Bahrain VAT at 10% — applied automatically

Bahrain introduced VAT in January 2019 at 5%, then raised the standard rate to 10% in January 2022 — the highest in the GCC. The National Bureau for Revenue (NBR) requires VAT-registered businesses to file monthly VAT returns, due by the last day of the month following the return period. Late payment incurs a 5% penalty on the unpaid tax, applied per month. Deliberate non-compliance or evasion can attract penalties of up to 25% of the tax evaded, plus criminal referral.

The classification challenge is where most businesses accumulate risk. Healthcare services, basic food items, and most educational services are exempt — meaning no VAT charged and no input VAT recovery on related costs. Exports and international services are zero-rated — charged at 0%, but with full input VAT recovery. Everything else is standard-rated at 10%. For a business that operates across these categories — a hospital that also sells pharmaceuticals, a food distributor that also handles non-food items, a professional services firm that also delivers international projects — every invoice requires a classification decision that flows into the monthly return.

The NBR's input VAT recovery rules require that purchases used in making taxable supplies are tracked separately from those used in exempt activities. Businesses with mixed activity must perform a partial exemption calculation each month to determine how much input VAT is recoverable. Done manually, this is a monthly reconciliation exercise that must be documented and defensible at audit. On WiseLinkNow, supply classifications are configured once per product or service category, applied automatically to every invoice, and fed directly into the monthly return figures.