withdraw voluntarily from the group provided 12 months have passed from the date of joining the group.

Apart from the above, a member should withdraw from the group as soon as it ceases to meet the conditions to be met for forming the tax group.

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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