Bahrain levies Value Added Tax at a standard rate of 10% on the value of a supply or import, unless the law makes a specific provision to exempt the transaction from tax or to impose tax at a zero rate. This rate has applied since the first of January 2022; before that date, the standard rate was 5%.

Legal Basis for the Tax Rate

The Value Added Tax Law promulgated by Legislative Decree No. (48) of 2018 provides in its second article that tax is imposed on taxable supplies made by a taxable person in the Kingdom, on goods and services received by a taxable customer under the reverse charge mechanism, and on the import of goods. Article Three of the Law then fixes the rate, stating:

Tax shall be imposed at a standard rate of (10%) of the value of a supply or import, unless a specific provision is made in this Law to exempt from Tax or to impose Tax at a zero rate.

The same article also requires that the price displayed for goods and services in the local market include the value of the tax due, meaning prices shown to consumers must be tax-inclusive, subject to the conditions and rules set by the Executive Regulation.

The Change from 5% to 10%

When the Value Added Tax Law was first issued in 2018, the standard rate was set at 5%. Law No. (33) of 2021 amending certain provisions of the Value Added Tax Law then replaced the first paragraph of Article Three with the current text fixing the rate at 10%. Article Five of the amending law expressly provides that this new rate takes effect as of the first of January 2022.

Transitional Rule for Existing Contracts

The legislator took into account contracts concluded before the increase took effect. Article Four of the amending law provides that tax continues to apply at 5% to a supply or import made in performance of a contract concluded before the amending law entered into force, until whichever of the following dates occurs first:

This transitional rule does not apply to any supply or import that is subject to a specific exemption or zero-rating provision under the Value Added Tax Law, which remains governed by its own specific rule regardless of the contract date.

Illustrative Example

To illustrate the calculation: if the value of a supply of goods subject to the standard rate is 200 Bahraini dinars excluding tax, the tax due at the standard rate of 10% equals 200 × 10% = 20 Bahraini dinars, making the total amount payable by the customer 220 Bahraini dinars inclusive of tax (illustrative example using assumed figures).

Legal References

For questions about your specific situation, you can ask the Bahrain Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.