Value-added tax (VAT) and excise duty
VAT was implemented in Bahrain on 1 January 2019.
The general 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 exempted 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 will be required to register upon making the first supply subject to VAT in Bahrain.
Transitional provisions were put in place to increase the mandatory registration threshold to BHD 5 million from 1 January 2019 until 30 June 2019, following which the mandatory registration threshold was adjusted to BHD 500,000 from 30 June 2019 until 31 December 2019. Thereafter, the standard thresholds set out above apply.
The National Bureau for Revenue is the regulatory body that is 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 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.
The general rate of customs duty is 5% of the value in cost, insurance, and freight (CIF), except for alcoholic beverages, which is 225%, and cigarettes, which is 200%.
Certain categories of goods, such as paper and aluminium products, are subject to a 20% duty rate.
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.
There are no payroll taxes other than social security contributions (see below).
Social security contributions
Employer's social security contribution is 12% for Bahraini workers and 3% for non-Bahraini workers, calculated on their monthly salaries and capped at an income ceiling of BHD 4,000.
There is a 10% municipality tax levied on the rental of commercial and residential property to expatriates.