On 1 January 2019 Bahrain became the third of the six GCC countries to introduce VAT, following Saudi Arabia and the United Arab Emirates one year earlier. As per the terms of the Unified VAT Agreement signed by all the GCC States in 2016 the rate of VAT is 5%.
In a departure from the way in which KSA and UAE introduced VAT however, Bahrain limited the January 2019 implementation of 5% VAT to large tax payers, meaning that ahead of 1 January 2019 only businesses with an annual turnover of approximately 5 million Bahraini Dinars (BD) were required to register, by 20 Dec 2018.
Rolling forwards, from 1 July 2019 businesses with an annual turnover between BD 500k and BD 5million will be required to register and from 1 January 2020 businesses with an annual turnover between BD 37.5k and BD 500k will be required to register.
As with KSA and UAE, non-resident businesses have no threshold and must register immediately and voluntary registrations are permitted.
Zero-rating is available for, amongst others, the construction of new buildings, education and healthcare services, transport services, as well as oil and gas and derivatives, pearls and precious stones and, in a further departure from KSA and UAE, for basic food items. The sale and lease of real estate as well as certain financial services and life insurance/reinsurance are exempt from VAT.