Value-Added Tax (VAT) Frequently Asked Questions
1. What is VAT?
VAT or Value-Added Tax is a form of consumption tax that is imposed on selected goods and services at a transactional level. The GCC has agreed to apply a uniform standard rate of 5%. This standard rate will apply to almost all domestic transactions.
VAT was introduced in Bahrain on 1 January 2019, but will be implemented in phases in accordance with the timeline prescribed by the National Bureau for Revenue.
UAE and KSA have already implemented VAT on 1 January 2018, and the other GCC countries are expected to implement it within the following 12 months.
In limited instances, VAT can also apply at 0% (zero-rate) or transactions can be exempt from VAT, or out of scope.
Taxable businesses are generally able to recover the VAT they incur on their purchases and expenses.
However, as individuals, we are the final point of the supply chain and therefore, will bear the cost as we are not able to recover the VAT.
2. Will the VAT Law and rules be the same in all GCC countries?
The GCC countries’ VAT rules must be compliant with the GCC Framework Agreement. However, where the framework does not specify a treatment, it is up to each member state to set their own detailed rules.
For example, Bahrain has decided to zero-rate essential medical services, since the framework does not impose a treatment for healthcare services. By way of contrast, in KSA medical services will be standard-rated, unless it is provided by a public hospital in which case it will be out of scope.
3. Do all businesses – corporate customers, brokers, partners, providers and suppliers – have to register for VAT?
Not necessarily. Businesses will only be required to register if the total value of their annual supplies exceeds or is expected to exceed the mandatory registration threshold for the different phases. Please refer to the registration guidance in the National Bureau of Revenue’s website: https://www.nbt.gov.bh/t_faq
Businesses whose supplies and costs combined exceed BHD 18,750 in any 12 month period, may also register for VAT voluntarily.
4. How should VAT registered intermediaries, providers and suppliers submit their Tax Registration Number to AXA?
A copy of the VAT registration certificate should be sent to firstname.lastname@example.org
5. What is AXA’s Tax Registration Number in Bahrain?
AXA Insurance (Gulf) B.S.C.(c)
VAT Registration Number: 200000442000002
Tax Payer Address: Building: 177, Road/Street: 2803, Town: Manama, Block: 428, Country: Bahrain
Effective date of registration: 1 January 2019
6. Will insurance and reinsurance be subject to VAT?
When provided locally, Life insurance and the reinsurance of Life contracts will be exempt. All other forms of insurance (including reinsurance of non-Life contract) will be subject to VAT at the standard rate of 5%. All other fees will also be subject to VAT at 5% (e.g. admin fees).
The policies may change to be zero-rated or out of scope, depending on whether they are being exported or being sold to another GCC member state. This will need to be determined on a “per policy” basis in line with the zero-rating provisions in the Executive Regulations.
7. Will all non-Life insurance products be subject to VAT at 5%?
Not always. There may be instances where the non-Life insurance policy qualifies for zero-rating (e.g. as an export), or where the supply is out of scope (e.g. because it is an intra-GCC supply to a business registered for VAT in another GCC state).
8. Will VAT be due on policies which span across 1 January 2018, where payment has already been received and an invoice issued prior to 1 January 2018?
The concept is, that supplies which are deemed to take place prior to 1 January 2018 are not subject to VAT, while supplies which take place on or after 1 January 2018 will be subject to VAT. In principle, VAT will be due on the pro-rata premium for 1 January 2018 onwards; i.e. the portion that relates to the policy period in 2018.
9. Will quotations show VAT?
The published price must be inclusive of VAT so VAT will automatically be charged at the applicable rate for all system generated quotes.
10. Will VAT be refunded if a policy is cancelled?
Where there is either an adjustment to the price, or a cancellation of a taxable supply, then there would be a corresponding adjustment to the output VAT accounted for by AXA.
Going forward, AXA will issue Credit Notes with respect to any cancellations of policies. The issuance of a Tax Credit Note triggers a corresponding downwards adjustment in the total output VAT payable by AXA.
For registered customers, the receipt of a Tax Credit Note triggers a downwards adjustment in the total input VAT, the customers are entitled to claim in the tax period they receive the Tax Credit Note.
11. What is self-billing?
Ordinarily, it is the supplier who is required to issue the tax invoice with respect to their supplies.
The VAT rules allow for VAT registered suppliers and VAT registered recipients to agree an arrangement where the recipient issues the tax invoice on behalf of the supplier, effectively to themselves.
AXA intends to offer this self-billing arrangement to its intermediaries.
12. Will VAT be chargeable by intermediaries or providers for services supplied in 2018, but invoiced in 2019?
Yes, if the service being provided was commenced in 2018, but completed only in 2019.
We would encourage you to obtain professional advice as to how your business will be impacted and/or review information published on the National Bureau for Taxation website: https://www.nbt.gov.bh