Group VAT Registration in Bahrain

by Zaara 20, Oct 2022

vat registration in bahrain

Bahrain is a country flourishing with high economic development. Therefore, there are various reasons to invest in the Kingdom of Bahrain.

One of them is the beneficial tax regime which includes the Value Added Tax (VAT) scenario. Small businesses appear to be more significant entities through VAT registration in Bahrain.

The business looks more professional, and the VAT paid can be reclaimed later while filing for taxes. Also, transactions with foreign investors become easy.

The retailers, wholesalers, and manufacturers collect the taxes from the consumers and present them to the government. On the other hand, importers who fall under the Unified Customs Law are eligible to pay VAT.

Eligibility to Join/Form a Group for Bahrain VAT Registration

The National Bureau for Revenue (NBR) in Bahrain started accepting applications for the Group VAT registration earlier in 2019.

Two or more individuals may apply for a tax group registration provided that the conditions mentioned below are met:

  • All applicants are legal persons
  • Each of them should have a residing place in Bahrain
  • Each of them should conduct economic activity
  • Each of them has a VAT registration
  • No one should be a member of any other tax group in the country
  • All of them should be related, i.e., one of the applicants should control or supervise the other(s).

What is the 'Related' condition for VAT grouping?

The same person should also control all the members. That same person can be:

  • A legal person
  • A natural person
  • A group of persons provided they are acting under the partnership or the shareholders' agreement.

The above-mentioned formal arrangement should be notarized under the Ministry of Justice. The control for a group of persons can exist under the following scenario:

  • They should directly or indirectly hold the voting rights of more than 50% attached to the shares of each entity
  • They should directly or indirectly regulate the capital or ownership of each entity
  • Other than voting rights or capital participation, they should control each entity by any other means.

A member can leave the group voluntarily only after twelve months.

Registering for Group Tax in Bahrain

So, once your company formation in Bahrain is done and you are eligible for group tax registration, prepare the essential documents because it’s very beneficial.

Documents Required for VAT Registration in Bahrain (Group)

The taxpayers looking forward to forming or joining a VAT meet the declared requirements and the necessary documents as mentioned below:

  • An approved agreement for joining the VAT group
  • The tax certificate of each member.

Benefits of VAT Group Registration

The taxpayers should consider the merit of such registration because it leads to additional administration, mainly where the group entities use different ERP systems and are involved in various business activities.

The benefits are as follows:

  • The members are jointly liable for the obligations of VAT.
  • Two or more corporate bodies can be treated as single taxable persons and submit just one return each period.
  • The compliance is made at the group level reducing the workload significantly.
  • VAT will not be charged on the supplies within the group
  • It is time-saving and economical as it will save the cash outflow.

Benefits of Appointing a Tax Group Representative

The tax group representative will be able to comply with all the group's obligations. This would be done without prejudice to the joint liability of all tax group members.

Some other benefits are as follows:

  • The representative can apply to form a tax group accordingly, with the form prepared by NBR for this purpose
  • The representative can notify the NBR of a request if any members want to withdraw or add new members to the tax group.
  • The representative can request the NBR to dissolve the tax group for any reason or if the conditions favoring the group formation no longer exist.

Categories Outside the VAT Scope for Taxation in Bahrain

Among Bahrain's business opportunities, some categories need not register for VAT in the country. They are as follows:

  • Indemnity and penalty payments
  • The deposits that are not used as a part of the consideration of a taxable supply
  • Transactions between the entities forming a tax group
  • The transactions between a head office and its branch(s)
  • The supplies made by the government bodies are as per their sovereign capacities.

Our business advisors at Commitbiz Management Consultants are highly competent, and their experience would guide you smoothly throughout the company incorporation process.

So, what are you waiting for, then? Contact us today for further discussions.

FAQs

Is it possible to group a legal person not a resident of Bahrain with a Bahraini legal?

No.

Which law promulgates the VAT law in Bahrain?

Decree-Law No. 48 for the Year 2018.

How can a tax group appoint one of its members as the group's representative?

The tax group can appoint one of its members as the representative by power of attorney.

Which article in Bahrain mentions the tax group representative?

Article 39.

What are the essential documents for group VAT registration in Bahrain?

The essential documents are as follows:

  • An approved agreement for joining the VAT group
  • The tax certificate of each member.

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