Place Of Supply And Prices In The Retail And Wholesale Sector

The retail sector means the place where every product is finally sold to the end customers, that is the common public. The most common examples of the retail sector are supermarkets, retail outlets, small grocery shops, etc.
The VAT is collected on goods and services at every stage of the supply chain where value is added to it, from production to point of sale.

Importance of retail and wholesale sectors?

The final VAT collection is done in the retail sector. Retailers commonly purchase products from wholesalers and will sell them to the end customers. This is the importance of both the retail and wholesale sectors.
All the goods and services are to be charged 10% VAT by every wholesaler and retailer unless the products are specifically exempted or zero-rated (some basic food items are zero-rated).

Are there any legal aspects relating to the prices displayed by retailers?

The law specifically mentions that the prices displayed in the local market are deemed to be inclusive of VAT by Article 3 of the VAT Law. The following retail environments are assumed to be the local market

• physical i.e., the MRP mentioned in any supermarket, retail stores, etc.,
• electronic i.e., over the internet like price mentioned in the online portals, and
• printed i.e., a retail sales catalogue printed and issued by any company for promoting their sales, or
• any other retail channels

There is an exemption to this rule that when it is related to an export of goods or services, the supplier can display the price exclusive of VAT. In such a case if the supplier displays the price exclusive of VAT in their local market, the supplier is bound to clearly mention that the price is exclusive of VAT.

Place of supply

What is meant by the place of supply and why do we need to check the place of supply?

In order to identify whether the sale of goods and services is falling under the purview of VAT one of the determining factors is the place of supply of the sale of goods and services. Hence under the Bahraini VAT law, the place of supply determines whether VAT is to be charged for that sale or not. Thus, it is very important to identify the place of supply to check whether Bahraini VAT will apply or not.

How to find out the place of supply of the sale of goods and services?

Generally, the supply contains either goods or services or both. There is some set of rules laid down by the NBR to identify the place of supply for both the sale of goods and services separately. Let’s have a look at them individually;

Place of supply of Goods

The general rule is that when goods are purchased by retail consumers in Bahrain from retail stores or supermarkets, the place of supply will be in Bahrain, and Bahrain VAT Law will be applicable.
But in some specific situations where the supply involves transporting or installing the goods, the specific regulations regarding the place of supply attract and it says that the place of supply will be;

• the place where goods are actually handed over to the customer in case the supply does not include transportation or installation
• the place where the transport begins, where the supply involves transportation which is carried out by the supplier or purchaser or a third party on their behalf, or
• the installation or assembly occurs will be the place of supply where the supply involves installation or assembly which is carried out by the supplier or a third party on his behalf.

Thus, it is clear that even if the supply involves transporting or installing or assembling the goods, if all these are occurring inside Bahrain, then the place of supply will be in Bahrain.

Place of Supply of Services

In general, if the supplier is registered under the VAT regime in Bahrain, the place of supply of a service is the place of residence of the supplier. Where the supplier is non-resident and the customer is a person residing in Bahrain and who is registered under the VAT regime in Bahrain, then the place of supply of the services is the place of residence of the customer.

Situations, where the VAT Law sets out a special place of supply rules for services, are as below.

• For services involving the rental of means of transport to a customer who is not a registered for VAT in Bahrain, the place of supply will be the location where the means of transport is made available to the customer.
• For the services relating to the transportation of goods, passengers, and services ancillary to such transportation, the place of supply will be where the transport begins.
• The place of supply will be the location where the service is actually rendered for restaurant, hotel, catering, cultural, artistic, sporting, or recreational events as well as for the services related to moveable goods provided by a supplier in Bahrain to a customer who is not registered person in another Implementing State. (Implementing state rule not yet started)
• The place of supply for services relating to real estate will be the location of that real estate.
• The place of supply for services related to telecommunications and electronic services will be the place where the services are used and enjoyed, to the extent of such use and enjoyment. ⁠⁠⁠⁠⁠⁠⁠

Delve into the concept of the place of supply, its meaning, and why it holds immense importance in determining whether VAT applies to a sale of goods or services. We shed light on the Bahraini VAT law and the factors involved in identifying the place of supply.

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.

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• VAT Registration
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