How It Works
Under the reverse charge, the recipient of services (not the supplier) accounts for VAT. The recipient records both output VAT (as if they made the supply) and input VAT (subject to normal recovery rules) in the same return.
When Does It Apply?
🌍 Imported Services
Services received from non-resident suppliers who are not VAT-registered in Bahrain. Includes consulting, software licenses, marketing, legal fees, and any B2B service from abroad.
📦 Intra-GCC Supplies
Goods and services received from other GCC states under certain conditions. The transitional GCC rules mean reverse charge applies until full GCC electronic system is operational.
🏗️ Specific Sectors
Certain domestic supplies may be subject to a domestic reverse charge in specific sectors, particularly where there is a risk of non-payment of VAT by the supplier.
Accounting Treatment
Record in Box 3 of the VAT return. Self-assessed at 10% on the value of imported services.
Claim in Box 7 of the VAT return. Recoverable if the services relate to taxable business activities.
⚠️ Common Mistake
Forgetting to self-assess the output VAT on imported services. This creates a tax liability and potential penalties during NBR audits, even when the input VAT would be fully recoverable.