A significant shift in Bahrain’s excise tax structure is on the horizon, with a new draft law proposing a tiered system for sweetened drink tax based on sugar content. Currently under review by Parliament, the legislation aims to encourage healthier choices while streamlining the administration of excise duties. While tobacco and energy drinks will maintain their existing 100% tax rate, the proposed changes will introduce a per-litre charge for sweetened beverages, varying according to their sugar levels. This move, alongside a transfer of administrative power, signals a proactive approach to public health and revenue management in the Kingdom.
New Excise Tax Structure for Sweetened Drinks in Bahrain
The core of the proposed law revolves around a more nuanced approach to taxing sweetened drink tax. Instead of a flat rate, the draft legislation introduces a sliding scale based on the amount of sugar present in each beverage. This is a departure from the current system and aligns with global trends towards sugar-reduction strategies.
Sugar-Based Tax Tiers
The proposed tax structure breaks down as follows:
- Zero Tax: Drinks containing only artificial sweeteners or with less than five grams of sugar per 100 millilitres will be exempt from excise tax, costing BD0.00 per litre.
- Lower Tier: Beverages with a sugar content between 5 and 7.099 grams per 100 millilitres will be taxed at BD0.079 per litre.
- Higher Tier: Drinks containing eight grams or more of sugar per 100 millilitres will face the highest tax rate of BD0.109 per litre.
This tiered system is designed to incentivize manufacturers to reduce sugar content in their products, ultimately offering consumers healthier options. It also acknowledges that not all sweetened drinks are equally detrimental to public health.
Shifting Administrative Control: NBR Takes the Lead
Beyond the changes to the excise duty on beverages, the draft law proposes a significant administrative overhaul. Currently, the Ministry of Finance oversees the implementation of excise taxes. However, the proposed legislation would transfer this responsibility to the National Bureau for Revenue (NBR).
This means replacing all references to ‘the Ministry’ with ‘the Bureau’ and substituting ‘the Minister’ with ‘the Chief Executive Officer of the NBR’ throughout the relevant articles of the law. This shift aims to centralize revenue management and potentially improve efficiency in tax collection and enforcement. The NBR’s CEO will inherit the powers previously held by the Minister, streamlining the decision-making process.
Transitional Rules and Compliance for Businesses
The draft law also addresses the practical implications of the changes for businesses already operating within Bahrain. A transitional rule has been included to manage existing stocks of sweetened drinks.
Key Transitional Provisions
Tax on existing, untaxed inventory will become due when three conditions are met: the goods are not under a tax-suspension status, they are held for trade, and the tax due exceeds BD500. Businesses will have 30 days from the law’s enactment to calculate the applicable tax, file a transitional return, and remit payment to the NBR. This provides a reasonable timeframe for businesses to adjust to the new regulations.
Furthermore, businesses involved in activities outlined in Article (7) of the current law are permitted to register with the NBR before the amendments officially take effect. This proactive measure encourages early compliance and facilitates a smoother transition. The official start date will be published in the Official Gazette.
Expanding Excise Goods and Refund Provisions
The bill maintains the flexibility to add other goods to the excise tax list, aligning with agreements within the Gulf Cooperation Council (GCC). Any additions will require a decision approved by the Cabinet.
Additionally, the draft law expands provisions for refunds, allowing for additional refund cases to be established through a Cabinet-approved decision. This demonstrates a commitment to fairness and transparency in the tax system. The focus on GCC alignment highlights Bahrain’s commitment to regional economic cooperation. Understanding tax regulations within the GCC is crucial for businesses operating across the region.
Implications and Future Outlook
The proposed changes to Bahrain’s excise tax system represent a significant step towards promoting public health and modernizing revenue administration. The tiered sweetened drink tax structure is a progressive move that encourages healthier consumption patterns. The transfer of administrative control to the NBR is expected to streamline processes and improve efficiency.
This draft law, currently under consideration by the Council of Representatives, is poised to reshape the landscape of excise taxation in Bahrain. Businesses should proactively prepare for these changes by understanding the new tax tiers, ensuring compliance with transitional rules, and registering with the NBR as appropriate. Staying informed about evolving tax laws is essential for sustainable business operations in Bahrain.
