ACC461-VAT Assignment

Name: Mohammed Abdulla

Student ID : 20147271

1. What is the difference between VAT at 5%, 0%, exempted, and out of scope?

VAT at 5% is the standard rate charged on most goods and services, moreover taxable
business owners registered with the tax bureau can recover the input tax

0% VAT is charged on some goods and services and since the rate is 0% the final consumers
doesn’t pay any VAT. furthermore; the input tax can be recovered by the taxable person
registered with the tax bureau.

VAT exempt means that the final consumers doesn’t pay any VAT and since the good or
service is tax exempt the taxable person is not allowed recover any input tax

Difference between zero rated and exempted is zero rated is charged 0% input tax meaning
the taxable person charged zero rate must record the goods sold in his VAT account and
when he is filing his tax return while VAT exempt is not obligated to included tax exempt
goods or services in his tax returns. Filing of the tax return and keeping record of zero-rated
supplies requires time and will increase the cost of tax returns, this results in a zero-rated
taxable supplier incurring what is known as an implicit tax

On the other hand, VAT out of scope means that the item is not covered by the VAT tax law
such as inheritance and individuals and corporation’s income.

2. Explain on what basis the companies will have to register themselves for VAT and the
deadlines imposed by the National Bureau of Tax?

There are two types of registration: Mandatory registration and Voluntary registration

Mandatory registration:

 A Person required to register for Tax purposes shall apply for registration to the
Bureau in accordance with the following deadlines:

1. Thirty days from the last day of the month during which the value of his annual
Supplies in the Kingdom exceeds the Mandatory Registration Threshold which is
37500 BD

2. Thirty days prior to the month during which the value of his annual Supplies in the
Kingdom is expected to exceed the Mandatory Registration Threshold which is
37500 BD

Furthermore, The Bureau shall automatically register the Taxable Person from the date his
Supplies reached the Mandatory Registration Threshold if he fails to submit the application
for registration within the deadlines specified above.
Voluntary registration:

A person can voluntary register for VAT if the value of his annual supplies exceeds the
voluntary registration threshold which is 18750 BD

3. Refer to the audited financial statements of Kuwait Finance House - Bahrain And Alba
for the year ended 2017 and quantify the expected amount of tax (input tax and output
tax) that might have an effect on their financial statements. Kindly refer to their websites
to obtain such Financials.

KFH:

input tax BD

Other Expenses-Excluding Premises- 367550

Rental & maintenance

total Input tax 367550

In our estimates since accepting deposits and checking accounts are tax exempt the bank
doesn’t have to pay input tax. However, business development, legal and consulting
expenses are subject to 5% VAT input tax except for rental of premises since according to
section 82 of the Bahrain VAT law rent and sale of real estate is tax exempted.

output tax
BD

income from financing contracts-Fees 65700

and Commission income

income from investments- Fee income 51450

total Output Tax 117150

According to section A of Article 81 of the Bahrain VAT Law, supply of financial services is tax
exempt, except for services that are considered as a fee, commission or commercial
discount.

ALBA:

input Tax BD
Additions of Property, Plant and Equipment- excluding 2,723,000
Land & Buildings and Power generating plant
Inventories-Raw Materials 726,800
Selling and Distribution Expenses- Excluding staff costs 755,500
Administrative expenses- Excluding staff costs 624,050
Total Input Tax 4,829,350
According to Article 76 construction of new buildings including power plants are subject to
zero rate VAT hence why we excluded them from our estimation. Moreover, based on
article 82 sale and rent of real estate such as lands and buildings are VAT exempt thus, they
should be excluded. Furthermore, Staff costs such as wages and incomes are out of scope
meaning they are not covered by the Bahrain VAT Law and thus should be excluded.

Output Tax
BD
Sales Revenue- excluding Calcined coke 42,480,950
Total Output Tax 42,480,950
Since Aluminum sold by Alba is not subject to zero rate nor tax exempt it’s expected that
Alba will start including VAT in the price of their products except for Calcined coke, a final
carbon-rich solid material that derives from oil refining used in the production of Aluminum
thus According to Article 79 the import and export of oil gas and other hydrocarbons are
subject to zero rate meaning Alba cannot collect VAT on the sale of Calcined coke.