Preparing for Value Added Tax in Bahrain
What is the rate of VAT?
Each country decides the VAT rate depending on variety of factors such as need of funds for public spending, financial discipline, effect of on business, effect on inflation, etc.
Globally, the rate of VAT varies from country to country and in certain countries may also vary from product to product. For example, countries with single VAT are include France (@20%), Australia (@10%), Singapore (@7%). On the other hand countries with dual or multiple rate include India (@ 5%/ 12%/ 18%/ 28%), Brazil (17% / 20%), Canada.
Standard VAT rate in GCC will be unanimous across the region i.e. @ 5% in all member states. This is one of the lowest in the world.
Are all goods and services liable to VAT?
The answer is: No.
All the countries have a list of goods and services which are not taxed. These are either classified as “Exempted” or “Zero rated” or “Out of scope” products (goods) / services.
In GCC also there will be products/services that will not attract VAT.
An illustrative list of such goods or services under KSA and UAE VAT law are outlined below.
It can be observed that while there are many similarities in the list of Zero rated and exempted items, there are also differences between the two member states. Such distinction is permitted by the GCC Common VAT Framework Agreement. Each member state, including Bahrain hence will prepare their own list subject to the framework prescribed under the GCC agreement.
***This series is only for educational purposes. To receive advice for a specific business scenario, please consult a Tax expert.
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