Bahrain's Shura clears VAT rate doubling to 10% effective January 2022

A move to double Value Added Tax (VAT) from five per cent to 10pc has passed its final legislative hurdle.

The Shura Council approved amendments to the 2018 VAT Law following a debate on the issue behind closed doors, during its weekly session at the National Assembly complex in Gudaibiya yesterday.

Fifteen of the 39 members present in the upper chamber had requested the secret debate.Last Tuesday, the MPs had approved amendments to the law, also following a debate behind closed doors.

The 10pc VAT will be now ratified and implemented on January 1, 2022.

The Shura Council yesterday also approved increasing social welfare and support allowances by 10pc from the same date.

The amendments to the 2006 Social Welfare Law have also been referred for ratification.

A government-drafted legislation to join the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) was also approved by members and referred for ratification.Under it, the member country will swiftly implement a series of tax treaty measures to update international tax rules and reduce the opportunity for tax avoidance by multinational enterprises.

Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa said the government was working on initiatives to strengthen the financial foundation of Bahrain.

“All of the financial stability programmes take into account low-income individuals and for that basic commodities and services continue to be exempted from taxation.

“Price increases have been taken into consideration and that is why social welfare and allowances have been increased by 10pc.“People are our top priority which is why since the outbreak of the coronavirus (Covid-19) we have offered protection be it in health or finance.

“And for that reason, we are amongst the top countries recovering from the pandemic; more is to come and now is the chance to do so.”The minister added that co-operation with legislators would be ongoing to achieve intended goals, which involve protecting the value of the dinar and creating new opportunities under a comprehensive plan.

“Prices in the market are under strict control and monitoring especially during this period and increases occur due to multiple reasons mainly logistics and transportation,” said Shaikh Salman.“But alert consumer protection officials are overseeing things throughout.

”Shaikh Salman said Bahrain was keen on implementing MLI with its rules coming into force in 2022 and 2023 with reservations to some articles.

“The articles under reservation in MLI could be given the go-ahead depending on assessment through implementation on those we have no issues with.

“Financial arbitration and taxation on big companies is amongst the issues we are committed to.”Labour and Social Development Minister Jameel Humaidan said the government was keen on providing decent living with the 16,588 people receiving social welfare not affected.

“Should we need more for the BD21.5m annual commitment for social welfare, the government will make up the difference,” he added.Around BD2m more is expected to be needed for the 10pc increase. Around 127,000 would also get a 10pc increase to allowances with the cost being around BD15m next year.The government is expected to net up to BD490m through full VAT implementation, though a conservative estimate of VAT revenues for 2022 remains at BD288m.

This comes as the government aims to reduce the total deficit expected for 2022 from BD1.112 billion to BD823.528m.

Statements on National Day and His Majesty King Hamad’s Accession to the Throne, Martyrs Day, Police Day and successful bilateral talks with Saudi Arabia were read out during the






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