Bahrain's National Bureau for Revenue has published an updated version of its Imports and Exports VAT Guide, dated 6 May 2019. The main update is a new sub-section on imports by non-resident suppliers as follows:
Import by non-resident suppliers
There may be cases where a non-resident supplier is required to bring goods into Bahrain from outside the territory of the Implementing States for the purpose of supplying them as part of a supply of goods with installation or as part of a construction service carried out in Bahrain.
From a contractual point of view, the ownership and the risks associated with the goods will transfer from the non-resident supplier to his customer at the time the installation/construction is completed. At the time of their import into Bahrain, the goods will still be under the ownership and “control” of the non-resident supplier.
The approach summarized below is to be followed when goods owned by and under control of a non-resident supplier are imported into Bahrain for the purpose of being sold either with installation or as part of a construction service.
If the customer is a VAT registered person resident in Bahrain, he may import the goods under his CR number and VAT Account Number. Import VAT will be payable upon import of the goods unless a VAT exemption at import applies.
Provided the non-resident supplier’s subsequent supply of the goods (with installation or as part of a construction service) is not VAT exempt, the VAT registered customer will be entitled to recover in full the VAT paid on the import of the goods. This is regardless of his usual input tax recovery entitlement (e.g. a bank which is usually entitled to partially recover the input tax charged on its expenses would be entitled to recover that import VAT in full).
The full recovery of import VAT is subject to the VAT registered customer being able to prove that the goods are imported for the purpose of a taxable supply (at 5% or 0%) to be made by a non-resident supplier. Evidence can be the supply agreement or purchase order entered into between the VAT registered customer and his non-resident supplier.
Unless VAT at the zero-rate applies, the VAT registered customer will also be liable to self-account for VAT under the reverse charge mechanism on the supply of the goods with installation or on the construction services, including on the value of the goods, made by the non-resident supplier (in accordance with the relevant tax due date rules applicable to the supply). The recovery of this VAT will depend on whether the VAT registered customer will use (partially or fully) the acquired goods/construction for the purpose of a taxable activity.