The Kingdom of Bahrain’s National Bureau of Revenue (NBR) has released an updated version of the Imports and Exports VAT Guide.

This comprehensive document offers essential guidance for businesses involved in international trade in Bahrain, detailing the VAT treatment of imports and exports.

It covers key areas such as VAT liability on imports, conditions for zero-rating exports, and compliance requirements for businesses engaged in cross-border transactions.

A notable update in the guide is the revision of Section 1.2, which provides enhanced details on the VAT treatment of goods exports.

The guide reaffirms that exports of goods from Bahrain are subject to a 0% VAT rate, provided they meet specific conditions.

To qualify as an export and benefit from zero-rating, goods must be shipped from Bahrain to a destination outside the Implementing States within 90 days from the date of supply.

Additionally, the goods must remain unchanged, unused, and unsold before leaving Bahrain.

Suppliers are required to maintain valid export documentation to prove compliance with these conditions, as failure to do so may result in the transaction being treated as a domestic supply subject to a 10% VAT rate.

The most significant update involves a new subsection under Section 1.2 titled “Multiple Supplies Resulting in a Single Export.”

The guide clarifies that when multiple transactions culminate in a single export, only the final supply in the chain will qualify for zero-rating, provided all export conditions are met.

Any preceding transactions in the supply chain will be treated as domestic supplies and will be subject to a 10% VAT rate.

This change directly impacts businesses involved in multi-step transactions where goods are initially sold within Bahrain before being exported.

For instance, if a VAT-registered supplier in Bahrain sells goods to another Bahrain-based entity, which then arranges for the direct export of those goods to a customer outside Bahrain, the initial transaction within Bahrain will be subject to a 10% VAT rate, while the final sale to the overseas customer will be zero-rated.

The supplier responsible for the export must ensure they retain documentation proving the outbound destination of the shipment to apply the 0% VAT rate.

These updates underscore the importance of accurate VAT classification and proper documentation for businesses engaged in imports and exports.

Companies are advised to review their VAT compliance procedures to ensure they correctly apply zero-rating to exports and account for VAT on domestic transactions preceding an export.

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