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 resident taxable Supplier's Service is zero-rated only when the Article's conditions are met: the Customer has no Place of Residence in Bahrain or an Implementing State and is outside Bahrain when the Services are performed; the Services relate to tangible Goods or real estate outside Implementing State territory; and performance and enjoyment occur outside that territory.

Who should read this?

Consultants, contractors, technical Service providers and businesses serving overseas Customers.

Why does it matter?

Foreign status or overseas payment is not enough. Customer presence, asset location, performance and enjoyment must all be tested. Failure of one condition prevents automatic reliance on this Article.

Customer outside Implementing StatesOutside Bahrain during performanceAsset, performance and enjoyment outside territory

Current text

Resident Customer Tax shall be imposed at the zero rate on a Supply of Services made by a resident taxable Supplier subject to the following conditions: 1. The Services shall be supplied to a Customer who has no Place of Residence in the Kingdom or any Implementing State and who was outside the Kingdom at the date the Services were performed. 2. The Services relate to tangible Goods or real estate located outside the territory of the Implementing States at the date the Services were performed. 3. The Services are performed outside the territory of the Implementing States. 4. The Services shall be enjoyed outside the territory of the Implementing States.

Test every condition

1
Document Customer residence.
2
Evidence Customer location during performance.
3
Identify related tangible Goods or real estate and location.
4
Record where work was performed.
5
Record where the Service was enjoyed.
6
Retain contract, correspondence and work records.
7
Do not rely on invoice address alone.

Connected provisions

Direct legislative link

Law — Article (53)

Services to Non-Residents

The Law sets the category and this Article supplies the location and enjoyment tests.

Open connected Article

Thematic link

Law — Article (16)

Place of Supply of Services

Place of Supply and zero-rate conditions must each be examined.

Open connected Article

Official guides and tools

Official text

VAT Executive Regulations

Article (73)

Official guide

VAT General Guide — Version 1.15

Zero-rated Supplies

Connected Madar tools

Tax Invoice Centre

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

Illustrative example by Madar

Foreign Customer, work in Bahrain

A foreign company with no residence in the Implementing States asks for inspection of machinery located in Bahrain, and the technician works in Bahrain. Foreign Customer status alone does not meet the Article because the asset and performance are in Bahrain.

Questions to help you apply it

Where is the Customer resident?
Where was the Customer during performance?
Where is the related asset?
Where were performance and enjoyment?