The Kingdom of Bahrain has introduced a Value Added Tax (VAT) of 5% on goods and services beginning January 1, 2019 for a trial period.  During this initial period, the  relevant ministries of the state will be working out the mechanisms and modalities for application of VAT.

In a Cabinet decision prior to its introduction,  1400 government services have been exempt from the tax, it was reported. For the moment, 94 goods and services have also been exempted from the tax regime by royal decree; these cover areas like real estate, fuel, financial services etc, it is said.

Bahrain   has planned   to introduce VAT in a phased manner, and bring in companies within  the tax bracket in stages according to their size. In the first phase, spread over six months, all businesses earning more than BD 5 million (US$ 13.2 million) will be liable to pay VAT. These companies were required to be registered by January 1, 2019. In the next phase, businesses with revenues over BD 500,000 (US$ 1.3 million) must be registered by July 1, 2019;  and those over  BD 37,500 (US$ 99,730) by January 1, 2020, reports state.

While for those falling below these brackets registration is not compulsory, they may do so on a purely voluntary basis – however they must have   minimum earnings of BD 18,750 (US$ 49,860) to be eligible to do so.

One report stated that Bahrain’s government has set a six-month “trial” period for the implementation of the tax “in order to ensure the operation doesn’t affect the market’s stability and the overall economic situation”.

It is learnt that while gold and silver jewellery and the making for it will be subject to VAT, pearls and gemstones are, for the present, exempt from the tax.

Bahrain is the third Gulf state after the UAE and Saudi Arabia to introduce VAT.