Bahrain is set to introduce 5% value-added tax (VAT) on January 1, 2019 after the House of Representatives voted in favour of the motion.
The move, which still requires the approval of the parliament’s upper house, would see Bahrain join the UAE and Saudi Arabia as the only GCC states to implement the goods levy.
While the introduction of VAT is unlikely to affect foreign direct investment, the three-month deadline would provide a challenge for local firms to have the necessary systems and processes in place.
The GCC made an agreement in 2018 to introduce VAT as one of several economic measures designed to reduce the region’s reliance on oil revenues.
Bahrain has been hit hardest of all GCC states by the recent drop in oil prices. The announcement of the January VAT launch comes just days after Bahrain was offered a $10 billion aid package from Saudi Arabia, the UAE and Kuwait to avoid a debt crisis.
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