Value added tax can be defined as a kind of indirect tax that is being levied domestic consumption of goods for services, excluding the items that are rated zero by the government such as food, medicines and other substances that are exempted from all kinds of duties. In this article, we are going to discuss some of the most important facts about its introduction in Bahrain:-
Introduction of VAT in Bahrain:-
The Bahrain government is all set to levy VAT from January 2018 and initially the rate is expected to be somewhere around 5%. The money received through this method of taxation would be treated as a new source of income for the government that would, in turn, serve the local people with a high-quality public service. Moreover, it would also reduce the dependence of the government on oil as well as other hydrocarbons as the main source of revenue. There are many Tax Agents in Bahrain who can provide you all possible help in regards to VAT Filling in the local area.
Implementation of VAT:-
It is assumed that VAT in Bahrain would be applicable on most of the transactions and services available in the local area with a limited number of assumptions. This tax is expected to marginally increase the overall cost of living, but it would definitely vary from person to person on then lifestyle as well as spending habit. A person who focuses on investing in the goods and services that are exempted from all kinds of taxes is likely to see hardly any increase in his cost of living. The national government is planning to introduce a set of rules according to which all the businesses must be very clear about the amount of VAT an individual needs to pay for each transaction done by him. His decision about whether or not to buy a product or service must be solely based on this data.
Method of VAT Registration:-
The businesses of all sizes in Bahrain can switch to VAT Registration by visiting the e-services section on the FTA website. First of all, they need to create an account. For more detailed information in regards to tax registration, they need to refer to the VAT Registration User Guide.
Process of implementation of VAT on businesses:-
The businesses of all sizes would be solely responsible for careful documentation of their total income, costs and other charges associated with VAT that applies to them. Businesses that qualify the minimum annual turnaround requirement will have to register for VAT. Those who think that they should be exempted from registering for it must maintain a well defined financial record for the ministry to decide whether they must register for this tax or not.
The business and traders that are registered need to charge VAT on all their customers on the basis on the prevailing rate and incur Vat on goods/ services that they purchase directly from the suppliers or service provider. The variation between these amounts is either reclaimed or paid to the government.
The registered businesses are required to charge VAT on all the products or services provided by them. They have the opportunity to reclaim the amount of VAT that they have paid for business-related goods or services. They need to keep a well-maintained record of all their dealings as a probe that they have paid this tax correctly.
Not only this, these businesses also need to clearly mention the amount of VAT that they have charged from their customers and also the amount that they have paid to the government in the form of tax on a daily basis. Initially, it would be a formal submission and the reporting would be usually online.
If they have charged more VAT than they have paid, they have to pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.
VAT in GCC:-
The government of Bahrain is planning to implement the entire taxation system in coordination with other GCC countries as it is closely connected with them and the GCC Customs Union through an economic agreement. The GCC has played an active role in the proper planning as well as the implementation of the new public policy as it was of the view that such collaborative approaches would ultimately lead to the development of the entire region as a whole.
Impact of VAT on business:-
It is obvious that the introduction of this kind of tax has impacted the business at least to some extent if not much. In this part of the article we are going to discuss some of the ways in which it has impacted:-
If a business paid 5% VAT or have indulged in dealing with any kind of Zero-rate transaction, then it would be eligible to take the facility of the VAT recovery policy. A special set of rules would be planed to effectively govern the entire process VAT Filling in Bahrain. These rules would usually cover the legal aspects related to free zones, relieve from bad debt, Real estate, VAT group, Insurance, Islamic finance as well as import of good. They would also include a few clauses related VAT refund. All the businesses strictly follow the transitional period as well as rules related to VAT Filling in Manama, Bahrain.
To conclude we can say that the above mentioned are some of the most prominent facts the VAT in Bahrain. You can find more details in this regard on the internet.