VAT/PC/20/3

Introduction

This clarification sets out the intention of the National Bureau for Revenue (NBR) to amend the "use and enjoyment" rules under which the place of supply for certain telecommunications services is determined for VAT purposes.

The purpose of the amendment is to align the place of supply rules for these services with the International Telecommunications Regulations (Melbourne, 1988), also known as the Melbourne Agreement, to which Bahrain is a party. It is intended for the amended place of supply rules to be effective from 1 February 2021 and those making supplies of telecommunications services should apply them from that date.

Amended use and enjoyment rules

Under Article 18 of the VAT Law, the place of supply of telecommunications services will be Bahrain if they are used in Bahrain and to the extent of their use and enjoyment in Bahrain. With effect from 1 February 2021, the place of use and enjoyment of telecommunications services shall be determined as follows, rather than under the provisions currently set out in Article 17 of the Executive Regulations to the VAT Law:

1. For telecommunications services that require the customer to be physically present in a specific location to use them (such as a wi-fi hotspot or an internet café), the place of use and enjoyment is that specific location. There is therefore no change in the place of supply rules for these services.

2. For all other telecommunications services, the place of use and enjoyment is the place of residence of the customer. The supplier of the service should determine the place of residence of the customer by reference to the following:

   1. The internet protocol address used by the customer to receive the service;

   2. The country code of the SIM card used by the customer to receive the service;

   3. The customer's address as stated on the VAT invoice or other documents used for billing;

   4. Details of the customer's bank account; and

   5. Other information of a commercial nature.