Bahrain is planning to double its VAT rate

After Saudi Arabia raised its Value Added Tax from 5 to 15% effective from 1st July 2020 now Bahrain is also set to double the VAT rate to 10% in the country. With this step the VAT rate is the second highest in Bahrain in Gulf countries after Saudi Arabia. currently the vat rate is 5% in Bahrain, the business registered in Bahrain which are engaged in performing economic activities and undertaking taxable supplies or importing goods exceeding 1 lakh US Dollar, are liable to collect VAT at 5% and remit it to Bahrain govt. 

Earlier in 2018 Saudi Arabia, UAE and Kuwait, the three diplomatic allies of Bahrain and most wealthiest countries in Gulf. promised 10 billion dollar to aid the country's reform programs and to reduce fiscal deficit. despite receiving the bail out package from neighbors the country is facing the region's widest budget deficit.

Bahrain is raising the rate to aim at eliminating its budget deficit which is delayed by 2 year and now is targeting to achieve it by 2024. 

Bahrain is the smallest economy in the Gulf countries and its revenue have been hit hard by the sudden fall in oil prices in 2014. It is taking all the measures for cost cutting and generating revenues by various sources, increasing tax rate has always been a major tool to boost state fund.

However Manama the capital of the country has not cleared the date of implementation or effective date for new increased rate. 


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