Goods and services set to cost more with VAT rollout

05/05/2016 08:06 AST

Consumers and businesses in Bahrain need to gear up for the introduction of Valued Added Tax (VAT) from January 1, 2018 which is set to make consumption of goods and services more expensive.

This was the key takeaway from a KPMG in Bahrain seminar held yesterday at the Downtown Rotana.

Talking exclusively to the GDN, KPMG in Bahrain manager of tax and corporate services Ali Al Mahroos said Bahrain, along with the other GCC member states would introduce a broad VAT at a rate of between three-five per cent.

“VAT is generally considered as a tax on consumption,” he said. “The more a person consumes goods and services subject to VAT (VAT-able supplies), the higher the VAT burden on that person. Basic essentials are generally excluded from the scope of VAT in order to reduce the impact on citizens.”

According to Mr Al Mahroos, all businesses in Bahrain will be affected since VAT will impact most sales of goods and services within Bahrain, where it is anticipated there would be limited exemptions and consumption tax relief.

However, he said there will be a right for businesses to claim a credit for VAT paid on their expenditures, relating to their business activities.

GCC countries are expected to sign the GCC Framework Agreements for VAT and Excise Duties in June.

The Finance Ministry is likely to announce the VAT legislation, practical guidance and executive regulations regarding the new VAT law during the months that follow.

The KPMG expert said businesses need to start preparing for the change despite the lack of specific guidance. Businesses looking to expand outside of Bahrain, need to see the VAT rollout from both a regulatory and tax perspective to better understand the respective business implications this could have, he added.

The seminar was part of the firm’s entrepreneurship club activities and brought together over 60 business people to discuss topics related to regional expansion.

Attendees from companies interested to grow their businesses outside of Bahrain enjoyed the opportunity to hear from successful entrepreneurs with prominent regional presence as well as KPMG experts.

KPMG in Bahrain partner and head of family business and private enterprises Harish Gopinath said since the inception of the club in Bahrain in 2014, the firm continued to coach and mentor entrepreneurs.

“They represent significant percentage of the business community, and helping them grow has enabled us to increase our positive impact on the local economy,” he added.

Jawad Business Group general manager Ram Ramakrishnan and Al Zain Jewelry chief executive Mohamed Al Zain shared their success stories with the attendees, while shedding light on the key challenges faced and how they were turned to opportunities.

Tamkeen executives were also present during the event to highlight key resources available to stimulate the business growth of Bahraini entrepreneurs.

Gulf Daily News