Seminar focus on implications of VAT roll-out

01/06/2016 08:10 AST

KPMG in Bahrain is organising a seminar on value-added tax (VAT) next week to discuss the imminent introduction of VAT and its implications on the business environment in the kingdom. The event will be held from 3pm to 5pm on Sunday at the Diplomat Radisson Blu Hotel, Residence and Spa.

Partner and head of tax and corporate services at KPMG in Bahrain Craig Richardson stressed the importance of corporates’ readiness to adopt this development that will lead to a significant change in the business environment.

The seminar will help companies navigate through the complexities of the system. The GCC countries are expected to sign the framework agreements to introduce VAT at a rate between three and five per cent by the end of the second quarter.

Draft legislation is then expected in the following months, providing practical guidance and executive regulations regarding the new VAT law.

“Once rolled out, VAT will affect sales of goods and services in Bahrain with limited exemptions and consumption tax relief,” said Mr Richardson.

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

“Therefore, it is important for businesses to start reviewing their business models to offset this anticipated change.”

Although the implementation of VAT will increase the cost of doing business, revenues gained from VAT will be ploughed back into the economy.

This will also contribute to enhancing the overall business conditions, while maintaining the country’s position as a business-friendly hub.

Generally, the introduction of a broad-based VAT at a low rate is unlikely to deter investment into Bahrain, or the GCC region, he said.

“The appeal of the region stretches much further than its low-tax status. Infrastructure development, access to high-potential growth markets in Africa and Asia, free-trade zones, competitive labour costs, few trade barriers, no exchange controls with US dollar pegged currencies, as well as economic and political stability, are all factors to be considered,” he said.

According to Mr Richardson, the implementation of VAT at a low rate will not have a recurring inflation impact unless the VAT rates are increased.

Some businesses may choose to absorb the VAT cost, wholly or in part, to limit the impact on consumers, he added.

Gulf Daily News