A MORE comprehensive rundown of goods and services that will not incur Value Added Tax (VAT) charges has been published by the country’s taxation authority.
Starting from Tuesday, VAT will be applied at a standard rate of five per cent on telecommunications services, clothing and apparel, hotels and restaurants, and vehicles.
However, unlike the UAE and Saudi Arabia – which introduced VAT on January 1 this year – Bahrain will apply a zero-rate on basic food items, some construction services, education and healthcare services, local transport services and the oil and gas sector.
Bahrain has also exempt from VAT the sale and lease of residential and commercial real estate – as well as certain financial services such as loans.
The tax is typically due where final consumption occurs, at the earliest between delivery, valid tax invoice generation and payment.
Basic food items
The National Bureau for Taxation (NBT), acting under the ambit of the Finance and National Economy Ministry, published on its website a list of 94 basic food items, agreed on between all GCC countries, to be zero-rated (see accompanying list).
Education
Educational services provided by kindergartens, pre-primary, primary, secondary and higher education institutions will also be zero-rated, along with subscription, application and administration fees; printed and digital books directly related to the curriculum; student accommodation provided by the educational institution; and activities and trips directly related to the curriculum.
Healthcare
In the healthcare sector, general medical health services have a zero-rated VAT along with specialist medical health services, including surgery; services related to the treatment of mental illnesses; dental services; occupational or surgical health services; speech therapy; physiotherapy; sight and hearing tests; nursing care; services to diagnose an illness (including the analysis of tests and X-rays); vaccinations; health testing and screening undertaken under a local law, documented policy or contractual obligation; cosmetic procedures provided as part of a medical condition; drugs, medicines, bandages and other medical consumables (if included in the list of zero-rated products as defined by the National Health Regulatory Authority); laboratory services; transport services for patients or those injured; accommodation and catering services; mortuary services; and medical consultations provided remotely by electronic communications.
All the above have to be provided by a qualified medical professional or qualified medical institution to be considered zero-rated.
Transportation
In the transportation sector, the local transport of goods and passengers in Bahrain such as buses and taxis will be zero-rated, along with airplane tickets from one place in Bahrain to a place outside of Bahrain.
Construction
In the construction sector, services such as construction works, site clearance, new extension to existing building, and services provided by engineers and surveyors for supervisory purposes are zero-rated.
Also, goods supplied as part of construction services where the goods are used, installed or incorporated into the building or its location such as building materials, fixtures and equipment permanently affixed to the building, and goods supplied to conduct civil engineering works are also zero-rated, along with goods supplied to connect a building to a water supply and telecommunications services; and photovoltaic cells and equipment to produce electricity and hot water.
Financial services
A list of five financial services are completely exempt from VAT including interest payments on loans (example: credit card, personal loans, mortgages, auto-loans, etc); forex transactions; investment fund services (example: issuance of stocks, bonds and derivatives); issue or transfer of ownership of securities (equities or debt); and life insurance and reinsurance contracts.
Real estate
While in the real estate sector, the sale and rental of real estate (residential, commercial and bare land) are exempt from the tax.
Subjecting goods and services to zero-rated VAT means their retail price is not affected, which is good news for customers.
It also allows companies to claim back credit for zero-rated products on which they may have incurred VAT charges.
When a product is VAT exempt the government doesn’t tax its sale, but producers cannot claim back credit for any VAT incurred in the supply chain.
The NBT previously said that the tax would be implemented in three phases.
In Phase One, which will kick off on Tuesday, companies with turnovers exceeding BD5 million will be required to start charging their customers and paying the tax to NBT.
However, those with turnovers exceeding BD500,000 have until June 20 to register, with Phase Two beginning from July 1.
Companies with turnovers of BD37,500 and above have until December 20 to register with Phase Three starting on January 1, 2020.
There is no VAT registration deadline for companies with turnovers below BD37,500.
A list of 94 basic food items that have been zero-rated, under Value Added Tax (VAT), in Bahrain:
Meat and Fish
1. Meat of bovine animals, fresh or chilled – carcasses and half-carcasses
2. Other cuts of bovine animals with bone in – fresh or chilled
3. Bovine animals boneless – fresh or chilled
4. Meat of lamb, fresh or chilled – carcasses and half-carcasses
5. Meat of sheep, fresh or chilled – carcasses and half-carcasses
6. Meet of sheep – other cuts with bone in – fresh or chilled
7. Meat of sheep – boneless – fresh or chilled
8. Meat of goat, fresh or chilled – carcasses and half-carcasses
9. Meat of goat, fresh or chilled – other cuts with bone in
10. Meat of goat, fresh or chilled – boneless
11. Edible offal of sheep, goats – fresh or chilled
12. Edible offal of camel – fresh or chilled
13. Edible offal of camel – frozen
14. Yellowfin tuna (Thunnus albacares)
15. Bigeye tuna (Thunnus obesus)
16. Bluefin tuna (Thunnus thynnus)
17. Southern bluefin tuna (Thunnus maccoyii)
18. Qabbab fish (Thunnus tonggol)
19. Sharwi fish (Thunnus affinis)
20. Kingfish (Scomber scombrus – commerson)
21. Bayadh – (hamam, khoudra and saal)
22. Seabream (such as showmeat, faskar, shaam, spaiti, nahash, gergifan
23. Hamour
24. Sheari (sheoor)
25. Hamra (alesmaudi)
26. Nagroor
27. Bori (meed)
28. Bori (biyah)
29. Safi
30. Barracuda (aqqam, dwailmi, qad)
31. Layer chickens
32. Broiler chickens
33. Roosters and chickens weighing more than 185g
Vegetable and fruit
34. Potatoes and similar – fresh and chilled
35. Tomatoes – fresh and chilled
36. Onions for food (green or dry rind)
37. Garlic
38. Cabbage and lettuce (head lettuce)
39. Carrots and turnips – fresh or chilled
40. Cucumbers and gherkin – fresh or chilled
41. Peas (pisum sativum)
42. Beans (vigna spp., haseolus spp.)
43. Other leguminous vegetables: beans
44. Aubergines (egg-plants)
45. Fruits of the genus capsicum or pimenta
46. Spinach, New Zealand spinach and orache spinach (garden spinach)
47. Olives
48. Pumpkins (cucurbita)
49. Marrow
50. Okra
51. Parsley
52. Coriander
53. Fresh dates (rutab)
54. Pressed dates
55. Pineapples
56. Guavas
57. Mangoes
58. Oranges
59. Mandarins (including tangerines and satsumas); clementines, wilkings and similar citrus hybrids
60. Fresh lemons
61. Dried lemon
62. Fresh grapes
63. Watermelons
64. Melons (musk melon)
65. Apples
66. Pears
67. Apricots
68. Cherries (sour) (prunus cerasus)
69. Kiwifruit
70. Pomegranates
Coffee, tea, cardamom
71. Coffee (not roasted) – not decaffeinated
72. Coffee roasted – not decaffeinated
73. Green tea (not fermented) in immediate packings of a content not exceeding 3kg
74. Other green tea (not fermented)
75. Teabags not exceeding 3g
76. Other black tea (fermented) and other partly fermented tea
77. Cardamom (whole) neither crushed nor ground
78. Cardamom, crushed or ground
Cereal/grains
79. Normal wheat
80. Thin wheat
81. Semi-milled or wholly milled rice, whether or not polished or glazed
82. Wheat flour
Sugar
83. Filtered sugar (refined) fine crystals
Food preparations for children
84. Milk-based infant foods and modified milk as substitutes for mother breast milk without cocoa
Dairy and its derivatives
85. Long life milk, in containers exceeding 1 litre
86. Milk
87. Yogurt
88. Fresh (un-ripened or uncured) cheese, including whey cheese and curd
Water
89. Artificial mineral water
90. Normal natural water salt
91. Common salt (table salt)
Olive oil and its fractions, whether or not refined, but not chemically modified
92. Virgin olive oil
Other – fresh eggs
93. Fresh chicken eggs (gallus domesticus)
Bread
94. Ordinary bread of any kind
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