Bahrain is set to become the third Gulf Cooperation Council (“GCC”) to implement the unified agreement on Value Added Tax (“VAT”) on goods and services.

The Parliamentary Finance and Economic Committee of Bahrain has approved the legislation on the VAT.

Timing of VAT introduction in Bahrain

The VAT executive regulations shall be issued 15 days after the enactment of the law which shall come into force on the 1 January 2019.

Standard rate of VAT in Bahrain

The standard VAT rate in Bahrain will be 5%, this is in-line with the GCC Unified agreement and consistent with the other implemented states. This will be one of the lowest rates of VAT in the world and significantly lower than the OECD average VAT rate of approximately 19%.

Considerations – Trading with Bahrain

Saudi businesses that have establishments in Bahrain or are involved in cross-border economic activities with Bahrain should start assessing the potential impact that VAT in Bahrain could have, and the available options to mitigate this.

If you operate in any of the following sectors, there are likely to be additional VAT considerations:

• Financial services
• Real estate  
• Retail and consumables
• Technology, media and telecommunications