02 Jan 2019
BAHRAIN VAT –PRE AND POST IMPLEMENTATION
WHAT IS VAT
Value added tax (VAT) is a form of consumption tax imposed on the supply of goods and services.
The VAT is charged on the value added at each stage of the supply chain.
Businesses act as VAT collectors while the final consumer bears the burden of VAT.
VAT IMPLEMENTATION COURSE • GCC countries agreed to implement VAT from 1 January 2018. The unified GCC VAT Agreement paved broad principles that should be followed by all the GCC countries in their VAT laws whilst providing litheness in certain subjects. Each GCC country will act out its own VAT legislation based on these common principles. The UAE and KSA implemented VAT on 1 January 2018. The Council of Representatives and the Shura Council have approved the implementation of VAT effective from 1 January 2019 and the establishment of the Bahrain Tax Authority which is now on to the road.
MAIN FEATURES Scope: Taxable supplies of goods and services, most imports of goods and services and deemed supplies would be subject to VAT. Rate: VAT would apply at the standard rate (5%) or zero rates (0%). Which People: Generally, the supplier is obligatory to an explanation for VAT. In some cases, the receiver of goods and services may be compulsory to account for VAT. VAT Registration: Compulsory: Businesses are required to register for VAT if the annual value of their taxable turnover exceeds SAR 375,000 (or its equivalent in GCC countries). Intentional: Businesses possibly will register for VAT if the yearly prices of their taxable turnover or expenses exceed SAR 187,500 (or its equivalent in GCC countries). Non-residents: Overseas businesses will be essential to list for VAT apart from business turnover if they make taxable supplies in Bahrain.
Recovering Input VAT: If you make standard-rated or zero-rated supplies, you are usually allowed to recover the VAT paid on operating expense incurred in making those supplies. If you make exempt supplies, you cannot recover the VAT paid on expenses attributable to making those supplies.
IMPACT OF VAT IN BUSINESS FUNCTION: The beginning of VAT will be a chief change and have an effect on all business functions across the entire organization including Legal, Finance, HR, compliance, technology, contracts & procurement, sales & marketing, and strategy. At the same time as VAT is anticipated to be put up with by the end consumer and should not be a cost to most companies, there will be cash flow inferences and the accountability of accounting for VAT will exist in with businesses. There will also be compliance encumber and cost associated with organizing for VAT before its introduction and ensuring that you comply with all your VAT requirements when the VAT law is effective The penalties for non-compliance can be very high so it is important to comply.
CHECK THE VAT PREPARATIONS ARE ONLINE: Kingdom of Bahrain implemented VAT from 1 January 2019. The grounding for VAT is not uncomplicated and was very time-consuming. Given that VAT is a key modification, verify the awareness given internally within your organization on the impact of VAT was effective. Make sure that presented utilities, procedures, accounts, working models, project resource setting up systems, working capital requirements, prices and commercial contracts reviewed properly and the changes implemented in order to be compliant with the requirements of the VAT legislation is proper. The communications and negotiations with their suppliers and customers in relation to existing and future contracts must also be re-confirmed.
CROSSCHECK BAHRAIN’ LEGISLATION FINALISED OR PUBLISHED WITH THE AMENDMENTS YOU MADE IN YOUR ORGANISATION:
Although VAT has been introduced for the first time in Bahrain, VAT is not a new tax. There is a considerable amount of information accessible based on which businesses can commence their VAT preparation. VAT or an analogous tax be present in more than 160 jurisdictions across the world. The GCC VAT agreement on which the Bahrain VAT legislation will be based has already been published. The GCC VAT system takes many of its features from the EU VAT system and the GST administration in other Asian countries such as Malaysia. Additionally, the VAT legislation in Bahrain will be alike to the VAT legislation in the UAE and KSA and therefore the legislation and carry out in these countries can serve as practical direction on the approach in Bahrain. It is highly recommended that you start your cross checking immediately rather than wait for the final VAT operation practice. It would be cautious to undertake the VAT impact appraisal now and authenticate suppositions and validate positions after the final law is published. Given the time limit, if you wait for the problems to arise, there is a high risk that you will not be compliant for VAT and this, in turn, will result in non-compliance and penalties. If you be unsuccessful to adequately prepare, in addition to taking the mistaken VAT positions in the VAT returns and not being able to comply with your VAT requirements, you may also end up bearing the VAT cost instead of your customer
ARE YOU VAT READY BY JANUARY 1ST
Make Sure You Have Fulfilled The Following Processes step by step:
Preparation for filing VAT returns
Fixed constant advice on transactions
Restructuring the internal system.
Stage 1: PREPARATION & REVIEW
Bringing into line processes and invoicing • Records • IT planning and testing • VAT methodological support • User training • VAT instruction manual and measures • Analysis contracts • Transition planning • VAT registration
Stage 2: IMPLEMENTATION
Review legislation • VAT conclusion flag • Transaction courses and process mapping • VAT impact assessment on business • Evaluate IT / accounting impact • Assess sample contracts • Recognize compliance necessities • VAT understanding workshops • Review business, functions and as is situation • Communication plan for staff, suppliers, customers
Stage 3: IMPACT ASSESSMENT
Stage 4: POST-IMPLEMENTATION