Article (42) of the Bahrain VAT Law

English text status

English translation published by the Legislation and Legal Opinion Commission. The Arabic text published in the Official Gazette remains the legal reference in the event of any discrepancy.

Practical summary

Input VAT may be deducted where Goods or Services support taxable or equivalent overseas Supplies. VAT paid on Import in another Implementing State that was the first point of entry is also deductible where Bahrain is the final destination. VAT relating to non-business use, prohibited Goods, exempt Supplies or another restriction is not deductible.

Who should read this?

Procurement, finance and Return preparers.

Why does it matter?

A tax invoice alone does not establish deduction entitlement: connect the expense to qualifying business supplies.

Business purposeEligible SuppliesStatutory restrictions

Current text

The Deductible Tax for a Taxable Person for any Tax period is the sum of the Input Tax paid or receivable on Goods and Services supplied to him or imported by him for the purpose of carrying out the following transactions: Taxable Supplies. Supplies made outside of the Kingdom which would have been Taxable Supplies had they been made in the Kingdom. The Tax paid at import into another Implementing State, which is considered the First Point of Entry of Goods into the Council States, shall be deductible when the Kingdom is the Final Destination Point of Entry of such Goods. Subject to the provisions of Paragraph A of this Article, Input Tax borne shall not be deducted in the following cases: If paid for Goods or Services other than those for the purpose of the Economic Activity of the Taxable Person. If paid for Goods that are prohibited from being traded in the Kingdom. If paid for Goods and Services for the purpose of making Exempt Supplies in the Kingdom. The Regulations shall determine the other cases when Input Tax is not deductible, and shall specify the provisions, conditions and controls for the application of the provisions of this Article.

Application steps

1
Identify how the goods or services are used.
2
Link their use to supplies carrying a deduction right.
3
Check statutory deduction restrictions before claiming.

Connected provisions

Direct legislative link

Regulations — Article (57)

Input VAT deduction

Sets the timing of deduction, the required evidence and practical limits.

Open connected Article

Direct legislative link

Regulations — Article (58)

Non-deductible Input VAT

Lists the further non-deductible cases referred to in paragraph (d), such as personal use and entertainment, and limits vehicle VAT to business-use proportion.

Open connected Article