Bahrain VAT rate to double

Bahrain will double its standard VAT rate from 5% to 10% with effect January 1, 2022. The draft amendment to the Bahraini VAT Law affects the VAT rate change was approved by Bahrain’s Shura Council on December 12, 2021 and will now be enacted into law by the King.

It has been reported that the Council’s main concern had been the impact of the VAT rate increase on low-income households. There had therefore been a request to amend the Social Security Act and increase the Social Security Allowance in order to mitigate the adverse impact. This was approved by the Bahraini Government on December 5, 2021 following a meeting between the Minister of Finance and members of the Council of Representatives.

It is anticipated that the amendments to the VAT legislation and guidelines from the Ministry of Finance and National Bureau for Revenue (NBR) will be published soon ahead of the VAT rate effective date of January 1, 2022.  

Businesses with a footprint or VAT registration in Bahrain should plan for the VAT rate change including:

• consider any transitional rules and impact on existing contracts and invoicing
• plan and test required rate changes in systems including ERPs, accounting software, billing and e-commerce platforms
• consider impact to pricing and price points
• update documentation including VAT compliance process notes
• update any pre-defined logic in systems including exception reporting
• raise awareness across the business and its stakeholders

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