Bahrain

Value-added tax (VAT) and excise duty

VAT was implemented in Bahrain on 1 January 2019.

The standard VAT rate was 5% from 1 January 2019 until 31 December 2021. From 1 January 2022, the rate was increased to 10%, but transitional provisions applied in certain circumstances under which the 5% rate could apply on certain supplies made after 1 January 2022 until 31 December 2022 at the latest. The standard rate applies to most goods and services, with a number of exceptions where certain goods and services may be subject to a 0% rate or be exempt from VAT.

The mandatory registration threshold is 37,500 Bahraini dinars (BHD) for businesses resident in Bahrain, and the voluntary registration threshold is BHD 18,750. Non-resident businesses are required to register upon making the first supply subject to VAT in Bahrain.

Transitional provisions existed that increased the mandatory registration threshold to BHD 5 million from 1 January 2019 until 30 June 2019. The threshold was reduced to BHD 500,000 from 30 June 2019 until 31 December 2019. Thereafter, the standard threshold set out above apply.

The National Bureau for Revenue is the regulatory body responsible for overseeing and upholding the provisions of the Bahrain VAT Law and Regulations.

Bahrain signed the Common Excise Tax Agreement of the States of the Gulf Cooperation Council (GCC) on 1 February 2017. The Bahrain cabinet ratified the Excise Tax Law, which entered into force on 30 December 2017. Tobacco products and energy drinks are subject to excise tax at 100%, while soft (carbonated) drinks are subject to excise tax at 50%. Other goods may also become subject to excise tax in the future.

Customs duty

The general rate of customs duty is 5% of the value in cost, insurance, and freight (CIF), except for tobacco, which is 100%.

Certain categories of goods, such as paper and aluminium products, are subject to a 20% duty rate.

Stamp duty

Stamp duty applies to the transfer and/or registration of real estate only and is levied at a rate of 2%. In case of payment of the stamp duty within the two months following the transaction date, the rate of the stamp duty is reduced to 1.7%.

Registration and licence fees

Companies are subject to registration and licence fees ranging from BHD 25 to BHD 1,000, which vary depending on the nature of their activity.

Payroll taxes

There are no payroll taxes other than social insurance contributions (see below).

Social insurance contributions

Employer's social insurance contribution is 15% (previously 12%) for Bahraini workers and 3% for expatriate workers, calculated on their monthly salaries and capped at an income ceiling of BHD 4,000.

Social insurance is also paid for nationals of other GCC countries working in Bahrain. Contributions are calculated according to the rates of the GCC employee’s home country regulations.

Municipality taxes

There is a 10% municipality tax levied on the rental of commercial and residential property to expatriates that is payable by the owner of the property.