Small traders in Bahrain feel pain of updating VAT

TDT | Manama

The Daily Tribune – www.newsofbahrain.com

Many supermarkets, small shops and other businesses have remained shut since the beginning of the New Year owing to their inability to update Value Added Tax (VAT) requirements.

The owners of these outlets, mostly expatriates, said they are in their best efforts to update their sales systems with the latest VAT rules, hoping to reopen their businesses soon.

Speaking to The Daily Tribune, a shop owner, who doesn’t want to be named, said: “I initially relied on some individuals, who claimed to know about VAT updating, for the process.

Now they have failed and I have approached a VAT firm to update the procedures.

“The VAT updating charges are high considering the daily business I have now.

Our daily sales have plummeted since the beginning of the pandemic season.

How could we hire expensive VAT consultants to update the procedure?”

Another trader said supermarket and small shop owners are being exploited by individual VAT consultants as well as firms.

“We, small traders are being exploited by many so-called VAT consultants.

They lock our audit system during the year-end, compelling us to pay again.

I want the Finance Ministry to take action against these consultants.”

On the flip side, Sivadas Vettath, General Manager at Green Effects Tally Bahrain, said fake VAT consultants are compounding the problem.

“Fake/unauthorised and individual VAT consultants are a big menace.

They mainly target smaller shops and supermarkets, who have ‘hired Company Registrations (CRs)’,” Vettath said.

“Hired CRs are a common illegal practice, according to which businesses are managed by expatriates under a CR belonging to a sponsor.

Most of these businessmen don’t even have business bank accounts and they still rely on personal accounts to carry out the business.

“A particular sponsor can have many businesses and VAT calculation would take into account the net revenues from all these businesses, while an ex-pat using a ‘hired CR’ wants VAT to be calculated exclusively for his outlet.

This strange situation makes the ex-pat businessman easy prey to fake VAT consultants.

“These fake VAT consultants charge between BD10 and BD15 from small shop owners and install an excel sheet in their system, which would be misleading.”

As per the Kingdom’s new law, an expatriate can start a trading business (WLL) with even one per cent Bahraini partnership.

This move aims to give more flexibility and encouragement to foreign investors.

“To overcome these issues, authorities concerned should implement the concept of government-certified VAT consultants.

But, again, well before this, all these small businesses must have a basic audit system in place.

Even the Decree highlights the need to have a self-audited system for even small businesses.”

“There are many authorised VAT services firms offering support with a low rate.

It is important to have VAT consultants who are legally accountable and responsible.

Now it is not there and all responsibilities are being shouldered by the businessmen alone.”

Vettath also highlighted a manipulative act on the part of many VAT consultancy firms.

“The Ministry of Industry and Commerce offers two specific CRs in the field of accounting – one for accounts consulting and the other for accounts services.

The firms possessing ‘accounts consulting CR’ should only advise on VAT compliance and strictly should not provide accounting services, which is not the case now.

We suggest authorities concerned to implement a norm where business firms have a proper agreement with VAT consultants, who are legally eligible to carry out accounting services,” Vettath said.

He said there were nearly 160 VAT consultancy firms during the beginning of 2020, “but most of them have vanished now”.