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Bahrain VAT on foreign digital services

On 1 January 2019, the Arab Gulf state of the Kingdom of Bahrain implemented Value Added Tax on non-resident digital or electronic services providers or marketplaces selling to consumers.

This was the date when it implemented its 5% VAT regime as part of the Gulf Cooperation Council six-state agreement to form a VAT union. So far, only UAESaudi Arabia, Bahrain and Oman have introduced VAT and taxed non-resident digital services. Check VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.

There is no VAT registration threshold, and a simplified registration procedure for non-residents.

What digital services are liable to Bahraini VAT?

Bahrain has made income from the following digital services subject to its VAT:

  • SaaS or cloud-based software
  • Telecoms data and voice, including voice over IP
  • Webhosting and support
  • Website domain name
  • E-learning
  • Apps and screensavers
  • Download and streaming media and images
  • Online gaming
  • Web-based advertising
  • E-books, newspapers and journals

Determining place of supply and if Bahraini VAT is due

Like most countries, Bahrain expects any provider to determine if the place of supply of any digital service is in-country. The following examples of evidence may be used to determine where the consumer is resident and/or the service consumed or ‘enjoyed’:

  • Billing address
  • Customer bank or credit card address
  • IP address used to access the services
  • Phone or SIM card country code

For telecoms services, since 1 February 2021, the place of supply is where the consumer is resident – not necessarily where they services are consumed.

Marketplaces VAT obligations

Where an intermediary such as an electronic marketplace facilitares the service for their third-party provider, then the marketplace becomes the VAT principal. They must therefore register and report VAT. This includes the marketplace being the disclosed or undisclosed agents.

The exceptions to the above rule are:

  1. If the marketplace cannot charge the customer for the services
  2. The third-party supply is named in the contract, invoice or terms and conditions.

VAT registration and compliance

There is no VAT registration threshold. There is no obligation to appoint a Fiscal Representative. There is a simplified VAT registration process with the National Bureau of Taxation.

VAT returns are then due on a quarterly basis. They must be filed, along with any VAT due, by the end of the following month.

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