The Gulf region (including the Kingdom of Bahrain), has long been considered an attractive and low-tax environment. However, to keep up with the changing economic landscape and as part of wider development reforms, the Gulf Cooperation Council (GCC) member states signed a framework agreement to introduce Value-Added Tax (VAT) on the supply of goods and services at a standard rate of 5%, in 2018.
Implementing VAT will have implications for businesses and new taxpayers, both in Bahrain and abroad, directly and/or indirectly. However, a broad-based VAT at a low rate is unlikely to deter investment into Bahrain, or the surrounding region, whose appeal stretches much further than its low-tax status.
Infrastructure development, access to high-potential growth markets in Africa and Asia, free-trade zones, competitive labor costs, few trade barriers and economic and political stability are all factors which add to the region’s appeal. In addition, VAT will have a neutral impact on registered businesses when managed efciently. In this publication, KPMG examines the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, the GCC VAT Framework Agreement, and analyzes the implications on businesses across the main economic sectors. We also outline practical steps businesses can take today, to be VAT ready and minimize as well as optimize the impact of VAT on their operations.