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A to Z of VAT Audit: Bahrain
VAT was introduced in Bahrain on 1st January, 2019. The standard rate of 5% will be applicable on goods and services. However, there are few items on which tax will be subject to Zero rated and exempt.
The NBR, through Audit procedure, assess the compliance level of a registered person . It also assess whether the VAT declared and paid is correct and fair. The assessment can be for one year or more. Books of accounts and records maintained are examined by the officials appointed by NBR during the audit. After its completion, if any addition tax liability arises, then the registered persons have to pay the additional tax.
Place and time of Audit
The tax audit may either be carried out at
- NBR’s office
- Registered person’s Office
Generally tax audit must take place during the business working hours only, but it may in exceptional situations be conducted any time.
Power of NBR during VAT Audit
For assessing the compliance and tax correctly paid or not, the NBR has the following powers:
- Access Books of accounts and documents maintained.
- Take samples of the registered person’s database.
- Take samples of any goods.
- Enter the business premises of the registered person.
- Gather all evidence by any measures.
- Question employees of the registered person.
- Close the business for a period for assessment.
- Record any violation and prepare a report.
- Intimated about VAT
For distance audit, the registered person will receive a request to produce additional information required from the NBR. The information asked must be submitted within a specified time period.
For on-site audit, the NBR will inform the registered person of its visit in advance. This should allow sufficient time for the taxable person to prepare the relevant records and ensure that relevant employees are available.
Unannounced tax audits may also take place notably for taxable persons who are suspected of tax evasion or other serious crimes.
Frequency of VAT Audit
This frequency may vary from person to person. However, the frequency depends upon:
- The size of the business.
- The track record of the taxable person in compliance with the tax laws.
- Whether the taxable person is in a refund position.
Where a tax audit shows non-compliance with the VAT laws, a tax assessment decision will be notified to the registered person of Bahrain. The assessment notice must include the following:
- The reasons for the assessment, facts, information and the legal basis
- The value of the net tax due tax differences and penalties (if any).
- The date of payment for the tax due and penalties.
The NBR must notify the decision by e-mail and post. If the registered person is not satisfied by the decision of the NBR, then he has the right to object this decision to the Tax Appeals Review Committee.