Bahrain considers doubling VAT rate

Bahrain could double its VAT rate. According to reports, sources confirm that Bahrain is considering increasing its VAT rate to 10%. The potential VAT hikes comes as the Gulf state looks to narrow its deficit and enhance revenue collection. 

Seeking fiscal relief

Like many countries, Bahrain’s economy took a knock from the Covid pandemic. In addition, the country has accumulated considerable debt since 2014, amid plunging oil prices. Notably, a $10 billion Gulf state aid package helped Bahrain avoid a debt crisis, but was conditional upon Bahrain implementing fiscal reforms. 

VAT an effective source of revenue in Bahrain 

Bahrain has seen successful revenue generation from VAT. In 2019, the gulf state saw considerable VAT revenue collection. The success of the programme was ascribed, in part, by a good level of compliance of VAT-registered companies. 

Bahrain was the third GCC country to implement VAT, following Saudi Arabia and the UAE. Oman introduced VAT in April 2021.

VAT increase not set in stone

While it seems apparent that Bahrain is likely to implement fiscal interventions of some sort, a VAT increase is not inevitable. 

Reports indicate that the government is considering a range of options to improve the country’s finances. Companies that do business in Bahrain are advised to watch out for VAT changes or other potential amendments, following a government fiscal review. 

Businesses can’t afford to neglect VAT recovery 

As businesses chart their way forward from the Covid downturn, with tighter budgets and potentially higher VAT rates, effective VAT reclaim solutions are more important than ever.

By ensuring you never miss an opportunity to reclaim VAT, and that you maximise the VAT you claim, you can effectively reduce the cost of doing business and open up new markets. 

Get in touch with VAT IT for an effective VAT reclaim solution tailored to your business.