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

For related Persons, agreed value is not replaced merely because of the relationship. Both conditions must exist: value is below Market Value and the Customer cannot fully deduct Input Tax. The NBR may request valuation evidence; if it is not supplied within 30 days or low value is established, the NBR substitutes Market Value.

Who should read this?

Related companies, finance, transfer-pricing and intercompany teams.

Why does it matter?

The test is cumulative. A low price to a partly exempt Customer creates Market Value risk and needs a valuation file available within the evidence deadline.

Related PersonsBelow Market ValueCustomer not fully deductibleEvidence within 30 days

Current text

A. Tax shall be calculated for Supplies between Related Persons on the basis of Market Value where both of the following apply: 1. If the value of the Supply is lower than the Market Value. 2. If the Customer is not entitled to deduct the Input Tax in full. B. The Bureau shall be entitled to request evidence from any of the Related Persons to ensure that the calculation of Tax has been based on the Market Value of the Goods and Services. C. If the evidence referred to in the preceding paragraph is not provided to the Bureau within thirty days from the date of its request, or if the Bureau finds that the Related Persons used a value lower than the Market Value, then the Bureau shall have the right to replace the value used with the Market Value and shall calculate the Tax on this basis.

Test related-party value

  1. 1

    Evidence the relationship.

  2. 2

    Compare price and Market Value at Supply.

  3. 3

    Determine Customer deduction entitlement.

  4. 4

    Apply Market Value only when both conditions exist.

  5. 5

    Keep contracts and comparables.

  6. 6

    Respond to NBR within 30 days.

Connected provisions

Direct legislative link

Regulations — Article (24)

Market Value

It supplies the valuation standard.

Open connected Article
Direct legislative link

Law — Article (22)

Supply value

This Article applies the value rule to related Persons.

Open connected Article

Official guides and tools

Official text

VAT Executive Regulations

Article (27)

Connected Madar tools

Connected Madar tools

Audit and Assessment Centre

Identify the audit or assessment-review stage and prepare an action list and report from your answers.

Illustrative example by Madar

BHD 6,000 sale with BHD 10,000 Market Value

A company sells an asset to a related company for BHD 6,000 when Market Value is BHD 10,000 and the Customer recovers only 50% of Input VAT. Both conditions exist, so Market Value can apply. Full Customer recovery would mean the cumulative test is not met merely by relationship.

Questions to help you apply it

  • Related?
  • Below market?
  • Full deduction?
  • What evidence?
  • NBR request date?