Many businesses who are not registered under VAT or who do not anticipate VAT registration in near future fail to maintain proper books of accounts on the belief that since there is no liability to register under VAT, they can skip proper accounting and opt for annual adjustments in the books. However, as per the limits set out in Bahrain VAT, it becomes necessary to have month-on-month accounting and closure of books for both registration and deregistration purposes under VAT.
From registration perspective:
If the value of supplies in the Kingdom exceeds the Mandatory Registration Threshold of 37,500 BHD over the previous 12 months, the person must notify the NBR within 30 days of exceeding the threshold.
Mandatory registration can also be applied for if it anticipated at any point in time that the Supplies made in the Kingdom in the next 12 months will exceed the mandatory threshold of 37,500 BHD.
The primary condition for registration is “exceeding the mandatory threshold limit over 12 months”. The words used are 12 months and not financial year. Therefore, this condition will be checked at the end of every month.
Further, the law also states that if a person anticipates making taxable supplies with a value exceeding the mandatory registration requirement in the next 30 days, the person shall make application to FTA for registration.
In this, it becomes necessary to maintain proper books of accounts to check the registration requirement.
From voluntary registration perspective:
The value of the Supplies or expenses made in the previous 12 months exceeds the Voluntary Registration Threshold of 18,750 BHD; or
The person expects at any point in time that the Supplies or expenses made in the next 12 months will exceed the voluntary threshold of 18,750 BHD
The laws state two condition value of taxable supplies and imports over the period of the previous 12 months and expected 30 days.
Only vatable expenses will be considered, implying it important to have proper accounting in place to book expenses under proper heads. Annual expenses mean business expenses subject to VAT in Bahrain at the rate of 5% or at the rate of 0%
From the deregistration perspective:
The taxable person no longer makes taxable supplies and does not intend to make any taxable supplies in the next 12 months;
Requirement for deregistration is also to be checked on a monthly basis, making it necessary to maintain proper records.
The value of the taxable person’s taxable supplies or taxable expenses over the previous 12month period is less than the Voluntary Registration Threshold and the taxable person does not anticipate making taxable supplies or incur taxable expenses in excess of the Voluntary Registration Threshold in the next 30 days.
Since the conditions have to be checked at the end of every month, it becomes necessary to maintain detailed books to avoid violation of provisions relating to VAT laws.
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