Are you ready?
ready well before the deadline (potentially as early as 1 October 2018)?
At the GCC Financial Forum in Bahrain on Wednesday 20 February 2018, H.E. Shaikh Ahmed bin Mohammed Al Khalifa, Bahrain s Minister of Finance, confirmed that the Ministry of Finance (MoF) is working towards finalising the legislation, systems and processes required to implement VAT with the aim of having everything in place before the end of 2018 this is part of the joint commitment to the GCC states and in line with the unified agreement . VAT went live in Saudi Arabia and the UAE, as planned, on 1 January 2018. For many businesses in both countries who were hoping that VAT would be delayed, it was a scramble to get ready. Many of these businesses are still struggling to properly implement VAT as they face the stark reality of lodging their first VAT return. Have you started planning for VAT implementation? If not, are you delaying the planning process because you still think VAT will not be introduced in Bahrain? Are you hoping that the introduction of VAT in Bahrain will be delayed beyond the end of 2018? Even if this was the case - in the face of all evidence and categorical statements by government ministers - do you really believe that VAT is not going to be introduced? If not, what is stopping you from at least starting the planning process for VAT implementation? Do you know how long it will take for your business to get ready? The lesson learnt from Saudi Arabia and the UAE is that most businesses will need four to six months to get ready for VAT. Larger, more complicated businesses need more time - six to twelve months. How long will your IT function need to make critical IT system changes? Wouldn t you rather be
If you are hoping the tax authority will provide leeway to a business who has known about the introduction of VAT but has done nothing - or has waited until it s too late to meet the deadline - the lesson learnt from Saudi Arabia and the UAE is that tax authorities take a strict Mubeen Khadir approach to compliance with the VAT law Keypoint and regulations and there will be little, if any, leeway for businesses. The UAE published its VAT law roughly five months before VAT s introduction and its final VAT implementing regulations on 28 November 2017, leaving very little time for those businesses that decided to wait till the regulations were released. With VAT already introduced in Saudi Arabia and the UAE, businesses in Bahrain do not need to wait for Bahrain s VAT law and regulations to start preparations. Bahrain s VAT law is unlikely to differ significantly from the legislation Saudi Arabia and the UAE have already introduced. Both the UAE and Saudi Arabia have been publishing guides, clarifications and running information sessions on their VAT laws and regulations. Bahrain has second mover advantage! We have completed VAT implementations for over 50 businesses in Saudi Arabia and the UAE. We have been working on VAT implementation with a number of businesses in Bahrain since mid-2017. We don t have a crystal ball but we can safely say that VAT in Bahrain is a reality - so we strongly recommend you start planning for VAT in Bahrain if you have not already done so!
Bahrain will introduce VAT in October 2018
H.E. Shaikh Ahmed Bin Mohammed Al Khalifa, Minister of Finance
A statement from the Minister of Finance in January revealed that the Kingdom of Bahrain will be officially implementing VAT in in early October of this year. A 5% VAT will be implemented on many types of goods and services in the Kingdom.However, health sector, education and transportation will be exempted from VAT.
VAT will be imposed on the following sectors: Telecommunications Water and electricity Traffic and licensing department, Real estate Construction and oil, (fuels, including gasoline, diesel, electricity, and gas) Modern Cars from the agencies Car rentals Luxury goods Mobile phones Clothes and watches Restaurants Movement of sales and purchase in the markets Tax will also be imposed on companies whose annual profits are upto 40 thousand dinars and more per annum and tax rate would be calculated accordingly. The Ministry of Finance also
said that a tax collection system will be established in the Kingdom of Bahrain and companies with an annual income of US $ 100,000 should be required to register their company. According to some economic studies, the Kingdom of Bahrain will benefit BD500 million from the state treasury, selective tax of BD60 million and income tax of BD750 million from companies, i.e. a total revenue up to BD1.3 Billion within one year. The revenues from VAT will be used for the establishment of a high network of infrastructure, including construction of roads, streets, and bridges. VAT will also contribute in the improvement of transport and communications, construction of hospitals, educational facilities and other services of the country. Forum 15