The first compliance activity for all businesses in Bahrain is to register under VAT. Businesses must know about who is obligated to register under VAT. Certain businesses are mandatorily required to obtain a VAT registration. At the same time, there is also a provision to voluntarily register under VAT. In addition, certain businesses are exempted from registering under VAT. Let us understand the rules on who should register under VAT in Bahrain.
Who should mandatorily register under VAT?
A person who is resident in Bahrain should obtain a VAT registration in the following 2 cases:
- Value of supplies in the previous 12 months exceeds BD 37,500 or
- Value of supplies in the next 12 months will exceed BD 37,500
The mandatory registration threshold under VAT in Bahrain is BD 37,500.
Note: A non-resident person in Bahrain must register under VAT, regardless of the value of supplies, if he/she makes supplies for which VAT is liable to be charged. The person can take registration either directly or through a tax representative.
Who can voluntarily register under VAT?
A person can voluntarily seek a VAT registration in the following 2 cases:
- Value of supplies or expenses in the previous 12 months exceeds BD 18,750
- Value of supplies or expenses in the next 12 months will exceed BD 18,750
The voluntary registration threshold under VAT in Bahrain is BD 18,850, i.e. 50% of the mandatory registration threshold.
Voluntary registration threshold: BD 18,750
Businesses who take voluntary registration generally do so for the benefit of the input tax deduction, i.e. the facility to deduct input tax (tax paid on purchases) from the output tax (tax collected on sales) and only remit the balance tax payable to the Government. This is a major benefit of taking a VAT registration. Businesses which don’t have a VAT registration will not be able to claim an input tax deduction and the VAT paid on purchases or expenses becomes a cost. There are other benefits of registering under VAT, such as the ability to issue a VAT invoice and the credibility that comes with a VAT registration. Businesses whose turnover exceeds BD 18,750 but does not exceed BD 37,500 can decide on whether they would like to voluntarily opt for VAT registration.
Who is exempted from registering under VAT?
A person who makes only zero-rated supplies can request to be exempted from registering under VAT. Some examples of zero-rated supplies are the supply of newly constructed buildings, export of goods to a non-GCC VAT implementing State, etc.
Exemption from VAT registration: Persons making only zero-rated supplies
Businesses in Bahrain must evaluate the value of their supplies and check whether they are required to register under VAT. If the value of supplies exceeds BD 37,500 in the previous 12 months or will exceed BD 37,500 in the next 12 months, it is required to obtain a VAT registration. Non-resident businesses in Bahrain must note that they must register under VAT, irrespective of the value of their supplies, in case they make supplies for which VAT is liable to be collected. Further, an option to voluntarily register under VAT has been given to businesses. To voluntarily register under VAT, the value of supplies in the previous 12 months should exceed BD 18,750 or the value of supplies in the next 12 months should be expected to exceed BD 18,750. Also, an exemption from registering under VAT has been given to persons who only make zero-rated supplies.