Bahrain: Request for comments to assist with introduction of e-invoicing
Comments intended to support review and enhancement of legal framework for the launch of e-invoicing in Bahrain
Request for comments for assistance with introduction of e-invoicing
The National Bureau for Revenue has (through the Bahrain Tender Board) invited comments to provide support with the review and enhancement of the legal framework for the launch of e-invoicing in Bahrain.
Given this development, Bahrain would be following other countries that have implemented e-invoicing.
Why is e-invoicing being introduced?
As per the Revenue tender document, the three core objectives for introducing e-invoicing in Bahrain are to:
- Support businesses in Bahrain by creating a "level playing field" and reducing their administrative burden
- Enable development and tracking of Bahrain’s economic policies by creating more granular economic data
- Support Bahrain’s fiscal balance program by addressing tax leakages with limited disruptions to economic activity
E-invoicing would allow Revenue to increase value added tax (VAT) compliance among taxpayers, better data collection, reconciliation and transparency.
What is e-invoicing?
E-invoicing converts the issuing of paper invoices and credit/debit notes into an electronic process that allows the exchange and processing of invoices, credit notes and debit notes in a structured electronic format between the supplier and customer and between the supplier and the tax authority. This is generally done through an integrated electronic solution. Once an e-invoice is issued it cannot be amended—a debit note or credit has to be issued.
A paper invoice converted into an electronic format through copying or scanning is not considered an e-invoice.
Who would e-invoicing be applicable to?
Businesses registered for VAT and any third parties issuing tax invoices on behalf of other taxable persons would need to comply with the e-invoicing requirements, once implemented. The requirements may vary depending on factors such as nature of business, annual value of supplies, number of transactions. Revenue may adopt a phased approach with largest businesses or businesses in certain industries being required to comply first.
When would e-invoicing be implemented?
No formal implementation timeline has been announced by Revenue, but tax professionals expect e-invoicing in Bahrain to be implemented in the next 18 months.
What are the technical requirements for e-invoicing solution?
Specific requirements will be announced by Revenue in due course—tax professionals expect the following minimum technical requirements for an e-invoicing solution:
- Connect with the internet and in-turn an application programming interface published by Revenue for sharing invoices
- Adequate mechanisms for preventing modification or tampering and the ability to record and detect any tampering attempts
- Compatible with any other Bahrain legal requirements and controls for data/information security
What are some of the challenges of e-invoicing?
- Access to high-speed and secure internet connectivity for integration with Revenue’s platform.
- Integration between point of sale and ERP systems and in turn integration with Revenue’s platform.
- Implementing systems security measures to provide recording of time stamps along with restriction of anonymous user access.
- Restrictions on system/document modification. An e-invoice cannot be modified once issued. Even for a small error on the invoice, it would need to be cancelled by issuing a credit note.
- An e-invoice would have many more fields than the current tax invoice and a prescribed format for all fields. Systems would need to be assessed to cater for this.
How can Bahrain businesses prepare for e-invoicing?
While Bahrain businesses await the formal Revenue announcement, Bahrain businesses need to undertake the following steps in advance for a smooth transition:
- Conduct a gap assessment to determine which systems and processes would be affected
- Map all transaction flows to which e-invoicing would be applicable
- Assess capabilities of existing systems and determine how these systems could integrate with external systems
- Conduct a gap assessment from a cybersecurity and system integrity perspective
- Update existing records including customer and vendor information
- Provide training to staff
E-invoicing would be a game changer for Bahrain businesses and would require a major change to existing processes and upgrading of systems. Tax professionals have been assisting businesses comply with the e-invoicing requirements in other countries in the region including:
- Conducting impact assessment and gap identification
- Providing recommendations and implementation roadmap
- Providing support for e-invoice solution (remediation, vendor selection)
- Implementing support and post implementation readiness review
Read a September 2022 report [PDF 129 KB] prepared by the KPMG member firm in Bahrain
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