English text status

English translation published by the NBR in its bilingual Regulations file (marked unofficial). The Arabic text published in the Official Gazette remains the legal reference in the event of any discrepancy.

Practical summary

A refundable deposit is outside Consideration where refundable and not payment on account. Market Value is the fair price between independent parties in similar circumstances without pressure, each acting in own interest and within reasonable time; otherwise the NBR determines it by its mechanism.

Who should read this?

Sales, contracts, property, leasing and valuation teams.

Why does it matter?

Calling an amount a deposit is insufficient where it will be applied to price. Market Value needs defensible independent comparison, not an internal choice.

Refundable depositNot payment on accountIndependent Market Value

Current text

A. Consideration shall not include amounts paid to the Taxable Person by the Customer as a deposit, if the following conditions are met: 1. Such amounts are refundable in nature. 2. They do not represent a payment on account. B. The Market Value shall be determined in accordance with the fair price tradeable in the market between two independent parties under similar circumstances at the same date as the date of the Supply and in accordance with the following free competition conditions: 1. Neither the Supplier nor the Customer is subject to any kind of commercial pressure; 2. Both the Supplier and the Customer independently work to achieve what is in their best interest; 3. The transaction is made within a reasonable period of time. C. Where the Market Value can not be determined in accordance with Paragraph B of this Article, the Bureau shall determine the Market Value in accordance with the mechanism it adopts.

Deposit and value test

  1. 1

    Read refund and use conditions.

  2. 2

    Will it automatically offset price?

  3. 3

    If advance, apply timing and value.

  4. 4

    Find comparable date transactions.

  5. 5

    Exclude pressure or distorted relation.

  6. 6

    Retain valuation method.

Connected provisions

Direct legislative link

Law — Article (20)

Supply value

This Article details excluded deposit and Market Value.

Open connected Article
Thematic link

Regulations — Article (27)

Related Persons

Market Value can replace agreed value in related cases.

Open connected Article

Official guides and tools

Official text

VAT Executive Regulations

Article (24)

Connected Madar tools

Connected Madar tools

Tax Invoice Centre

Check the invoice route and issue deadline, and calculate VAT for a single transaction.

Illustrative example by Madar

BHD 500 security or advance

BHD 500 returned in full when an asset is returned undamaged and never offset against rent is a deposit. If the contract applies it to the last payment, it is payment on account in substance.

Questions to help you apply it

  • Refundable?
  • Offsets price?
  • Market comparable?
  • Independent parties?