Introduction
This clarification sets out the position of the National Bureau for Revenue (NBR) on the VAT due date for loans (including amounts advanced on credit cards) subject to a six month payment holiday from March to August 2020 under circulars issued by the Central Bank of Bahrain (CBB).
Under the CBB circulars, Bahraini nationals and businesses are entitled to receive a payment holiday on interest / profit and capital arising on certain loans, including credit advanced on credit card accounts (together "Relevant Loans"). Payments on these loans will restart at the end of the six month period. Essentially, the Relevant Loans will be extended for up to six months without any additional charge being made to borrowers.
VAT due date
Under the principles set out in the VAT Law and its Executive Regulations, the VAT due date for supplies of credit is the earliest of:
When the consideration (e.g. interest or profit) becomes due and payable by the borrower;
The date a VAT invoice is issued in respect of the supply; and
The date of payment of the consideration (e.g. interest or profit) by the borrower.
As set out in the VAT General Guide, where none of the above three occurs within a twelve month period, a VAT due date will be triggered at the end of that twelve month period.
The NBR takes the position that, by virtue of the CBB guidelines, the terms and conditions of Relevant Loans have been changed so that no interest or profit is due and payable during the six month payment holiday. Therefore, where no VAT invoice has been issued in respect of interest or profit on a Relevant Loan during the payment holiday and a debtor has not actually paid interest or profit on such a loan, there will be no VAT due date on the Relevant Loan during the holiday period.