Bahrain VAT In Odoo ERP

What is VAT?

Firstly, a VAT is a tax on the consumption of goods and services. It is charged and collected by a taxable person and remitted to the tax authority. Furthermore, a taxable person, being a natural or legal person, is a person(s), who carries out the economic activity that requires them to be VAT registered.

Vat In Bahrain

The Gulf region (including the Kingdom of Bahrain), has considered an attractive and low-tax environment. However, to keep up with the changing economic landscape and as part of wider development reforms, the Gulf Cooperation Council (GCC) member states signed a framework agreement to introduce Value-Added Tax (VAT) on the supply of goods and services at a standard rate of 5%, in 2018.

The Kingdom’s parliament has approved the implementation of VAT with effect from 1 January 2019. As a result, this makes the kingdom the third GCC member state to implement the GCC Unified Agreement on VAT; with the UAE and the KSA already having implemented on 1 January 2018. As a result, the Bahraini businesses will benefit from the lessons learned during the implementation process in the UAE and the KSA.

It is inevitable that this introduction of VAT will present numerous challenges for businesses in Bahrain as VAT impacts all aspects of the business. The GCC Unified Agreement on VAT (UAVAT) provides the VAT Framework which will serve as the foundation for the VAT legislation to be implemented by each Member State. A modified version of the European Union model used successfully by each member state, and an experience that must be drawn upon for advising clients on conducting business in a VAT regime. The net of VAT paid on purchases and VAT collected on sales should be paid to the government along with the VAT returns.

How will VAT work?

The VAT will calculated based on the consumption of goods and services. Businesses can claim credit for VAT paid on their business-related expenditures, as illustrated in the info graphics below.

Bahrain Vat Laws

Bahrain released the VAT Law on 9 October 2018 via the Official Gazette website. But, the Royal Decree states that VAT will be implemented on 1 January 2019. And the Implementing Regulations (Regulations) are expected to be published shortly.

Main points of the Law

The effective date of implementation — Article 4 of the Royal Decree states that the Law will come into force on 1 January 2019.

The scope of VAT — In accordance with the GCC VAT Agreement, Article 2 of the Law provides that the supply of all goods and services made in Bahrain, as well as imports, shall be subject to VAT.

Rates of VAT — Article 3 of the Law provides for a standard rate of 5%, while certain goods and services may be subject to a zero-rate or exempt from VAT.

Zero-rated supplies — Article 53 of the Law sets out provisions where certain supplies and sectors are subject to the zero-rate of VAT (subject to satisfying conditions and procedures that will be outlined in the Regulations). These include:

• Oil, oil derivatives and gas sector
• Supply and importation of foodstuffs (based on a list approved by the Financial and Economic Cooperation Committee)
• Local transport sector
• International transportation services and the supply of related means of transport
• Construction of new buildings
• Supply of educational services, as well as the related goods and services to nursery, pre-school, primary, secondary and higher education
• Preventive and basic healthcare services, as well as related goods and services
• Supplies or imports of certain medicines and medical equipment
• Export of goods outside of the implementing states
• Export of services to a customer residing outside the implementing states
• Supply of goods under a customs duty suspension scheme
• The supply or importation of investment gold, silver, and platinum with a purity level not less than 99%, which is tradeable on the Global Bullion Market (and subject to obtaining a certificate)
• The first supply of gold, silver, and platinum after extraction for commercial purposes
• Supply and import of pearls and precious stones (subject to obtaining a certificate)

Exemptions — Articles 54 to 56 set out the scope of exemptions, which include:

• The supply of financial services, unless payment made by way of an explicit fee, commission or commercial discount. The rules and conditions with respect to these services will be
• outlined in the Regulations
• Supply of vacant land and buildings by way of lease or sale. (subject to further rules and conditions outlined in the Regulations)
• The importation of:
• Goods where the supply of such goods in the final country of destination is exempt or zero-rated
• Goods that are exempt from customs duty in accordance with the terms and conditions set forth in the Common Customs Law, and that are as follows:
• Diplomatic exemptions
• Military exemptions
• Used personal effects and household items transported by nationals living abroad on return
• and expatriates moving to live in Bahrain for the first time
• Personal luggage and gifts carried by travellers
• Necessities for people with special needs

Exemptions will be subject to satisfying conditions and procedures to be outlined in the Regulations.

Import VAT — Article 51 provides that import VAT should paid to the customs authority, where Bahrain is the first point of entry. Thus, tax authorities may allow the taxable person to defer the payment of VAT until submission of the VAT returns.

Registration — Article 29 provides an overview of the persons required to registered for VAT purposes.

The thresholds for registration are in line with the GCC VAT Agreement.  (referencing the Saudi Arabian Riyal – SAR) which are as follows:

• Mandatory registration threshold — SAR375,000 (approx. BHD37,700)
• Voluntary registration threshold — SAR187,500 (approx. BHD18,850)
• A nonresident person required to register in Bahrain, regardless of the value of supplies, as long as he obliged to pay the tax in Bahrain. Registration can be done directly or through a tax representative
• Exception from registration — Article 32 outlines that a taxable person, who has a mandatory registration requirement due to all taxable supplies being zero-rated, can request an exception from having to register

Group registration — Article 30 allows two or more taxable legal persons, resident in Bahrain to register as a VAT group, upon application and approval (as per the Regulations).

Tax period — Article 35 provides that the Regulations will specify the duration of the tax period, which should not be less than one month.

Filing of the tax return — Article 36 provides that the deadline for filing the VAT return is the last day of the month following the month in which the tax period ends.

Tax invoices — Article 38 provides that the Regulations will determine the content and conditions relating to tax invoices.

Issuance of a tax invoice — Article 39 states that tax invoices issued within 15 days of the month following the date of the supply.

Penalties — The law outlines the penalties that could imposed for non-compliance. These include penalties for failing to register for VAT (up to BHD10,000) and failing to provide the tax authority with information it requests (up to BHD5,000). Under Article 63, the following violations could regarded as tax evasion, and could result in imprisonment:

• Failing to register for VAT within 60 days of the registration deadline
• Failing to pay VAT within 60 days of the payment deadline
• Failure to provide a tax invoice
• Charging VAT on non-taxable items
• Un Rightfully recovering input VAT

Transitional rules — Articles 75 to 79 set out the transitional provisions relating to supplies that span the implementation date. These include:

• The special time of supply (Article 75) — Should the supply take place after 1 January 2019, but the invoice issued or payment received before 1 January 2019. The time of supply will be the date when the supply made and VAT should be due
• Contracts silent on VAT (Article 76 (a)) — Where a contract has signed prior to 1 January 2019 that relates to supplies provided partially or fully after 1 January 2019. The consideration for the supply would treated as VAT inclusive (if VAT is applicable). The Regulations will provide special provisions for such contracts
• Government contracts silent on VAT (Article 76 (b)) — Under special conditions, supplies after 1 January 2019 under contracts signed with the Government before 1 January 2019 should be zero-rated until the earlier of the contract renewal date, contract expiry date or 31 December 2023
• Intra-GCC supplies (Article 78) — Provides that until the implementation of the Electronic Services System, supplies of goods which transport from Bahrain to other GCC implementing states will be treated as export of goods
• Treatment of non-implementing states (Article 79) — Bahrain will not treat a GCC Member State that has already implemented VAT as an implementing state where that Member State does not treat Bahrain as an implementing state and does not fully comply with the GCC VAT Agreement

Moreover, the original law published in Arabic. In case of a conflict between the original version (Arabic) and any translation, the Arabic version will prevail.

Courtesy: Home | Building a better working world | EY – Global, KPMG International

Bahrain Vat In Odoo ERP

If you are a taxable person making supplies of goods or services in Bahrain, you will need to issue tax invoices and, depending on the circumstances, other documents and also you should know about Bahrain VAT In Odoo. The purpose of this section is to highlight the obligation of a taxable person to issue this documentation together with the requirements that these documents must meet. Moreover, the Bahrain Vat/ Tax Contained two types of invoices, full tax invoice and simplified tax invoice.

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Bahrain Vat in Odoo effectively implemented for the customers who is highly in need of it. Technaureus Providing GCC VAT ERP software implementation in the United Arab Emirates, Kingdom of Bahrain, Kingdom of Saudi Arabia, Sultanate of Oman, State of Qatar and State of Kuwait.

Views of Bahrain VAT in Odoo

Firstly, examples of VAT with purchase and sales of a particular product:

Next, when purchasing a product with vat from a vendor:

Journal Entries:

When selling the same product to a customer:

Journal Entries:

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• Bahrain Vat Invoice.

• Bahrain simplified tax invoice.

• Vat date of issue in Bahrain.