Bahrain's National Bureau for Revenue published VAT Financial Services Guide Version 1.4, clarifying that reinsurance VAT treatment turns on the parties to the reinsurance contract rather than the underlying insured risk's location or status.
Bahrain’s National Bureau for Revenue (NBR) has published VAT Financial Services Guide Version 1.4 on 3 August 2026. The latest version of the guide updates Section 10.4.
Under Bahrain’s VAT rules, financial services are generally treated as follows:
- Zero-rated: Financial services supplied to a recipient outside Bahrain, provided the conditions for the zero-rating of exported services are met;
- Standard-rated at 10%: Financial services for which the consideration is charged through an explicit fee, commission, or commercial discount; and
- VAT-exempt: Financial services for which the consideration is earned through an implicit margin or spread.
The updated guide clarifies the VAT treatment of general insurance and reinsurance contracts, stating that the VAT liability of reinsurance contracts depends on the parties to the reinsurance contract, rather than the location or status of the underlying risk or the ultimate insured persons. An illustrative example has also been added.
10.4. General insurance and reinsurance contracts (non-life)
Overview of products/services
A general insurance or reinsurance contract provides cover on assets and liabilities, with the exception of life, for any loss or damage. For VAT purposes, general insurance also covers health insurance.
VAT treatment
When supplied in Bahrain, general insurance and reinsurance services (i.e. the premium paid) are VATable at the standard rate of 10% unless they meet the conditions to be subject to VAT at the zero-rate. Some insurance and reinsurance services, when supplied in Bahrain, will be subject to VAT at the zero-rate, provided they meet some specific conditions:
- Exported insurance services: any insurance and reinsurance services that meet the conditions to be regarded as exported services will be subject to VAT at the zero-rate.
- Insurance and reinsurance services related to international transport of goods or passengers: insurance and reinsurance services of cargo and passengers are subject to VAT at the zero-rate when the cargo or passengers are transported as part of international transport.
It is worth noting that the VAT liability of reinsurance contracts must be analyzed based on the parties to the reinsurance contract. The location and status of the underlying risk and the persons ultimately insured (i.e. the persons with whom the insurance company has contracted) are not relevant.
Separately, it may be that additional fees are charged to policyholders as part of the insurance or reinsurance contract, for example administration fees. These fees, whether charged separately to the participants or netted against their premium, are subject to VAT at the standard rate of 10% when supplied in Bahrain unless they meet the conditions to be regarded as an export of services and are subject to VAT at the zero-rate.
VATable persons are required to issue VAT invoices for their supplies in Bahrain, including their zero-rated supplies. It is therefore expected that a VATable person providing standard rated or zero-rated insurance and reinsurance services in Bahrain issues VAT invoices.
Example
Palm Shield Company, a VAT-registered business in Bahrain, insures its commercial property located in Bahrain with BBB Insurance Company, a non-resident insurer. To manage its underwriting exposure, BBB Insurance Company enters into a reinsurance arrangement with Insure Spot Insurance Company, a Bahraini resident reinsurer that is registered for VAT, under which they provide reinsurance cover to BBB.
The VAT treatment of this reinsurance arrangement is determined solely by reference to the parties to the reinsurance contract – namely the resident reinsurer (Insure Spot) and the non-resident original insurance company that receives the reinsurance services (BBB Insurance Company).
The location or nature of the underlying insured property, as well as the status of the original insured party (Palm Shield Company), are not relevant for determining the VAT treatment of the reinsurance supply.
Reinsurance is a financial risk-transfer service and is not treated as a service directly connected with real estate. Therefore, the fact that the underlying insured asset is real estate located in Bahrain does not affect the VAT treatment of the reinsurance service.
Since the recipient of the reinsurance service (BBB Insurance Company) is non-resident in Bahrain and the reinsurer (Insure Spot) is a resident, the VAT treatment must be assessed under the general place of supply rules and the reinsurance service may qualify for the imposition of VAT at the zero-rate as an export of service where the conditions are met.
