‘VAT in Bahrain’ is a buzzword among the businesses located in Bahrain.
Bahrain VAT Implementation
On 9th October 2018, Bahrain VAT Laws under the Royal Decree No. (48) of 2018 was approved and was released on its official website. The Bahrain Tax laws officially mention the implementation of VAT in Bahrain from 1st January 2019. While the approval of VAT laws itself is a significant milestone in the process of implementing VAT in Bahrain, the following are some of the important next steps which will soon be announced by the tax authorities.
- Finalization of VAT Regulations
- VAT procedures and related circulars
- Bahrain VAT Portal Readiness
- Opening registration in Bahrain VAT Portal along with the registration timelines
- Finalizing VAT return format and portal readiness
- Knowledge sharing user Guide on various aspects of VAT in Bahrain.
No Doubt! The authorities are working on full swing to do all that requires to implement VAT in Bahrain on 1st January,2019.
Business readiness for VAT in Bahrain
While most of the critical things in implementing Bahrain VAT will be ready very soon, this doesn’t mean that businesses need to wait till then to prepare their business towards the VAT regime.
For sure, VAT in Bahrain is coming and coming very fast on 1st January 2019 which is just a few weeks away. Thus, it is important for businesses to start preparing in-advance and be ‘VAT-Ready’. Being ‘VAT Ready’ does not mean your readiness on the 1st January 2019, it signifies about today’s readiness for VAT.
First of which is about ensuring that all the financial transactions are recorded, and books of accounts are accurate and up to date. This is because, the books of accounts will act as evidence for minimum annual turnover threshold limit for registration and on this basis, either you will be mandated to register, or you can request for exemption from registration.
Secondly, VAT being a transaction-based tax, meaning on every taxable supply of goods or services, VAT at 5% needs to be charged and Vat bill is known as ‘Tax invoice’ needs to be issued from the first day of 1st January 2019 onwards. On the purchase side, you will be allowed to recover the VAT paid as Input VAT deduction. The net of VAT paid on purchases and VAT collected on sales should be paid to the government along with the VAT returns.
Thus, in order to be VAT ready, businesses need to explore the best VAT Software which will not only help you to be VAT compliant tomorrow – when VAT is implemented in the country but will also help you transit seamlessly into the new VAT era.
Apart from the above, VAT impacts every function within the organization such as finance, supply chain, product pricing, sales, procurement, legal, commercial, logistics, HR etc. As a business, you got few weeks before implementation of VAT in Bahrain and it is important to use these in understanding the VAT fundamentals, educate your teams on VAT, study the possible impact on your business operation and make suitable changes to be VAT compliant from day one.
Educating and Informing the external stakeholders such as your vendors and customers about VAT and the subsequent impact on transactions is equally important in process of preparing towards VAT.
Any lapse in your preparedness towards VAT in Bahrain may impact your credibility which you built over the period with your customers and vendors and will have bearing on your profitability owing to loss of Input VAT and hefty fines due to non-compliance.