How to Calculate VAT in Bahrain

In Bahrain, the standard Value Added Tax (VAT) rate is currently 10%. Calculating VAT is essential for businesses and individuals dealing in taxable goods and services. This guide breaks down the process step-by-step, including how to determine net VAT, calculate VAT-inclusive prices, and perform reverse VAT calculations.

Step 1: Know the Standard VAT Rate

As of 2022, the standard VAT rate in Bahrain is 10%. There are also zero-rated and exempt supplies, which are not subject to VAT.

Step 2: Determine the Taxable Amount

The taxable amount is the price of goods or services before VAT is added. This includes:

• Product or service value
• Delivery or packaging costs (if applicable)
• Any additional service fees

Step 3: Use the VAT Calculation Formula

Example:

• Taxable amount: BHD 500
• VAT = 500 × 0.10 = BHD 50
• Total price = 500 + 50 = BHD 550

Step 4: Calculating Reverse VAT (From VAT-Inclusive Price)

If a price already includes VAT, use the reverse formula to calculate how much VAT is included.

Example:

• Total VAT-inclusive price: BHD 550
• VAT = 550 × (10 / 110) = BHD 50
• Base price = 550 – 50 = BHD 500

Step 5: Applying VAT to Different Scenarios

Here are a few examples of how VAT may apply depending on the transaction:

• Standard-rated product: Add 10% VAT
• Zero-rated product: VAT is 0%, but record-keeping is still required
• Exempt product: No VAT is applied or claimed on purchases or sales

Step 6: How to Issue VAT-Compliant Invoices

To properly document VAT charges, your invoice should include:

• VAT registration number
• Invoice date and number
• Supplier and customer details
• Taxable amount, VAT amount, and total price

Step 7: Use a Bahrain VAT Calculator

Instead of manually calculating VAT every time, you can save time by using a tool like the Bahrain VAT Calculator. It helps you determine the VAT amount, VAT-exclusive and inclusive prices instantly.

Step 8: Understanding Input and Output VAT

• Output VAT: VAT you collect from customers on your sales.
• Input VAT: VAT you pay on purchases for your business.

At the end of each filing period, you subtract input VAT from output VAT to determine your net VAT payable.

Step 9: When to File and Pay VAT

Registered businesses in Bahrain file VAT returns quarterly or monthly depending on their revenue. You must calculate:

• Total output VAT collected
• Total input VAT paid
• Net VAT = Output VAT – Input VAT

The resulting amount must be paid to the National Bureau for Revenue (NBR) by the due date to avoid penalties.

Conclusion

Calculating VAT in Bahrain is a straightforward process when you understand the formula and rules. Always check if your goods or services are standard-rated, zero-rated, or exempt, and make sure you apply VAT correctly in each case. Using digital tools like the Bahrain VAT Calculator can simplify the entire process and help you stay compliant.