Transitional Provisions for Bahrain VAT Rate Change

On 24 December 2021, the Bahrain National Bureau of Revenue (NBR) released the VAT Rate Change Transitional Provisions Guide on the transitional rules following the publication of Amended VAT Law in the Official Gazette on the same date. The law enforcement date is on 24 December 2021, while the effective date is on 1 January 2022.

The application of the transitional provisions for the VAT rate change shall depend on whether the supply is considered as one-off or continuous supply:

One-Off Supplies

Continuous Supplies

• If contract is amended before the supply is made, 10% new rate will apply
• Prior to 1 January 2022, VAT invoice to be issued by supplier or consideration received should be subject to 10% VAT
• 5% VAT rate shall be applied on the value of the goods or service delivered before 01 January 2022

Changes to Contracts

Changes to contracts as mentioned above include but not limited to:

• Extending the contract duration
• Including additional supply of goods and/or services
• Increasing the consideration payable which would otherwise qualify under transitional rules

How can Crowe help?

• Where there is no contract, help identify the applicable VAT rate on the imports/supply of goods or services.
• Analyze the contract and identify the applicable VAT rate.
• Analyze whether any change in the existing contract will result to change in VAT rate.

Key Takeaways:

• Companies will need to act fast and prepare the business for the transition considering the VAT rate amendment has already been effective. 
• Companies should review all existing contracts and assess the impact of transitional provisions.
• Companies should consider the effect of transitional provisions before amending an existing contract or entering in a new contract during the transition period.