The ‘VAT free’ conundrum

Products being offered at VAT free rates despite the legal requirements to impose the tax, has become a topic of controversy. According to widespread reports, various businesses have been marketing such VAT free offers on social media, raising eyebrows of many. However, Tribune has learnt that the stores bore the cost of VAT as a promotional offer rather than offering completely VAT free items.

“Many stores advertised that they are offering products completely free of VAT. This led to a confusion as many believed that the stores are avoiding VAT,” a source said. One of the stores stated that it will run the promotion until the end of March while another stated that it will run until the end of next month. A few others have also posted similar offers. “Even though VAT amount may not be charged on customers, it is shown on their systems and the tax is being paid to the government by the businesses,” the source added.

On Monday, the Cabinet affirmed its commitment to continue monitoring all ministries’ efforts towards ensuring VAT compliance, and instructed the Ministry of Industry, Commerce and Tourism to intensify its efforts in monitoring the market, enhancing consumer protection and responding to violations. In response to HM the King’s directives to consider the citizens’ needs through exemptions and non-application of VAT on basic goods and services, the Cabinet approved a memorandum submitted by the Ministry of Finance and National Economy exempting 1,400 government services from the VAT.

The MOICT recently stated that it is intensifying its inspection efforts following VAT implementation. The Minister of Indus - try, Commerce and Tourism (MOICT), Zayed Al Zayani, on Tuesday affirmed that MOICT’s ‘Companies Control’ and ‘Consumer Protection’ directorates have intensified their VAT inspection efforts following its induction on January 1st. He stated that Bahrain’s VAT law and its executive regulations clearly outline the penalties for non-compliance, which include hefty fines, administrative closure and referring cases to the Public Prosecution.

He said that the ministry’s inspection efforts will include closely monitoring the movement of goods and services across the Kingdom. Meanwhile, rumour that a leading supermarket started charging VAT before the end of 2018 was found to be baseless. The rumour that was spread on social media was circulated along with an image claiming that the store, Al Anwar Discount Center started charging VAT on 29th last month. The image that was circulated was a photograph of a receipt which showed VAT being charged on a transaction. The claims were found to be untrue and no VAT was charged on consumers.