Executive summary

The legal framework for excise duty implementation in Bahrain is the Common Excise Tax Agreement of the States of the Gulf Cooperation Council (GCC) that was agreed by GCC Member States in November 2016. Following the framework, His Majesty King Hamad bin Isa Al Khalifa signed the GCC Common Excise Tax Agreement and the Bahraini Excise Tax Law on 7 December 2017. The GCC agreement and the local law were published in the Official Gazette on 14 December 2017. Based on the Excise Tax Law, excise duty was implemented in Bahrain on 30 December 2017.

The Implementation Regulations of Excise Tax were issued with the Resolution of the Minister of Finance (Resolution No. 17 for the year 2017) and published in the Official Gazette on 28 December 2017.

This Alert summarizes the Excise Tax Law and the Implementation Regulations.

Detailed discussion

Excisable goods and tax rates

The following goods will be subject to excise tax in Bahrain at the noted tax rate:

Article 1 of the Implementation Regulations defines the excisable goods as:

• Tobacco: Includes all items listed within Schedule 24 of the GCC Common Customs Tariff that are imported, cultivated or produced in the Kingdom.
• Soft drinks: Any aerated beverage except unflavored aerated water. Soft drinks include any concentrates, powder, gel, or extracts intended to be made into an aerated beverage.
• Energy drinks: Any beverages marketed or sold as an energy drink that may contain stimulant substances that provide mental and physical stimulation, which includes without limitation caffeine, taurine, ginseng and guarana. This also includes any substance that has an identical or similar effect as the aforementioned substances.

Registration for Excise Tax

Based on Article 7 of the Excise Tax Law and Article 8 of the Implementation Regulations, persons exercising or intending to exercise any of the below activities are required to register for excise tax in Bahrain:

• Importation of excisable goods
• Production of excisable goods
• Possession of excisable goods under the tax suspension status

Businesses required to register for Excise Tax purposes had to submit the registration application to the MoF by 15 January 2018.

Excise tax return filing and payment

Based on Article 48 of the Implementation Regulations, excise tax is due on excisable goods that are available in Bahrain under the Excise Tax Law effective date (30 December 2017), given that such excisable goods are:

• Not under tax suspension status
• Held for commercial purposes

The same provision (Article 48 of the Implementation Regulations) provides that persons who hold stocks of excisable goods that satisfy the above conditions, are required to file a transitional excise tax return and pay the applicable excise tax within 30 days of the effective date of the Implementation Regulations.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Consulting W.L.L., Manama, Bahrain

• Ivan Zoricic
  ivan.zoricic@bh.ey.com
• Shankar P B
  shankar.pb@bh.ey.com
• Stefan Majerowski
  stefan.majerowski@bh.ey.com

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ATTACHMENT

PDF version of this Tax Alert