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VAT Rate increase in Bahrain

The Council of Ministers in Bahrain has approved an increase in the standard rate of VAT from 5% to 10% with effect from 1 January 2022. This is to re-stabilise the Fiscal Balance Programme which was impacted by Covid 19.

The expectation is that the zero-rate applicable on supplies including basic food, healthcare, education, the oil and gas sector, the construction of new buildings, local and international transport, and investment metals will not be affected. We also expect that the VAT exemption for certain financial services and real estate will continue.

Transitional Rules

Details of transitional rules, if any, have not yet been published.

Businesses will need to manage the impact of the proposed rate change, in particular on their cash flow, as they continue to navigate a challenging economic environment. Businesses need to take action to ensure compliance by the effective date. (Source PwC website 27 September 2021).

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