Bahrain: NBR releases FAQs and notification form for obsolete stock

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25 June, 2020

In brief

Obsolete stock

Following the guidance published in the VAT Retail and Wholesale Guide, the National Bureau for Revenue (NBR) has now issued further details on the VAT treatment of obsolete stock in the technical FAQs on their website. They have also made available the form to be used by taxpayers in order to notify the NBR of any obsolete stock that they intend to dispose of.

In detail

The NBR recently published a VAT Retail and Wholesale Guide which includes guidance on inventory and stock. The FAQs section of the NBR’s website has been updated to include information on obsolete stock and the form to be used when notifying the NBR of the intention to dispose of such stock.

Obsolete stock refers to stock that is no longer used, tradable or is not useable or needed, usually because something newer and better has replaced it. Where obsolete stock is disposed of for no consideration:

  • The taxable person is not regarded as having made a supply for VAT purposes; and
  • The taxable person is not required to adjust any input tax claimed relating to such stock

In order for this treatment to apply, the taxable person must give advance notice to the NBR of its intention to dispose of such stock at least 30 days before the disposal and not proceed before confirmation from the NBR is provided that it may proceed with disposing of the obsolete stock.

Any obsolete stock that is disposed of without approval from the NBR will result in a clawback of input tax originally claimed in respect of that stock. However, prior approval will not be required:

  • For the first BHD 5,000 of value of obsolete stock disposed of during a calendar year. Any excess will need to be pre-approved in line with the above;
  • Perishable goods no longer fit for human consumption that need to be disposed of quickly to avoid a risk to human health; and
  • Hazardous materials required to be disposed of quickly to avoid damage to human health, property etc.

Where one of these exceptions applies, certain information on the obsolete stock must be retained on file.

Notification to the NBR

Unless one of the exceptions listed above applies, a taxable person must give advance notice to the NBR of its intention to dispose of obsolete stock at least 30 days before the disposal. The NBR have published the form to be used by a taxpayer when providing advance notice. This can be found under the VAT e-services section of the NBR’s website.

The form also requires a list of the obsolete stock to be disposed of to be provided by the taxpayer and an extract of the journal entries relating to the stock from their accounting system.

The NBR has published the FAQs and the form on its website. The links can be found below:

FAQs

https://www.nbr.gov.bh/t_faq/8

Notification form

https://www.nbr.gov.bh (under the e-services section)

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Ken Healy

Ken Healy

Partner, Tax Leader, Bahrain, PwC Middle East

Tel: +973 1711 8886

Mohamed Al Mahroos

Mohamed Al Mahroos

Bahrain VAT Senior Manager, PwC Middle East

Tel: +973 1711 8857

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