KPMG in Bahrain provides an update on the new Guide issued by the National Bureau for Revenue (NBR) on the imports and exports.
The National Bureau for Revenue (NBR) issued the Imports & Exports VAT Guide (‘Guide’) which is intended to provide an overview of the VAT rules and procedures to be followed in Bahrain regarding import and export of goods and services. The Guide is also intended to clarify certain specific issues in relation to imports and exports.
Broadly, the Guide deals with aspects such as VAT treatment for import/ export of goods and services, persons liable to pay VAT on imports, valuation of imported goods for computing VAT, recovery of import VAT and VAT paid under the reverse charge mechanism, conditions for applying zero-rate on exports etc.
We have outlined below the key highlights from the Guide:
- Entry of goods into Bahrain and customs clearance of such goods is enough for an import of goods to have taken place for VAT purposes. Import of goods does not require an actual supply (e.g., sale) between two separate parties or for consideration to be paid.
- Intra-GCC supplies of goods will be treated as exports/imports of goods until the Electronic Service System is in place and applied in all Implementing States.
2. Value of imported goods
- Costs relating to importing the goods such as transportation charges, commission expenses, insurance, storage, packing, surveillance or other similar charges in relation to the goods until their arrival in Bahrain would be added to the value of imported goods for computation of VAT.
- Where goods are re-imported into Bahrain after having been temporarily exported for repair, completion of manufacturing or any other similar service, the value of the goods at re-import for computing import VAT would be the value added to the goods while they were temporarily exported, in accordance with the provisions of the Customs Law.
3. Adjustment to value of imported goods
- If, after the goods have been imported, the supplier grants a discount, such discount will not affect the value of the goods used to compute VAT due at import, unless the customs value of these goods is itself subject to adjustment.
- If any amendment to the value of imported goods results in an additional payment of customs duty and VAT, this adjustment would be processed by way of a payment order issued by Bahrain Customs Affairs, with the additional amounts to be collected from the importer.
- If the amendment results in an excess payment of customs duty and VAT, Bahrain Customs Affairs will adjust the customs duty and VAT payable. However, Bahrain Customs Affairs will not refund the overpaid import VAT when the importer is a taxable person. Instead, the importer taxable person may recover the amount of overpaid import VAT as input tax in its tax return.
4. Recovery of import VAT
- Import VAT can be recovered as “input tax” in the taxable person’s tax return for the tax period during which all the conditions for input tax recovery are met.
- A taxable person who is registered for VAT in Bahrain and imports goods for the purpose of his economic activity, is expected to use his own Commercial Registration (CR) number and its own VAT Account Number when importing the goods. The use of an erroneous VAT number will preclude the taxable person from claiming import VAT back from the NBR.
- Where the taxable person uses a clearing agent to assist with the customs clearance process, the agent should prepare and submit the customs documentation using the CR number and the VAT Account Number of its client.
5. Deferral of import VAT
- The Guide is silent regarding the time frame for implementation of the import VAT deferral mechanism envisaged under the Bahrain VAT Law and states that “Further detail will be provided in due course”.
- The NBR would have full discretion as to whether to permit a taxable person to defer the payment of VAT on the import of goods.
- Where the importer has received the authorization to defer the payment of import VAT, his VAT Account Number will be flagged to Bahrain Customs Affairs as authorized for VAT payment deferral.
- Where the payment of import tax has been deferred to the taxable person’s tax return, the taxable person will be able to also report this VAT as a recoverable input tax within the same tax return (provided all the conditions for recovery are met at that time, including the customs documentation supporting the deferral of payment).
6. Export of goods
- It is the supplier’s responsibility to check that all of the conditions to apply VAT at the zero-rate are met and to retain the necessary supporting evidence. The supplier is expected to treat a supply of goods as a local supply of goods if the evidence is not satisfactory/ sufficient.
- Goods sold in shops located in the departure areas of an airport or port in Bahrain are subject to VAT at the zero-rate, subject to fulfilment of certain conditions. The sale of food and beverages meant to be consumed immediately as well as the supplies of services performed in departure areas would be subject to VAT at the standard rate.
- Supply of goods with shipping starting from a place outside Bahrain to a place outside Bahrain does not fall within the scope of the Bahrain VAT Law and would be disregarded from a Bahrain VAT perspective.
7. Reverse charge mechanism
- The customer liable to account for VAT under the reverse-charge mechanism is required to record the VAT amount due, in Bahraini Dinars, on the invoice issued to him by the supplier and the VAT amount can be written in pen.
- In cases where a non-resident supplier is registered for VAT in Bahrain and supplies goods or services in Bahrain to both taxable persons and non-taxable persons, the non-resident supplier must issue valid tax invoices for his supplies. When issued to customer taxable persons, the supplier must not charge VAT but may quote “supply subject to reverse-charge mechanism” on his tax invoices.
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