Your Comprehensive Guide to the Latest Bahrain VAT Updates (July 2026): What Needs to Change in Your Accounting Today?

In an ever-evolving business landscape, precise tax compliance is the cornerstone of any company's success and the key to avoiding unexpected financial penalties. Based on the VAT General Guide, issued by the National Bureau for Revenue in the Kingdom of Bahrain and updated on 29 July 2026, we present an in-depth analysis of the latest changes and how they directly impact your daily operations.  

Key Updates in Version 1.15 (July 2026)

The National Bureau for Revenue has introduced substantial updates focusing on accurate accounting documentation and the treatment of capital assets. Here are the details you need to implement immediately:  

1. Stricter Requirements for Supply Descriptions in Tax Invoices (Section 10.3):

A general or vague description of goods and services is no longer acceptable. The new update stipulates that a description of the supply must be sufficiently detailed to indicate the nature of the goods or services in a manner that allows the correct VAT treatment to be clearly determined.  

• Construction Sector: As a crucial addition, for supplies related to the construction of a new building, the building permit number of the relevant project must be provided on the invoice.  

  
  

2. New Details on the Capital Assets Scheme and Change in Use (Section 11.8.4):

Capital assets are tangible or intangible assets assigned by the VATable person for long-term use as a business instrument (such as buildings, equipment, and software). The update meticulously clarifies how to handle capital expenditure and adjust input VAT:  

• Where a capital asset is purchased for making VATable supplies only, the input VAT on this asset is fully recoverable.  

• However, where the use of a capital asset changes over time (for instance, it becomes partially used to make exempt supplies), the amount of recoverable input VAT shall be adjusted according to the specified rules.  

• Adjustment Periods: The adjustment period is ten years for immovable tangible capital assets, and five years for movable tangible capital assets and intangible capital assets.  

• Any additional costs incurred that are directly attributable to the acquisition, construction, or improvement of a capital asset are considered as separate capital assets, and their useful life must be accounted for separately.  

  
  

A Reminder of the Golden Rules of VAT in Bahrain

To ensure your company's comprehensive compliance, do not forget these fundamental rules:

• Tax Rates: The standard rate of 10% applies, while vital sectors like healthcare, education, construction of new buildings, and basic food items are subject to the zero-rate (0%).  

• Exemptions: The sale, lease, or license of real estate (regardless of whether it is residential, commercial, or land) and financial services (which are not provided in exchange for an explicit fee or commission) are VAT exempt supplies.  

• Record Keeping: Did you know that you must maintain relevant records and accounting books for a period of 10 years (or 15 years for records relating to real estate)?.  

• Mandatory Registration: Resident companies must register for VAT if the value of their annual supplies exceeds BHD 37,500.  

Your Next Step

Review your billing systems and ensure invoice templates are updated to include accurate descriptions and permit numbers (for construction). Your accounting team must also track any changes in the intended use of company assets to avoid incorrect tax adjustments.

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