Bahrain has endorsed agreements related to introduction of value added tax (VAT) in the GCC, paving for the levy to be applied by mid-2018.

Information Affairs Minister Ali bin Mohammed Al-Romaihi held a press conference at the Information Affairs Ministry, attended by Finance Undersecretary Arif Khamis, to provide details on the GCC's unified VAT agreement and the GCC’s unified agreement on selective taxation.

The minister said VAT will not be considered as an income tax, but will be applied to goods and services at 5 per cent, whereas basic food commodities, medicines and medical supplies have been exempted, according to a Bahrain News Agency report.

He stressed that the applied percentage in Bahrain is the lowest among more than 150 countries adopting it, the report said.

He added that the unified VAT agreement will come into effect in 2018 after it is approved by the legislative authority.

The finance undersecretary said the two agreements have been signed in implementation of the 2015 Riyadh GCC Summit resolution.

He emphasised that the tax will not affect persons with low or middle incomes, and that the list of commodities comprises more than 90 items while basic consumer commodities are exempted.

He added that five GCC countries, including Bahrain, have signed the agreement, and that the administrative and legislative work will start soon.

He pointed out that awareness programmes will be held to inform the public about the items on the list.

He added that VAT taxes revenues are not included in the 2018 state budget, because there is no law to support it and that consultations are being held under the current financial situation to reach a budget capable of promoting national economy.

He noted that the VAT tax is expected to be in force in mid-2018.