Bahrain VAT Rate Increase & Guidance on Transitional Rules

28 Dec Bahrain VAT Rate Increase & Guidance on Transitional Rules

On 24 December 2021, the Government of Kingdom of Bahrain has published the amended VAT Law in official Gazette to enforce the increase in standard VAT rate from 5% to 10% with effect from 1st January 2022. National Bureau of Revenue (‘NBR’) has issued guidance to explain the Transitional Rules.

Summary of the transitional rules:

Transitional Rule 1: Contracts for one-off supplies entered into before 24 December 2021 where the date of supply is on or after 1 January 2022

Transitional Rule 2: Contracts for one-off supplies entered into after 24 December 2021 where the date of supply is on or after 1 January 2022

# If, however, changes are made to the contract before the supply is made, or if the supply is made on or after 1 January 2023, Transitional Rule 1 will not apply, and the supply will be subject to VAT at 10% (for detail pls refer to the Vat Rate Change Transitional Provisions Guide)

Transitional Rule 3: Contracts for Continuous Supplies entered into before 24 December 2021 where some or all of the supply occurs on or after 1 January 2022

Transitional Rule 4: Continuous supply contracts entered into before 1 January 2022 where Transitional Rule 3 does not apply

* If, before 1 January 2023, a contract to which Transitional Rule 3 would otherwise apply expires and is renewed, Transitional Rule 3 will not apply with effect from the date of expiry.

Guidance note also provide the guidance on change to contracts and valuation of continuous supplies.