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Bahrain has imposed taxes for the first time as of January 1, 2019. (except for consumer taxes). The introduction of VAT, as in most tax systems, was the first step. At first, the VAT rate was set at 5%. After two years, the decision was made to raise the VAT rate to 10%, which went into effect on January 1, 2022.
Under Article 67 of the GCC VAT Framework Law, foreign companies may apply for a VAT refund if the taxable supplies were obtained within the scope of the company and from a GCC member state.
By 31 March following the end of the year in which the VAT was paid, the application for a VAT refund must be made in Bahrain. Only businesses that satisfy all five of the following requirements may apply:
- The applicant must not be registered or required to register for VAT in Bahrain.
- The applicant is tax-registered in his country and can show proof of registration.
- Taxable supplies have been acquired within the business scope,
- If the applicant is a member of a fiscal unity, a certificate from each member is required,
- The applicant has not yet submitted a refund application for the calendar year for which they are applying.
- The amount of the requested refund is at least BHD 200.
A business can take advantage of the VAT refund process even if it doesn’t have a registered office or permanent establishment in Bahrain if it satisfies all the requirements and has the necessary invoices, payment receipts, and other supporting documentation.
Services between GCC states are currently considered international trade as the so-called “Electronic Services System” has not yet been implemented in the GCC region, and member states are not yet considered member states for taxation purposes.
Therefore, businesses based in the GCC area that pay VAT in other Member States should also have their eligibility for a VAT refund checked.
Refund requests are processed three months after they are submitted. With the help of our committed professionals, we can assess your eligibility for a VAT refund and submit the required paperwork to the Bahrain Tax Authority on your behalf.
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