Bahrain starts to implement 10% VAT on goods & services

Bahrain starts to implement 10% VAT on goods & services

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Bahrain has increased 10 percent value-added tax (VAT) for all goods that are taxable by law as the Kingdom ringed in the year 2022 with renewed hope amid concerns over the new Omicron variant.

The increase comes two years after Bahrain implemented a 5 percent VAT on taxable items in an effort to reduce the budget deficit and re-stabilize the Fiscal Balance Program, which has been hit by COVID-19 pandemic.

American credit rating agency, S&P Global Ratings estimated that the VAT increase could contribute receipts of about 3 percent of the gross domestic product (GDP) in the next few years, up from about 1.7 percent in 2021.

The supplies that are subject to the zero-rate (eg. basic food, construction of new buildings, oil and gas, healthcare, and education) or exempt from VAT (eg. real estate and certain financial services) will be unaffected.

The VAT hike does not apply to 94 “basic” food items and over 1,800 non-taxable government services. The non-taxable items include water, milk, meat and fish, oils, eggs, sugar and salt, infant foods, bread products, vegetables and fruits, coffee beans, tea and cardamom, and wheat and rice. In addition, Bahrain exempts 1,820 government services from VAT.

However, a 5 percent VAT rate