A new year just started few hours ago. People usually think that between 31st of December and 1st of January nothing really happens, as it is a new day and people around the globe are still celebrating. Well, tax practitioners know that this is not very true. 2019 is an important year that will be marking tax changes in many countries, such as deductions at source for tax purposes in France, events arising as of January 1st, 2019 for the withholding tax rules under the MLI, VAT in Bahrain, reforms in VAT e-commerce package, and the one and Only Brexit. In this article I would like to mention two main new VAT changes occurring on the first day of the year.
1st of January 2019 is an important date for global VAT tax experts as Bahrain VAT is implemented and the VAT e-commerce package will show its first effects.
VAT in the Kingdom of Bahrain:
It seems true that in the case of Bahrain, the UAE and Saudi Arabia VAT implementation was a great lesson learnt for practitioners and for the National Bureau for Taxation ("NBT"). It is the third of the six Gulf Cooperation Council (GCC) to implement VAT after having signed the 2016 Unified VAT Agreement for the GCC states, establishing the harmonized VAT union across the member states. In my view, Bahrain VAT implementation tools were presented a little too late in 2018 as businesses were working hard to become compliant by updating their ERP systems and educating their tax teams. In October 2018, the NBT published the new VAT Bill and the transitional rules, which explain that 2019 shall be a transitional year for residents and taxable persons to adapt to VAT. The transitional period shall end on January 1, 2020. VAT guidelines and regulations were published only last month, December 2018. No later than last week, NBT made few press releases commenting on VAT.
For many of us, in EU and other VAT countries, VAT mechanisms are easy to follow and to understand. However, for GCC residents it is not such a clear nor acceptable concept. In a recent poll, residents of Bahrain consider that, from B2C perspective, VAT is an inflation of prices where families cannot follow because salaries remain the same. In order to follow the VAT implementation mechanisms, last week on Christmas's day, the NBT released the position of the Finance and National Economy Minister towards the Royal directives of HM the King on reviewing the VAT mechanisms during the trial application period. It is state that the minister welcomes said directives and reiterates the importance of communication to ensure that implementation is done smoothly and observe the citizens needs through the exemption of basic commodities and services.
- VAT rate: 5%
registrations deadlines and thresholds:
- > BHD 5M between December 20th, 2018 and January 1st, 2019
- > BHD 500,000 between June 20th, 2019 and July 1st, 2019
- > BHD 37,500 between December 20th, 2019 and January 1st, 2020
- Business with less than BHD 37,500 are not entitled to register in 2019, but they can do so, voluntarily if they exceed BHD 18,750.
- There are different calendar rules for VAT filing for 2019 and 2020 and onward. Mainly in 2019, we are facing quarterly filings based on the registration date of the taxable persons.
- In 2020, there will be monthly filings for businesses with threshold above BHD 3M and quarterly filings for business with a threshold less than BHD 3M.
- VAT invoices are not required to be in Arabic as it is the case in Saudi Arabia, they can be issued in English and Arabic.
For more information on VAT in Bahrain you may visit the NBT website or have directly access to the laws and regulations at the following link https://www.nbt.gov.bh/laws_regulations
VAT e-commerce package
In 2015, the EU proposed legislation and changes to create a Digital Single Market across its territory. The first reforms entered into force in 2015 and covered telecommunication, broadcasting and electronically supplied services ("TBE"). In that same year, one simplified system was put in place to declare VAT on B2C TBE services across EU.
On December 5th, 2017, the EU council adopted the VAT e-commerce package which purpose was to "facilitate cross-border trade, combat VAT fraud and ensure fair competition for EU businesses". Said package will be implemented gradually till 2021. As of January 1st, 2019, two thresholds to simplify VAT obligation on the MOSS portal are presented for SMEs:
1. The place of supply for EU suppliers generating a turnover up to EUR 10,000 for TBE services to non-taxable persons (customers), shall be subject to VAT rules and mechanism applicable in Member state where the supplier is located. This is an exception to the general rule stating that VAT shall be applicable based on the location of the customer. On
2. One piece of evidence shall be sufficient to determine the place of supply, when the threshold is not exceeding EUR 100,000 for EU suppliers in the current and preceding year. The general rule was requiring two pieces of evidence.
3. A supplier using the MOSS will have only to respect the invoicing rules of the Member State for which he is identified, regardless of the customer's location.
4. A non-EU taxable person registered or is obliged to register for VAT purposes in an EU Member State will be allowed to use the non-Union scheme, which is the MOSS regime for taxable persons not established in the EU supplying TBE services to customers in the EU.
While Bahrain is struggling to clarify VAT to its residents and EU is working on simplifying VAT e-commerce package, we know that 2019 will be bringing many changes and will be resolving other pending issues. I can only hope for us all a year with less hectic reforms, clear vision from our governments and tax policies based on fair economic reasoning. I cannot conclude without mentioning how eager I am to know how the Brexit will end, "Deal" or "No Deal"? Maybe Theresa May needs the Banker to make the right Offer to finish once and for all with this chaos. Only the future can tell us!
I wish us all a Happy New Taxation Year!
 European Commission: https://ec.europa.eu/taxation_customs/business/vat/digital-single-market-modernising-vat-cross-border-ecommerce_en