VAT treatment for good sold online:E-commerce or electronic commerce is the buying and selling of goods and services online. Bahrain VAT law specifically states, for the purpose of VAT treatment, if goods supplied are based out in Bahrain, the sale of such goods using an online platform such as a website by a taxable person to a customer in staying in Bahrain will be taxable at the standard rate, unless the supply of the specific goods are specifically exempt from VAT or zero-rated.
And if the goods being supplied are located outside of Bahrain, the sale of the goods using an online platform such as website by a person located outside of Bahrain (i.e., a non-resident supplier) to any customer in Bahrain will be outside the scope of Bahrain VAT. However, if the customer is the importer of record for the goods an import VAT will be paid on the goods by the Customs Affairs Department at the point of entry, unless the goods are specifically exempt from import VAT.
So, one needs to consider two aspects of a transaction while deciding the VAT treatment
1. The sale of the goods by a person located outside of Bahrain (i.e., a non-resident supplier) to a customer in Bahrain who is the importer of record for the goods – outside the scope of Bahrain VAT
2. The import of the goods into Bahrain by the Bahraini customer – subject to import VAT at the time of import, unless the goods are specifically exempt from import VAT
VAT treatment for services sold online:Similarly, electronic services are services provided over the internet or any electronic platform, and which operate in an automated manner with limited human intervention and which are impossible to complete without the use of information technology. For example, the purchase of films on the internet.
Electronic services include, but are not limited to, the following:
• Services that provide or support an electronic network, including a website or web page on the internet
• Digital products, including computer programs and any changes or updates to software programs
• Services automatically generated by a computer over the internet or an electronic network, as a response to specific data inputs by the receiver
• Internet services software for information that allows the communications component to provide an assisting element, for example components that allow access to news, weather or travel reports, web hosting, online discussion and others
• Supply of a website domain, web hosting and remote maintenance of software and equipment
• Supply of visual content, such as images or texts that are automatically supplied, screensavers, electronic books and other documents and digital files
• Electronic supply of music, films, television series, games, magazines, newspapers, or other programs upon request
• Provision of advertising on websites and advertising space on websites and any rights associated with such advertising
• Provision of online educational services, and
• Supply of computer programs and updates.
Some services, although provided electronically will not be regarded as electronic services for VAT purposes. These services include but are not limited to the following:
• A supply of services over the internet that requires significant human intervention. These include, for example, professional consultancy services delivered via email, educational or professional courses where an individual is delivering the services in real time and this is broadcasted live over an electronic network
• Online booking services for hotels, car hire, tickets for entertainment events or other similar activities
• Online repair services that are remotely provided for computer equipment
• The supply of tangible products, for example goods that are ordered and sold online
For services that are not considered as electronic services for VAT purposes, the normal VAT rules for supplies of services will apply.