Bahrain VAT Rate Explained: A 2025 Guide

Value Added Tax (VAT) was introduced in Bahrain on January 1, 2019, and it marked a significant shift in the country’s approach to public revenue. Unlike traditional taxation systems based solely on corporate or income tax, VAT affects nearly every resident and business through consumption. This article explores Bahrain’s VAT rate, how it has evolved, who it affects, how it’s collected, and what resources are available for compliance.

What Is VAT in Bahrain?

VAT in Bahrain is a broad-based consumption tax that is levied on the value added at each stage of the supply chain, from production to the final sale. It applies to most goods and services, with specific exemptions and zero-rated sectors. It is administered by Bahrain’s National Bureau for Revenue (NBR).

Current VAT Rates in Bahrain (2025)

• Standard Rate: 10% (effective from January 1, 2022)
• Zero Rate (0%): Applied to essential services such as basic food, healthcare, and education
• Exempt: Financial services, local transport, and bare land transactions

Initially, the VAT rate was 5%. However, due to increased economic demands and the effects of the COVID-19 pandemic, the government raised the VAT rate to 10% starting in 2022. This adjustment aims to ensure long-term fiscal sustainability.

Who Must Register for VAT in Bahrain?

Businesses operating in Bahrain must register for VAT if they meet the following thresholds:

• Annual turnover exceeding BHD 37,500 (mandatory registration)
• Voluntary registration threshold: BHD 18,750

Businesses that meet these thresholds must register with the Bahrain National eGovernment Portal.

VAT Categories in Bahrain

There are three broad categories of VAT application in Bahrain:

• Standard-rated: Most goods and services, taxed at 10%
• Zero-rated: Exports, international transport, certain medical/educational services
• Exempt: Financial services, residential rental, and local passenger transport

Filing VAT Returns in Bahrain

VAT-registered businesses in Bahrain are required to file returns on a quarterly or monthly basis depending on their revenue volume. The return must include details of:

• Sales and purchases
• Input VAT vs output VAT
• Net VAT payable or refundable

Businesses must keep accurate records and file online through the NBR portal. Non-compliance can result in penalties and legal action.

Common Challenges with VAT in Bahrain

• Understanding exemptions vs zero-rated items
• Timely VAT filing and payment
• Managing cross-border VAT implications
• Adapting accounting systems to comply with VAT rules

Government VAT Services and Help

Bahrain has taken steps to ease the VAT implementation process by offering online tools, public workshops, and detailed documentation. Businesses and individuals can access official support through:

• Bahrain Business VAT Portal
• Bahrain National Portal
• National Bureau for Revenue (NBR) helpline and guides

VAT Exemptions Explained

Some sectors are VAT-exempt in Bahrain, meaning no VAT is charged, and input VAT cannot be claimed. These include:

• Financial services not explicitly fee-based
• Residential rentals
• Life insurance policies
• Local transportation services

Zero-Rated Goods and Services

Zero-rated items include:

• Basic food commodities
• Medical devices and medicines
• Educational services (accredited)
• Export of goods outside Bahrain

Unlike exempt supplies, suppliers of zero-rated goods can still reclaim input VAT, making zero-rating more favorable for businesses.

VAT Impact on Consumers

While VAT is paid by the consumer, the responsibility to collect and remit it lies with businesses. For consumers, the increase to 10% VAT means that goods and services have become more expensive since 2022. Retailers must display VAT-inclusive prices clearly.

FAQs About Bahrain VAT

Conclusion

Bahrain’s VAT system, while relatively new, has matured significantly. The current 10% standard rate reflects Bahrain’s commitment to sustainable revenue generation and economic stability. Businesses and consumers alike must stay informed and compliant with evolving VAT regulations. By leveraging digital tools and official guidance, VAT can become a manageable and even strategic part of your financial operations.

For official resources, always refer to the Business VAT Portal or the Bahrain National VAT Portal.