Value Added Tax in Bahrain

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 special domestic Reverse Charge route is available to Taxable Persons mainly making Intra-GCC Supplies or Goods Exports, but only by application, NBR approval and certificate. Purchase VAT must be fully recoverable, Intra-GCC Supplies plus Exports must exceed 50% of total Supplies, and recurring refunds must materially affect the financial position. With a valid certificate, the Supplier does not charge VAT and the Customer accounts for it in its Return.

Who should read this?

Exporters, frequent Intra-GCC suppliers, their suppliers, purchasing and treasury teams.

Why does it matter?

This differs from ordinary reverse charge on overseas Services. It is a certified domestic cash-flow mechanism, not an exemption, and a Supplier must not stop charging VAT merely because the Customer exports.

Application and certificateExports and Intra-GCC > 50%30-day loss-of-condition notice

Current text

A. Where the conditions set out in Paragraph D of this Article are met, a Taxable Person who is primarily engaged in making Intra- GCC Supplies or Exports of Goods may submit an application to the Bureau, using a form prepared by the Bureau for this purpose, to use the domestic Reverse Charge Mechanism, on certain purchases of Goods and Services which are subject to Tax at the standard rate. B. Where the Bureau approves the Taxable Person’s application, and after verifying that all of the conditions are met, a certificate shall be issued to the Taxable.) Person granting him the right to apply the domestic Reverse Charge Mechanism on certain purchases. C- Where the Taxable Person submits a copy of the certificate issued by the Bureau to a Taxable Person for Supplies of Goods or Services made to him and where all the conditions are met, the following shall apply: 1. The Tax on the Supply of such Goods or Services shall not be calculated by the taxable Supplier. 2. The Taxable Person receiving the Goods or Services shall calculate the Tax due on such Supplies and declare such Tax through his Tax Return. D. In order to obtain the approval from the Bureau to apply the Reverse Charge:) Mechanism, the following conditions must be met: 1. The Tax due on the Goods or Services supplied to the Taxable Person shall be fully recoverable by the Taxable Person as Input Tax. (% 2. The Taxable Person shall demonstrate that the total amount of Intra-GCC Supplies and Exports exceeds 50% of the total value of his Supplies. 3. The Taxable Person shall provide reasonable grounds to the Bureau evidencing that the Net Tax, in accordance with his Tax Return, will be a negative amount on a recurring basis and that the negative amount will have a material impact on his financial position. E. Where, following the receipt of approval from the Bureau to apply the domestic Reverse Charge Mechanism, one of the conditions set out in Paragraph D ceases to be met, the Taxable Person shall notify the Bureau within thirty days, of the date when he fails to meet any of these conditions. The Bureau shall revoke his approval to use the domestic Reverse Charge Mechanism. F. In all cases, the Bureau may revoke its approval to allow the Taxable Person to apply the Domestic Reverse Charge Mechanism by a notification issued to the Taxable Person specifying the effective date of the cancellation. Supplies subject to zero rate

Apply domestic reverse charge

1
Calculate Export and Intra-GCC share and confirm it exceeds 50%.
2
Confirm purchase VAT is fully recoverable.
3
Evidence recurring refunds and material cash-flow effect.
4
Do not apply before NBR approval and certificate.
5
Give the Supplier a certificate copy and identify covered purchases.
6
Supplier omits VAT only where certificate and conditions apply.
7
Customer accounts for VAT in its Return.
8
Monitor conditions and notify loss within 30 days.

Connected provisions

Thematic link

Law — Article (4)

Person liable for VAT

The mechanism shifts accounting from domestic Supplier to Customer for covered purchases.

Open connected Article

Direct legislative link

Regulations — Article (63)

Reverse-charge payment

Customer-accounted VAT is disclosed and paid through the Return.

Open connected Article

Official guides and tools

Official text

VAT Executive Regulations

Article (66)

Official guide

VAT Return Filing Manual — Version 1.2

Disclosure and payment

Connected Madar tools

VAT Return Centre

Check return deadlines, calculate net VAT from entered amounts, and identify a correction route.

Connected Madar tools

Payment and Refund Centre

Guidance on payment, refunds, carry-forward and instalments, with preparation checklists.

Illustrative example by Madar

Export status alone is insufficient

Exports are 70% of Supplies and the business is regularly refundable. It still cannot request VAT-free invoices immediately. It first obtains the NBR certificate and gives it to the Supplier; the Customer then accounts for VAT in its Return.

Questions to help you apply it

Does the share exceed 50%?
Is Input VAT fully recoverable?
Are refunds recurring and material?
Is a valid certificate held by the Supplier?
Was any lost condition notified within 30 days?