VAT rate on sales of auto-parts or auto-spares is subjected to place of supply:Retail sales of auto parts attract standard rate of VAT if the place of supply is Bahrain. In case of exports of auto-parts, when taking place in Bahrain, are subject to Bahrain VAT at the rate of 0%. The zero-rate at exports allows auto-part suppliers in Bahrain remain competitive in global markets.
In case the parts are exported then the selling prices are not impacted by VAT (i.e., VAT is charged but at a rate of 0%). Bahrain VAT law encourages exports by allowing businesses recover VAT charged on expenses incurred relating to the parts being exported The application of VAT at the zero-rate on exports of automobile parts is subject to certain conditions though.
Please note. intra-GCC supplies of goods (i.e., supplies between Implementing States) will be treated as exports/imports of goods until the Electronic Service System is in place and applied in all Implementing GCC States. It is only then that the specific VAT rules applicable to Intra-GCC supplies of goods will become applicable. The Electronic Service System is the system to be implemented by the GCC member states enabling them to capture the details of all the cross border transactions happening within the territory of the GCC.
Auto parts are tangible movable items, pieces of a motor vehicle, which are manufactured separately and used to build or repair the vehicle. Here is a non-exhaustive list of auto-parts subjected to standard rate on VAT on domestic sales and subjected to Zero-rate VAT if exported.
Auto-parts and spares charged at Standard rate of VAT:- A/C Components (Filter, Condenser, Evaporators, Compressors, Valve, Driers)
- Brake Component (Discs, Hoses, Pads, Sensors, Shoes)
- Batteries, Belts, Coolants, Shocks & Struts, Other Service Parts
- Cooling System (Radiators, Engine & Transmission Cooler, Thermostat Cooling Hoses, Water Flanges)
- Drive Train (C.V Joints & Boots, Bearing, Discs, Shaft Rubber, Bushes and Seals)
- Electrical Parts (Spark Plugs, Ignition Coil, Starts)
- Engine Components (Mounting, Gaskets & Seals, Engine Oil Filters, Air Filters)
- Fuel System (Pump, Filter, Hose, Injectors)
- Lubricants (Engine Oil, Coolant, Atf, Hydraulic Fluid, Additives)
- Suspension & Steering (Control Arms, Bush, Strut Mounting, Stabilizer Link, Steering Rod)
- Transmission (A/T Mounting, Transmission Clutches, A/T Filter, Oil Pan)
Conclusion: Bahrain VAT law clearly states all goods (auto-parts and spares) would attract standard rate of VAT when supplied in Bahrain by taxable person unless specifically treated as exempted, zero-rated or out-of-scope of VAT law. As auto-spare parts is an inventory intensive subject keeping track of VAT at product level, manually could be overwhelming. We strongly recommend building or buying a VAT invoicing and accounting software like TopNotepad.