It is important to understand the meaning of the frequently used terms and definitions under VAT. These terms will soon become a part of your daily business conversations with all your stakeholders. Let us understand the important terms under VAT in Bahrain, along with their respective meaning.
|Goods||All types of physical assets that can be supplied, including real estate, water, and all forms of energy.
Example: Cars, apparel, electronics, etc.
|Services||Anything that can be supplied other than goods
Example: Legal services, professional services, car repair, etc.
|Supplier||A person who supplies (sells) goods or services|
|Recipient||A person who receives (purchases) goods or services from a supplier|
|Consideration||Everything collected or to be collected by a supplier from the recipient or a third party for supply of goods or services
Example: Ahmed Electronics supplies 100 mobile phones @ BD 100 each to Niyaz Electronics. VAT @ 5% (BD 500) is charged on the supply. Here, the consideration to be collected by Ahmed Electronics is BD 10,500 including VAT.
|Taxable person||A person, being a natural or legal person, who carries out an economic activity that requires them to register under VAT. Only a taxable person can charge VAT.|
|Registrant||A taxable person who has been issued a VAT registration number|
|Export||Supply of goods or services from Bahrain to another country|
|Import||Supply of goods or services from another country to Bahrain|
|Capital assets||Material and immaterial assets of a business allocated for long-term use
Example: Buildings, machinery
|Input tax||Tax paid by a taxable person on goods or services purchased
Example: Ahmed Electronics purchases 20 laptops @ BD 1,000 each from Ziya Computers. VAT @ 5% (BD 1,000) is charged. Here, Ahmed Electronics’ input tax is BD 1,000.
|Output tax||Tax charged by a taxable person on supply of goods or services
Example: Ahmed Electronics supplies 50 laptops @ BD 2,000 each to Niyaz Electronics. VAT @ 5% (BD 5,000) is charged on the supply. Here, Ahmed Electronics’ output tax is BD 5,000.
|Input tax deduction||A mechanism by which a VAT registered person can deduct input tax from the output tax for a period and only remit the balance tax payable to the Government.
Example: In the above example, Ahmed Electronics’ output VAT on supply to Niyaz Electronics is BD 5,000 and input VAT on purchase from Ziya Computers is BD 1,000. Ahmed Electronics can claim input tax deduction of BD 1,000 and only remit the balance output tax (BD 4,000) to the Government.
|Taxable supplies||Supplies on which VAT is charged and input tax deduction can be availed|
|Exempted supplies||Supplies on which no VAT is charged, and no input tax deduction can be availed|
|Tax invoice||A written or electronic document where the occurrence of a taxable supply is recorded|
|Tax credit note||A written or electronic document where the occurrence of any amendment to a taxable supply, that reduces or cancels the same is recorded|
|Tax period||A period for which the tax payable needs to be calculated. Tax periods are usually monthly, quarterly and annually.|
|Tax return||Statement to be prepared and submitted by a taxable person for a tax period. It contains the details of sales, purchases, output tax, input tax, tax payable, etc.|