Bahrain – VAT and Real estate
Unlike the UAE and KSA, the Bahraini VAT legislation provides for an exemption for the supply or lease of both residential and commercial buildings. Bahrain is the first GCC country that implements a VAT exemption for the supply and lease of commercial buildings. The exemption may have far reaching consequences for the real estate market.
Furthermore, a zero rate is applicable on construction services related to new buildings (residential and industrial). Goods supplied by a business that supplies construction services and which are supplied in the course of providing construction services for a new building, are also zero rated. This includes for instance building materials and materials necessary to construct specialised raised flooring for computer server rooms.
However, goods like furniture that is not affixed to the building, swimming pools and decorative lighting, paintings, carpets and murals and other artwork are not zero rated.
The zero rate is also not applicable on restoration works, demolition of existing buildings and architects and interior design fees. VAT incurred on these purchases will therefore constitute a cost for businesses who want to sell or lease their new constructed building.
Authors: Thomas Vanhee (Aurifer Middle East) and Roberto Scalia (Chairman JIACC Tax Commission)
