How to Pay VAT in Bahrain: Step-by-Step Guide for Businesses

Value Added Tax (VAT) was introduced in the Kingdom of Bahrain on January 1, 2019, as part of a regional agreement by the Gulf Cooperation Council (GCC). Initially launched at a rate of 5%, Bahrain increased its standard VAT rate to 10% on January 1, 2022. This guide walks you through everything you need to know about how to pay VAT in Bahrain, including registration, filing, payment, and compliance tips for local and foreign businesses.

1. What Is VAT and Who Pays It in Bahrain?

VAT is a consumption tax applied to goods and services at each stage of the supply chain. The final consumer ultimately bears the tax. Businesses in Bahrain act as intermediaries, collecting VAT on behalf of the government and remitting it to the National Bureau for Revenue (NBR).

VAT applies to most domestic transactions, imports, and exports. All businesses earning above the mandatory threshold must register, collect VAT, and file returns. You can calculate your VAT liability using our Bahrain VAT Calculator.

2. VAT Registration in Bahrain

Businesses are required to register for VAT based on their annual taxable turnover:

• Mandatory Registration: For businesses with taxable turnover exceeding BHD 37,500.
• Voluntary Registration: For businesses with turnover between BHD 18,750 and BHD 37,500.

Registration can be completed online via the NBR website. You will need:

• Commercial Registration (CR) certificate
• Details of taxable supplies and expected turnover
• Bank account information
• Legal representative’s ID and contact details

3. How to Charge VAT

Once registered, businesses must charge VAT at the applicable rate (typically 10%) on all taxable supplies. Invoices must clearly indicate:

• VAT registration number
• Invoice number and date
• Customer’s name and address
• Net amount, VAT amount, and gross total

4. How to File VAT Returns

VAT returns in Bahrain are filed quarterly or monthly, depending on your turnover. Businesses must log in to the NBR VAT portal to complete and submit their returns.

Steps to File VAT Returns:

1. Log in to the NBR portal using your credentials.
2. Navigate to the “VAT Return” section.
3. Enter details of your taxable sales, purchases, input and output VAT.
4. Upload required documents if applicable.
5. Submit and review your summary before finalizing.

Filing deadlines are usually 30 days after the end of the tax period. Late filing may result in penalties.

5. How to Pay VAT in Bahrain

After filing your return, the NBR will issue an invoice showing the net amount due. Here’s how to complete your payment:

• Download your tax invoice from the NBR portal.
• Log in to your bank’s online platform.
• Initiate a bank transfer to the NBR’s designated account (details are provided on the invoice).
• Include your VAT registration number and invoice reference in the payment description.
• Save the transfer confirmation for record-keeping.

Payments must be made in Bahraini Dinar (BHD) by the due date mentioned on the invoice to avoid interest or penalties.

6. Input VAT and Claiming Refunds

Input VAT is the tax you pay on business-related purchases. Registered businesses can reclaim input VAT against their output VAT liability, provided the expenses are directly related to taxable supplies.

Examples of Eligible Input VAT:

• Purchases of goods for resale
• Marketing and advertising expenses
• Transportation and logistics

Any excess input VAT can either be carried forward to the next period or refunded after a review by the NBR.

7. Penalties for Non-Compliance

The NBR enforces strict compliance rules. Failing to register, file returns, or pay VAT on time can result in:

• Late filing penalties: BHD 100 per return
• Late payment interest: 5% monthly on unpaid amounts
• Administrative fines and possible suspension of business activities

8. Exemptions and Zero-Rated Supplies

Not all goods and services are subject to the standard VAT rate. Bahrain has a list of:

• Zero-rated items: Exports, international transport, specific food items
• Exempt supplies: Financial services, bare land, certain education and healthcare services

It’s crucial to categorize your goods correctly when filing to avoid errors and potential audits.

9. Foreign Businesses and VAT in Bahrain

Foreign entities that conduct taxable business in Bahrain must also register for VAT if their turnover exceeds the mandatory threshold. Non-resident businesses are required to appoint a tax representative based in Bahrain.

10. Record-Keeping and Audit Readiness

Businesses must maintain all records related to VAT for at least 5 years. This includes:

• Sales invoices
• Purchase receipts
• Bank statements
• VAT filings and payment proofs

The NBR may conduct audits to verify compliance, and failure to provide accurate documentation can lead to fines.

11. Using Tools to Simplify VAT

Managing VAT manually can be time-consuming. You can use online tools like our Bahrain VAT Calculator to compute how much VAT to charge or pay based on your transaction value.

12. Common Mistakes to Avoid

• Missing VAT filing deadlines
• Incorrect VAT calculations
• Using non-compliant invoices
• Failing to separate taxable and exempt supplies
• Ignoring zero-rated categories

Conclusion

Paying VAT in Bahrain involves proper registration, timely filing, accurate calculations, and prompt payment. Understanding your obligations not only ensures legal compliance but also strengthens your business operations. For faster calculations and compliance support, don’t forget to use the Bahrain VAT Calculator.

For more detailed and updated guidelines, visit the official NBR portal.