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basics of tax grouping


Every business is supposed to pay a certain amount to the government from the profits at the end of the financial year as ‘Tax’. In Bahrain, there is a law for VAT at 5% which has to be paid by the business owners. There are tax groups for business professionals which make the process of payment easy.

In this blog, we will understand about these tax groups and their provisions.

tax grouping

Tax Group

The tax group is a fiscal unity that allows the businesses to register them as a single taxable person under the law.

The need for Tax groups:

  • All the registered entities will be treated as a ‘one’ entity for the VAT purpose
  • Any supplies made within the registered entities stand free of tax

Provisions for a Tax group

To register under a tax group, the related parties shall be only considered when they are associated in economic, financial, and regulatory aspects that include the following:

(1) Industrial practices that consisting of any of the below:

  • A common commercial goal
  • Supply goods or services by different businesses to the same customer

(2) Financial practices consisting any of the below:

  • Financial support between the related parties
  • Common financial interest

(3) Regulatory practices should include any of the following:

  • Common Management
  • Common employees or jointly employed
  • Common shareholders or economic ownership

Amendments to a Tax group

The related parties registered under a tax group have the right to request the authority to do the following:

  1. Add one more person to become a member of the tax group
  2. Remove one of the members of the tax group
  3. Nominate one more member of the tax group to be the representative member
  4. De-register the existing tax group

Conditions for De-registering of a Tax Group

The de-registering of a tax group may happen when the below-mentioned conditions are met:

  1. If the related Parties no longer meet the requirements for registration as a tax group
  2. There is no longer an association based on economic, financial and regulatory practices
  3. There are serious grounds that prove the existence of the tax group would significantly decrease the tax paid to the authority.

In conclusion, we would say that a business should be careful while proceeding towards the registration of the tax group. It is very much advisable that you take the help of tax consultancies as they can help you in the best way in these matters.

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