VAT refund procedure in the GCC Region: Bahrain

published on 29 September 2022 | reading time approx. 2 minutes

In a series of articles we would like to inform our readers about the possibilities of VAT refunds in the GCC region. Analogous to Section 18 (9) of the German VAT Act, it is also possible for a foreign company in the GCC region to obtain a refund of VAT paid.

Each part of this series of articles is intended to introduce the VAT refund procedure in one of the GCC states as well as the requirements for filing an application.

Part I is about Bahrain – a small island in a bay on the south-western coast of the Persian Gulf. The name is derived from the Arabic term al-bahrayn, which means “two seas”.

Since 1 January 2019, taxes have been imposed in Bahrain for the first time (except for consumer taxes). As in most tax systems, the first step was the introduction of VAT. The VAT rate was initially set at 5 percent. Two years after the introduction, the decision was made to increase the VAT rate to 10 percent, which came into effect on 1 January 2022.

Foreign companies are entitled to apply for a refund of VAT under Article 67 of the GCC VAT Framework Law, provided that the taxable supplies were obtained within the scope of the company and from a GCC member state.

The application for VAT refund must be submitted in Bahrain by 31 March following the end of the year in which the VAT was paid. Only those companies that cumulatively fulfil the following conditions are entitled to apply:

The applicant must not be registered or required to register for VAT purposes in Bahrain,
The applicant is registered for tax purposes in his country and can provide evidence of a registration certificate,
The taxable supplies have been received within the scope of the business,
If the applicant belongs to a fiscal unity, a certificate of all members of the fiscal unity is required,
The applicant has not yet submitted a refund application for the period applied for (calendar year),
The requested refund amount is at least BHD 200.

If a company does not have a registered office or permanent establishment in Bahrain and meets all the requirements, it can benefit from the VAT refund procedure, provided documents such as invoices, proof of payment, etc. are available.

Since the so-called "Electronic Services System" has not yet been introduced in the GCC region, services between GCC states are considered international trade until then, and member states are not yet considered member states for tax purposes.

Consequently, companies based in the GCC region that pay VAT in other Member States should also have their entitlement to a refund of VAT checked.

The refund applications are processed within 3 months of submission. We will be happy to assist you in checking whether you are entitled to an VAT refund and will submit the applications to the Bahrain Tax Authority on your behalf.