A new legislative proposal seeking to exempt social and youth associations from value-added tax (VAT) will be debated by Bahrain’s Parliament on Tuesday.
The proposed amendment to the VAT Law, submitted by five MPs led by Hanan Fardan, aims to add a new clause under Article (53) of Decree-Law No (48) of 2018 on value-added tax.
Under the proposal, a new paragraph would be added to the article, stipulating that: “The supply of social care services and related goods and services to social and cultural societies, clubs, and private entities operating in the field of youth and sports shall be subject to a zero per cent VAT rate.”
MPs believe the plan, if approved, would support civil society organisations and youth and sports institutions that provide non-commercial services to the community.
“This amendment reflects Parliament’s commitment to supporting non-profit organisations that serve society, just as the law already recognises the importance of education and healthcare by exempting them from VAT,” said Ms Fardan.
The financial and economic affairs committee said the proposal is rooted in “the principle of providing backing to non-profit entities that contribute directly to social care and community development.”
The Finance and National Economy Ministry, along with the National Bureau for Revenue (NBR), have stressed the need to reconsider the proposal, citing its potential fiscal implications.
In its written response, the ministry said that the VAT system in Bahrain is based on a unified GCC framework agreement.
“Adding new sectors to the list of zero-rated supplies could have adverse effects on overall VAT revenues, which are an important source of non-oil income for the state budget,” the ministry stated. It noted that current zero-rated sectors were selected because they directly affect essential needs such as healthcare, education, housing, and basic food commodities.
“Introducing additional zero-rated categories could impact funding for social protection programmes and public projects agreed upon in the national budget,” the response added.
The government also highlighted that registered VAT entities can already reclaim VAT paid on their eligible supplies, thereby maintaining fiscal balance while supporting operational continuity.
Despite the government’s reservations, the committee chaired by MP Ahmed Sabah Al Salloom endorsed the proposal unanimously.
“Supporting these associations through a VAT exemption would reinforce their capacity to deliver services and initiatives that complement government programmes in social care, culture, and sports,” he said.
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