National Bureau for Revenue revises VAT Real Estate Guide to clarify owners’ associations and zero-rating of construction.
Bahrain’s National Bureau for Revenue (NBR) has published Version 1.5 of its VAT Real Estate Guide, dated 18 November 2025, providing updated guidance on Value Added Tax in the Kingdom’s real estate sector.
The update clarifies the VAT treatment of owners’ associations. The guide states that associations performing their primary role, including managing common property areas, preparing annual budgets, representing owners in legal matters, and invoicing maintenance costs, are not considered to be carrying out an economic activity. Services outside these primary duties that generate income on a regular basis may be treated as taxable economic activities. In such cases, associations may need to register for VAT if their annual taxable supplies exceed the mandatory threshold.
When an owners’ association hires third parties to manage day-to-day operations, any fees charged by VAT-registered providers are subject to the standard 10% VAT rate. Input VAT on purchases linked solely to the primary roles of the association is not recoverable, while VAT incurred on other taxable activities can be reclaimed if the association is VAT-registered.
The guide also reiterates broader VAT principles for the real estate sector, noting that the sale and rental of property is generally exempt from VAT, whereas the construction of new buildings qualifies for a zero-rate VAT. It further provides detailed rules on distinguishing real estate supplies from standard-rated services, such as serviced accommodation or short-term parking, and outlines criteria for recovering input VAT for partially exempt businesses.
Bahrain increased its standard VAT rate from 5% (effective 2019) to 10% in 2022, and the updated guide aims to provide clearer guidance for compliance within the real estate and construction sectors.
