The Bahrain National Bureau for Revenue released a guide addressing the value added tax (VAT) treatment of transfers of a going-concern. Separately, the tax authority clarified that certain expenses incurred prior to obtaining a new building permit may be zero-rated for VAT purposes.
VAT is normally charged on the sale of business assets. However, if a business is transferred as a going-concern, then such a supply is outside the scope of VAT. A transfer of a going-concern is not treated as a supply of goods or services; therefore, no output tax is chargeable on the business sale and this limits any impact on cash flow for the purchaser. For a business sale to be treated as a transfer of a going-concern, certain conditions need to be met.
Read a September 2020 report prepared by the KPMG member firm in Bahrain
The National Bureau for Revenue clarified that certain expenses incurred prior to obtaining a new building permit may be zero-rated. In Bahrain, new building construction services are zero-rated. To apply the zero rate, contractors and sub-contractors must obtain a certificate (or a certified copy of the original certificate) prepared by the main contractor, or the property owner, that the building meets the criteria to be a new building.
The National Bureau for Revenue updated a VAT real estate guide to clarify that expenses incurred for obtaining a building permit (for a new building) from the Ministry of Works, Municipalities, and Urban Planning will be subject to VAT at a zero- rate without the possession of a new building certificate. The updated guide provides a list of eligible expenses, including:
When there are any further amendments or additions to be made to the application, the expenses for such amendments and additions will also be subject to VAT at the zero rate even in situations when the application for the building permit is rejected or the building has not been constructed after issuance of building permit.
VAT at the standard rate of 5% will apply on drawings not required by the municipality.
These rules are effective from 1 October 2020.
Read a September 2020 report [PDF 181 KB] prepared by the KPMG member firm in Bahrain
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.