Fama Accounting Services, Office 2294, Building 574 Road 31 Block 611 Al Hamriya, Bahrain
Fama Accounting Services, Office 2294, Building 574 Road 31 Block 611 Al Hamriya, Bahrain
Navigating the complexities of VAT can be challenging for Non-Profit Organizations in Bahrain, especially when they must distinguish between taxable and exempt activities. Unlike commercial businesses, non-profits must comply with specific VAT obligations while still fulfilling their social or charitable missions. Missteps in this area can lead to financial penalties, reputational damage, and resource diversion away from your core cause.
At our firm, we provide specialized VAT compliance services for non-profits in Bahrain. Whether you’re a registered charity, NGO, foundation, association, or social enterprise, we ensure your operations align with the National Bureau for Revenue’s (NBR) evolving VAT regulations. From registration and reporting to invoicing and claimable expenses, we simplify every step — so you can focus on impact, not administration.
With extensive experience in Bahrain’s tax ecosystem and a deep understanding of non-profit operations, our team ensures you’re compliant, cost-efficient, and audit-ready. We’re here to protect your mission by helping you get VAT right — the first time, every time.
Although non-profit organizations are not primarily profit-driven, many of their activities may still fall under the definition of “economic activity” under Bahrain’s VAT law. This means:
You may be required to register for VAT.
You may need to charge VAT on certain goods/services provided.
You may be entitled to claim input VAT on purchases.
You are subject to invoicing, record-keeping, and reporting obligations like any other VAT-registered entity.
Failure to comply can lead to:
❌ VAT assessments
❌ Denied refunds
❌ Late filing penalties
❌ Non-compliance notices
❌ Risk to donor trust and public credibility
Our advisory helps ensure full legal compliance while protecting your financial efficiency.
Our VAT advisory services cater to a wide range of non-profit and third-sector entities, including:
Charitable foundations and trusts
Community-based organizations (CBOs)
Religious institutions
Humanitarian aid NGOs
Education and cultural societies
Research institutes
International donor-funded projects
Social enterprises
Many non-profits mistakenly assume they are exempt from VAT entirely. However, if your organization has taxable turnover exceeding BHD 37,500, even if incidental (e.g. ticket sales, merchandise, paid training programs), registration is required.
Some services (like fundraising dinners, ticketed events, or training workshops) may be taxable, while others (like donations and grants) are not. Proper classification is essential to determine VAT liability and reclaim eligibility.
Only input VAT related to taxable activities can be reclaimed. Mixed-use expenses must be apportioned, and supporting documentation is mandatory.
For grant-funded or donor-backed activities, VAT treatment varies based on the agreement. Incorrect treatment can lead to disallowed claims or donor disputes.
If your organization provides taxable services (e.g., conference entry, consultation), you must issue invoices that meet NBR standards — with TRN, date, rate, and line-item breakdowns.
We provide end-to-end VAT compliance support, customized for the non-profit sector in Bahrain:
Evaluate whether your organization must register
Guide you through NBR registration (or voluntary registration if under threshold)
Assist in deregistration if economic activity ceases
Classify income streams: donations, grants, ticket sales, service fees
Determine which are taxable, zero-rated, exempt, or out-of-scope
Maintain defensible documentation and treatment memos
Prepare and review monthly/quarterly VAT returns
Calculate allowable input VAT recovery
Submit filings to the NBR and manage confirmations
Create compliant invoice templates (Arabic/English)
Train your team on how and when to issue VAT invoices
Set up secure digital record-keeping (required for 5 years)
Review expense policies and internal controls
Help maximize legitimate recovery of VAT
Apply apportionment methods where needed for mixed-use expenses
Analyze donor funding contracts for VAT implications
Provide VAT-inclusive vs. VAT-exclusive breakdowns
Coordinate project budgeting and reporting to donors
Conduct internal VAT health checks
Prepare documentation packets for NBR audits
Respond to queries and defend VAT treatments with supporting logic
✔ Bahrain-Based VAT Specialists – Deep knowledge of local NBR policies and charity-specific applications
✔ Sector-Specific Experience – We’ve worked with humanitarian, faith-based, and education non-profits
✔ Affordable Advisory Packages – Flexible plans for small charities, scalable for larger NGOs
✔ Full Confidentiality & Compliance – We protect your financial, operational, and donor reputation
✔ End-to-End Support – From registration to returns to audits, we’re with you every step of the way
| Activity | VAT Treatment | Claim Input VAT? |
|---|---|---|
| Donation from individual donor | Out of scope | ❌ No |
| Ticketed fundraiser event | Standard-rated (10%) | ✅ Yes (related costs) |
| Grant from international agency | Depends on contract terms | Varies |
| Free educational workshop | Exempt | ❌ No |
| Paid consulting to another NGO | Standard-rated (10%) | ✅ Yes |
| Booklet printing for public distribution | Zero-rated (if exported) | ✅ Yes (if linked) |
Minimize risks and maximize growth with our comprehensive accounting solutions in Bahrain.
Below is an overview of our general pricing packages for our suite of services in Bahrain. Costs vary depending on factors such as the services we offer.
Read some reviews and success stories from our loyal customers who achieved their goals and how our expert solutions have made a lasting impact on their growth, compliance, and financial clarity. Your success is our greatest achievement!
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Highly recommend for anyone looking to establish a company in Bahrain! Waqas Akram and his team made the entire process smooth and stress-free. They were incredibly knowledgeable, responsive, and handled every detail with professionalism.
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The team was highly professional, efficient, and knowledgeable. They ensured that all paperwork and procedures were handled smoothly, saving us both time and effort. I highly recommend their services to anyone looking out there.
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Abdullah and the team have been great in assisting me with related tasks. In challenging timeframes they've supported me to ensure our company operations can start in Bahrain without any issues. Thank you. I will recommed their services.
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With years of experience and a highly qualified team, we bring unmatched expertise and in-depth knowledge of Bahrain’s financial landscape to every service we provide.
Understanding whether your organization must register for VAT or may choose to is essential. In Bahrain:
Mandatory registration applies if your taxable income exceeds BHD 37,500 annually.
Voluntary registration is allowed if taxable turnover is above BHD 18,750 but under BHD 37,500.
Non-profits conducting taxable activities (e.g., selling tickets to an event, running a paid seminar) may benefit from voluntary registration, especially if they want to reclaim VAT on inputs.
We help assess your threshold status and advise on whether registration will add value or create unnecessary compliance burdens.
Understanding the difference between zero-rated and exempt activities is vital for effective VAT planning:
| Classification | Output VAT Charged | Input VAT Claimable? |
|---|---|---|
| Zero-rated (0%) | ✅ No | ✅ Yes |
| Exempt | ❌ No | ❌ No (generally) |
For example, exports of donated goods may be zero-rated, while religious services are often exempt. Misclassifying these affects both your recoverable VAT and return accuracy.
Many non-profits hold events to raise funds — dinners, galas, sports days. If tickets are sold, this becomes a taxable transaction.
We help structure fundraising in a VAT-compliant way:
Differentiate between donations and event participation fees
Determine if input VAT (venue, catering, marketing) can be claimed
Create VAT-compliant invoicing and promotional language
The VAT treatment of donor grants depends on whether:
The grant is unconditional, or
There is an obligation to deliver services/products in return
We review contracts and flag clauses that may trigger VAT liability:
Is there a supply in return?
Is there a beneficiary defined?
Is the grant earmarked for specific outputs?
We also help structure proposals and budgets to factor in VAT where needed — so you aren’t surprised later.
Non-profits often incur costs used for both:
Exempt/out-of-scope activities (e.g. community outreach), and
Taxable activities (e.g. consulting services)
We implement VAT apportionment methods such as:
Input-based proportion (percentage of taxable inputs)
Revenue-based allocation (by output split)
Direct attribution + residual split
This ensures you claim only the allowable VAT — preventing future clawbacks during audits.
Your operations staff, volunteers, and accounting team need to be aware of VAT obligations. We offer tailored workshops on:
How to issue compliant invoices
What documentation is needed for input VAT
How to differentiate between exempt and taxable services
What to do if contacted by the NBR
This capacity-building ensures your team becomes part of the compliance solution — not a risk factor.
During annual audits or donor reviews, non-compliance with VAT can raise red flags. We support clients by:
Providing VAT reconciliation reports
Offering explanations for mixed-use transactions
Preparing summary sheets of claimable vs. non-claimable VAT
Responding to queries from external auditors and partners
This makes your non-profit look well-governed and financially competent in the eyes of donors and regulators.
We help set up tools and templates designed for non-profits using:
QuickBooks or Zoho Books (VAT tagging, invoice templates)
Excel-based VAT return templates
Cloud-based folders for invoice storage and digital archiving
This simplifies filing, reduces errors, and ensures NBR audit readiness.
If your organization operates across GCC borders, VAT may apply differently in:
Procurement (import VAT, reverse charge)
Project delivery (taxable vs. exempt services)
Grant agreements with international donors
We help identify where cross-border tax applies and how to stay compliant with Bahrain and foreign jurisdiction VAT laws.
Donors, especially institutional and foreign funders, increasingly require proof of tax compliance as part of their due diligence.
Being VAT compliant:
Prevents audit risks from cascading to your donors
Enhances your credibility in financial reporting
Shows fiscal responsibility and governance maturity
Makes your organization more fundable and partnership-ready
We help you build a VAT strategy that aligns with your donor confidence goals — so compliance becomes an asset, not a cost.
No. Non-profits are not automatically exempt from VAT. They are subject to the same rules as any other entity when engaging in economic activities, such as charging for services or goods. Whether VAT applies depends on the nature of the transaction, not the legal status.
Examples include:
Selling tickets for fundraising events
Charging for workshops or training
Selling merchandise or promotional items
Offering paid consulting or advisory services
These are considered taxable supplies, even if proceeds go toward charitable goals.
The standard mandatory registration threshold is BHD 37,500 in annual taxable turnover. If your organization earns this much (from taxable supplies), you must register for VAT. Voluntary registration is possible from BHD 18,750.
Unconditional donations with no benefit to the donor are outside the scope of VAT. However, if a grant or donation includes a contracted deliverable, such as services or goods, it may be taxable. Each case should be evaluated.
Zero-rated: No VAT charged, but input VAT can be reclaimed.
Exempt: No VAT charged, and input VAT cannot be recovered.
Proper classification impacts your ability to reclaim VAT on expenses.
Yes, if you voluntarily register, you may reclaim input VAT related to your taxable activities. This can be beneficial if you have significant operating costs.
No. You cannot recover VAT on inputs that relate exclusively to exempt activities (e.g. religious services, unpaid charity work). For mixed-use expenses, you must apportion.
When a cost supports both taxable and exempt operations, you must divide the VAT claim using an approved method:
Revenue-based ratio
Input-based allocation
Direct attribution plus residual calculation
Free services are generally not considered taxable, unless there’s a deemed supply rule triggered (e.g., use of business assets for free). We assess each situation to confirm.
Yes, for any taxable supply, you must issue a VAT-compliant invoice with:
Supplier & customer details
TRN (Tax Registration Number)
Invoice number & date
Taxable amount & VAT amount
Description of goods/services
Religious services such as sermons or worship activities are generally exempt. However, revenue from paid seminars, bookstore sales, or rental income may be taxable.
It’s when a non-profit uses business resources for free, or transfers assets without charge (e.g. donating items bought with reclaimed VAT). This could trigger VAT liability.
Late registration can result in penalties up to BHD 10,000. VAT is also backdated to the date liability began, meaning you may owe past VAT amounts.
Yes, if the organization carries out taxable activities in Bahrain (e.g. projects, trainings), it may be required to register as a non-resident taxable person.
Records must be kept for at least 5 years, including:
Sales and purchase invoices
VAT returns
Input VAT claim calculations
Contracts and agreements
Donor grant documentation (where applicable)
Yes, if a fee or ticket is charged. This includes charity auctions, gala dinners, or ticketed community events. We help you structure these activities correctly.
Only the portion related to taxable activities is recoverable. You must apply an apportionment ratio if the space supports both exempt and taxable operations.
Most organizations file quarterly, but large ones may file monthly. The due date is the end of the month following the tax period.
It depends on:
Whether there’s a deliverable or benefit
The terms of the grant
VAT status of the project activities
Some grants are considered taxable consideration, others are not.
Yes. Where VAT is not recoverable, it should be included as a cost item in donor budgets. Some donors require proof of VAT recovery status to allow this.
Absolutely. Errors in invoicing, expense claims, or classification often result from lack of awareness. We provide training tailored to your finance and program staff.
Depending on the violation:
Late filing: BHD 500–5,000
Incorrect returns: Additional tax + fines
Failure to issue tax invoices: BHD 1,000+
Late registration: Up to BHD 10,000
Yes. Both internal and donor auditors review tax compliance. Proper VAT management improves audit ratings and boosts donor confidence.
We recommend:
Zoho Books: Easy, cloud-based
QuickBooks: Great for donor reports
Xero: Useful for multi-currency non-profits
Excel templates (for micro-NGOs)
We help set these up VAT-compliantly.
Yes, you can deregister if your taxable activity ends. NBR must approve deregistration. Failing to do so may incur ongoing return obligations.
No. As long as these are reimbursements of actual expenses, and not payment for services, they are outside the scope of VAT.
Training delivered in Bahrain is generally taxable. If conducted overseas or for foreign participants, it may qualify as zero-rated export of services.
Yes. This makes input VAT tracking, return preparation, and audits much smoother. We help set up cost codes and chart of accounts segmentation.
When a non-profit engages in both taxable and exempt activities, they’re considered partially exempt and must apportion input VAT accordingly.
While small organizations can manage in-house, a qualified VAT consultant is strongly recommended — especially during:
Initial registration
First-year filings
Donor project structuring
Preparing for audits
With the introduction of Value Added Tax (VAT) in Bahrain, businesses must ensure they are fully compliant with local regulations to avoid fines and maintain smooth operations. Our services ensure:
✅ Accurate VAT calculations and filings.
✅ Error-free bookkeeping for tax audits.
✅ Cost savings through VAT optimization strategies.
✅ Peace of mind knowing your financials are in expert hands.
✅ Improved business credibility and investor confidence.
✅ Seamless regulatory compliance for local and international operations.
Our services cater to businesses of all sizes and industries operating in Bahrain, including:
📌 Small & Medium Enterprises (SMEs) – Streamline accounting processes and tax compliance.
📌 Startups & Entrepreneurs – Affordable and efficient accounting solutions to manage finances.
📌 Retail & E-Commerce Businesses – VAT compliance for online and offline transactions.
📌 Construction & Real Estate Companies – VAT advisory on industry-specific transactions.
📌 Corporate Entities & Large Businesses – Advanced accounting strategies for profitability.
📌 Freelancers & Consultants – Hassle-free tax reporting and financial planning.
📌 Manufacturing & Trading Companies – Optimize VAT compliance on goods and imports.
📌 Service-Based Businesses – Financial management for professional service providers.
📌 Step 1: Consultation & Assessment – Understanding your business needs.
📌 Step 2: Implementation of Accounting & VAT Systems – Setting up cloud-based solutions.
📌 Step 3: Ongoing Compliance & Reporting – Monthly financial management and VAT filings.
📌 Step 4: Audit Support & Advisory – Ensuring full regulatory compliance and business growth.
📌 Step 5: Financial Analysis & Growth Planning – Helping businesses scale with strong financial planning.
🚨 Did you know? Businesses failing to comply with Bahrain’s VAT regulations can face penalties up to BHD 10,000 for late or incorrect filings! Our experts ensure:
✅ Timely VAT returns & error-free financial statements.
✅ Accurate record-keeping for VAT reclaims & audits.
✅ Guidance on VAT-exempt and zero-rated transactions.
✅ VAT risk assessment & compliance checks to avoid fines.
✅ Optimized tax strategies to enhance profitability.
✅ Assistance with government tax incentives and rebates.
🔹 Certified Accountants & VAT Specialists with deep industry expertise.
🔹 Customized Accounting & VAT Solutions for every business.
🔹 Reliable, Transparent, and Affordable Services.
🔹 100% Compliance Guarantee with Bahrain’s financial laws.
🔹 Cloud-Based, Secure, and Efficient Accounting Processes.
🔹 End-to-End Financial Support from Bookkeeping to Tax Advisory.
🔹 Trusted by Hundreds of Businesses Across Bahrain.
Accounting is not just about tracking income and expenses; it plays a key role in a company’s success by:
Ensuring compliance with Bahrain’s financial laws and regulations.
Providing accurate financial insights for informed decision-making.
Helping businesses optimize tax planning and VAT compliance.
Enhancing transparency and credibility with investors and stakeholders.
Supporting business growth through strategic budgeting and forecasting.
Whether you handle accounting in-house or outsource accounting services in Bahrain, having a well-structured accounting system is non-negotiable for success.
✅ Expert Accountants & VAT Specialists – We handle everything from bookkeeping to VAT filing.
✅ 100% Compliance with Bahrain’s Tax Laws – Avoid penalties and late filings.
✅ Accurate & Transparent Financial Reporting – Essential for decision-making and audits.
✅ Cost-Effective & Scalable Solutions – Tailored accounting services for businesses of all sizes.
✅ Cloud-Based Accounting & VAT Automation – Secure and efficient financial management.
✅ Industry-Specific Expertise – Customized solutions for various business sectors.
✅ Dedicated Support – Personalized assistance for financial planning and compliance.
Various regulatory bodies govern Bahrain’s accounting landscape, ensuring businesses adhere to financial reporting and compliance requirements.
| Regulatory Authority | Role in Accounting Compliance |
|---|---|
| Ministry of Industry & Commerce (MOIC) | Oversees business registrations, financial regulations, and commercial compliance. |
| Central Bank of Bahrain (CBB) | Regulates financial institutions, banks, and investment firms in Bahrain. |
| National Bureau for Revenue (NBR) | Governs VAT registration, compliance, and reporting. |
| Bahrain Commercial Companies Law (BCCL) | Mandates financial record-keeping, audits, and reporting for companies. |
| International Financial Reporting Standards (IFRS) | Global accounting standard applied in Bahrain for financial transparency. |
Key Takeaway: Businesses operating in Bahrain must maintain accurate accounting records, submit periodic financial reports, and comply with VAT regulations to avoid penalties.
Bahrain follows International Financial Reporting Standards (IFRS), ensuring businesses align with global best practices. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards also apply to Islamic finance institutions operating in Bahrain.
| Accounting Standard | Applicable Businesses |
| IFRS | Public companies, multinational corporations, financial institutions |
| IFRS for SMEs | Small and medium enterprises (SMEs) |
| AAOIFI | Islamic financial institutions |
Companies are required to maintain financial statements, including balance sheets, income statements, and cash flow reports, adhering to IFRS principles.
Businesses in Bahrain can benefit from a range of accounting services that streamline operations and ensure compliance.
Accurate bookkeeping ensures every financial transaction is recorded properly. This includes:
Recording daily transactions.
Managing accounts payable and receivable.
Reconciling bank statements.
Bahrain implemented VAT (Value Added Tax) at 10%, requiring businesses to:
Register for VAT with the National Bureau for Revenue (NBR).
File VAT returns on time to avoid penalties.
Maintain proper VAT invoicing and compliance documentation.
Efficient payroll management ensures timely salary payments while complying with Bahrain’s labor laws.
Monthly salary processing.
End-of-service benefits calculation.
WPS (Wage Protection System) compliance.
Businesses must maintain annual financial statements for tax reporting and auditing purposes.
Preparation of balance sheets, profit & loss statements, and cash flow reports.
Conducting internal and external audits.
Ensuring compliance with MOIC and CBB regulations.
Many businesses in Bahrain use accounting software like:
Zoho Books (for SMEs & startups)
QuickBooks (for cloud-based accounting)
Tally ERP (for large enterprises)
Odoo ERP (for automated accounting & reporting)
Solution: Work with an experienced accounting firm in Bahrain to stay updated on new tax laws and compliance regulations.
Solution: Use automated accounting software or outsource VAT compliance to professionals.
Solution: Implement cloud-based payroll systems to ensure error-free salary processing.
Solution: Conduct periodic audits and use standardized accounting frameworks like IFRS.
Yes, businesses with an annual turnover above BHD 37,500 must register for VAT in Bahrain.
Zoho Books, QuickBooks, Tally ERP, and Odoo are popular choices for Bahrain companies.
Yes, all businesses in Bahrain must undergo an annual external audit as per the Bahrain Commercial Companies Law.
Yes, many businesses choose to outsource accounting in Bahrain to specialized firms for cost efficiency and compliance.
Bahrain has adopted the Bahraini Accounting Standards (BAS), which are aligned with the International Financial Reporting Standards (IFRS). These standards ensure consistency, transparency, and comparability of financial statements across businesses.
Most businesses in Bahrain are required to prepare their financial statements in accordance with IFRS. These globally recognized standards enhance the credibility of financial reports and facilitate international business operations.
Bahrain’s taxation system is relatively simple compared to other countries. Key taxes include:
Value Added Tax (VAT): Introduced in 2019, VAT is levied at a standard rate of 5% on most goods and services.
Corporate Tax: Bahrain does not impose corporate tax on most businesses, except for oil and gas companies, which are subject to a 46% tax rate.
Withholding Tax: A 5% withholding tax is applied to royalties, interest, and other payments made to non-residents.
Whether you’re a small business or a multinational company, having accurate, compliant, and strategic accounting in Bahrain is essential for success. From VAT compliance and bookkeeping to financial reporting and auditing, the right accounting partner can save you time, money, and legal troubles.
Get Started Today! If you need expert accounting in Bahrain, contact us for a free consultation and discover how our tailored services can benefit your business.
Minimize risks and maximize growth with our comprehensive accounting solutions in Bahrain.
With a reputation for precision, and excellence, we are here to support your business growth while ensuring compliance with Bahrain’s financial and regulatory standards.
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Accounting, VAT, & Audit Services by famabh