NBR has expanded its VAT guidance on the profit margin scheme, confirming documentation requirements for businesses selling eligible used goods.
Bahrain’s National Bureau for Revenue (NBR) has issued updated VAT guidance clarifying the conditions for applying the profit margin scheme to used goods. The updates were published on 20 September 2026 in VAT General Guide Version 1.16 and VAT Retail and Wholesale Guide Version 1.3.
Under Section 17 of VAT General Guide Version 1.16, VAT under the profit margin scheme is calculated on the supplier’s profit margin rather than the total value of the supply. However, only goods that have previously been subject to VAT are eligible for the scheme.
The NBR clarified that used goods acquired before the effective date of the VAT Law, as well as goods that have not previously been subject to VAT for another reason, cannot be sold under the profit margin scheme. VAT is therefore due on the full selling price of those goods.
The guidance expands subsection 17.4, requiring a VATable person applying the scheme to demonstrate that the goods were previously subject to VAT. Supporting evidence may include information showing when goods were first manufactured, sold or brought into use. For a vehicle, for example, its first registration date may demonstrate that its sale was subject to VAT where it was registered after 1 January 2019.
A purchase invoice or customs declaration from any point in the supply chain may also demonstrate that the goods were previously subject to VAT in Bahrain.
Where a VATable person does not retain the required records or cannot provide supporting documentation establishing that the goods were previously subject to VAT, the business is not eligible to apply the profit margin scheme.
The NBR has incorporated the same clarification into Section 12 of VAT Retail and Wholesale Guide Version 1.3.
Bahrain introduced VAT on 1 January 2019 at an initial rate of 5%, with the standard rate increasing to 10% effective 1 January 2022. The VAT framework covers supplies of goods and services and imports into Bahrain.
Under the wider VAT rules, standard-rated supplies are generally subject to 10%, while zero-rated supplies, exempt supplies, out-of-scope transactions and deemed supplies receive different tax treatments.
For VAT registration, resident businesses generally face mandatory registration when annual taxable supplies exceed BHD 37,500 in the preceding 12 months or are expected to exceed that amount in the following 12 months. Voluntary registration is available where annual supplies or taxable expenses exceed BHD 18,750.
The NBR guidance also provides rules covering VAT Group Registration, the Reverse-Charge Mechanism (RCM), Input VAT Recovery, the Capital Assets Scheme, VAT invoicing, VAT returns and payment, record retention, Bad Debt Relief, and appeals.
VAT records and accounting books generally must be retained for 10 years. Businesses can request a review of an NBR assessment within 15 days, while formal objections to the VAT Appeals Review Committee can be submitted within 30 days of notification, subject to a BHD 50 fee.
