Related Party Transactions For VAT In Bahrain

The Kingdom of Bahrain under Decree-Law Number 48 of 2018 (Decree-Law) is the pivotal legislation with regards to Value Added Tax (VAT) in Bahrain. Further, the Executive Regulations Number 12 of 2018 (Executive Regulations) are the elaborate rules with respect to the application of the VAT Law. With regards to the related party transactions, Article 22 of the Decree-Law as well as Article 24 of the Executive Regulations, lays down the rule that on the supply between two or more related parties a market value should impose in case the value of the supply is represented or marked lower than the actual market value, and there cannot be full claim on related input tax by the recipient.

With regards to the related party transactions in VAT, the National Bureau for Revenue (NBR) in Bahrain has published clarification notes to calculate the market value of such related party transactions. Article 24 of the Executive Regulations mentions that the market value shall be that fair price tradeable between the independent parties where:

That the customer and his supplier are not subject to commercial pressure. The customer and supplier both works as per their market interests independently. There is no...