Skip to main content

REVERSE CHARGE MECHANISM IN BAHRAIN

REVERSE CHARGE MECHANISM IN BAHRAIN




Reverse Charge Mechanism Under Bahrain VAT Law: Can a VAT payer opt for Reverse Charge Mechanism in Bahrain on Local supplies? The output VAT liability is triggered as soon as a transaction within the scope of the Bahrain VAT Law takes place. But who is supposed to pay the Output VAT due on such a transaction to the National Bureau for Revenue (NBR) is to be analyzed intimately. Generally, the supplier is suppose to pay output VAT to the NBR, but in certain transactions, reverse charge mechanism in Bahrain would be applicable and therefore the person liable to pay would be the customer. 

The principle here states that the output VAT that is due on transaction is to be paid by the person liable to the account for the VAT due on a transaction. 

Let’s understand principle of Reverse Charge Mechanism on local supplies in detail


General rule of determining the person liable to pay the Output VAT

According to the Bahrain VAT law, the general rule is that the person liable to pay the Output VAT on a supply is the supplier. And also it has to be specifically noted that any person who charges a VAT amount in the invoice is liable to pay such VAT to the NBR.

Who is liable to pay the VAT when the ‘special rule’ is applied?

Bahrain VAT law has listed out certain transactions under ‘special rule’ where the liability to pay the VAT is shifted from the supplier to the customer. So, customer will be liable to account for VAT and to disclose it in his VAT return. This is called “Reverse Charge Mechanism”. 

When is the Reverse Charge Mechanism applicable by default?

According to the Bahrain VAT law, the RCM is applicable by default under following situations:

  1. In case of purchase of Standard rated services by a taxable person in Bahrain wherein the supplier of the service is a non-resident.

  2. In case of purchase of Standard rated goods by a taxable person in Bahrain wherein the supplier of the goods is a non-resident.



Can the VAT be recovered under Reverse Charge Mechanism in Bahrain?

Under the Reverse Charge Mechanism, the customer would self-account for the output VAT. The Output VAT recorded is also input VAT for the customer. This input VAT can be recovered in his VAT return provided he meets the normal input tax recovery rules.


So, this is the Reverse Charge Mechanism in Bahrain, you can also take help of any

 VAT Consultant in Bahrain for more help.

Comments

Post a Comment

Popular posts from this blog

Why You Must Hire A CA Firm For Your Company?

Chartered Accountants (CA) are the specialists which will provide you with help on ways to use your assets to get the best out of them. The owner of the business can be good at handling his/her business but may not be expert in handling the accounting, legalities and taxation of his/her business. Thus, the businesses should take the help of chartered accountants because they have expertise & experience in handling accounting and taxation that will actually shed light on ways of managing and saving money to enable your success to flourish. In this blog, we will discuss in detail why you must hire a CA firm for your company. Helps you to stay focused on core business: When you hire a CA firm then they help you with all accounting functions so you don’t have to allocate your time on accounting and other related functions and thus you can use that time in the main functions of business where your need is required. Expertise service: Chartered accountants have very deep knowledge about ...
1 comment
Read more

Accounts and Business records to be maintained under VAT in Bahrain

Accounts and Business records to be maintained under VAT in Bahrain It is the compliance responsibility of the businesses registered under Bahrain VAT, to maintain books of accounts and records. The VAT in Bahrain mentions different types of records to be maintained and also time period of retaining such records. In this blog, we will see the different types of records that are to be maintained under Bahrain VAT and time period for retaining it. Retention of Records and Accounting Books The following records and books should be maintained by a VAT registered business in Bahrain: The Books of Account which are related to taxable person’s work (all the transactions according to their chronological and numerical order) Balance sheet and profit and loss account Records of salaries and wages Fixed Assets record Stock records and accounts at the end of any relevant tax period A copy of  tax Invoices,  credit and debit notes issued, and original Tax Invoices received by the taxabl...
Post a Comment
Read more