Bahrain Launches Tax Stamps on Cigarettes

The National Bureau for Revenue (NBR) in Bahrain has launched its digital tax stamp and traceability system on cigarettes, following the signing of a contract with De La Rue in 2021.

(© Bahrain National Bureau for Revenue).

The system is being introduced in three phases, with Phase 1 having already started in March, when the system began receiving electronic requests for tax stamps from manufacturers and importers registered with NBR.

In Phase 2, starting in May, all imported cigarettes must carry tax stamps upon arrival at Bahrain customs for clearance.

Then in Phase 3, beginning in August, all cigarette products available for sale in local markets will be required to carry tax stamps.

As advised by NBR on its website, no specific software is needed to access the digital stamp system, as it is an electronic system that can be used via a web browser, ideally Google Chrome.

Manufacturers of cigarette products are required to install the necessary equipment for automatically applying physical tax stamps and printing digital codes, as well as production line camera systems, and software for recording and uploading collection and shipping data.

No equipment or systems will be imposed by NBR or De La Rue. Instead, NBR advises that there is a recommended list of suppliers available for different types of equipment and systems.

In a subsequent phase, NBR will expand the system to include shisha and other tobacco products, such as electronic cigarette consumables. In addition, the contract with De La Rue includes extension to a variety of beverages.

De La Rue now has contracts for national digital tax stamp and traceability programmes with five out of the six Gulf Cooperation Council (GCC) nations, namely, UAE, Saudi Arabia, Qatar, Bahrain, and Oman (the sixth nation is Kuwait).

The GCC’s move to tax stamps followed the drawing up of a common excise tax agreement, in 2016, between all six members. The agreement was reached at a time when the majority of Middle Eastern countries were not using tax stamps, either because there was no tax legislation in place, or because it was not common practice to levy excise duties.

This situation changed, however, when countries in the region began intensifying efforts to implement new sources of tax revenue in the wake of rapidly declining oil prices, including the introduction of VAT and excise tax on tobacco and sugary drinks.

Kuwait is yet to introduce VAT or excise tax, and according to a VAT Calc report, it may decide not to implement VAT at all. It is, however, exploring an excise or turnover tax on a limited range of supplies, including tobacco and related products, soft and sweetened drinks, expensive goods such as watches, jewellery and precious stones, and luxury cars and yachts.

This change of plan has resulted from inflation hitting 10-year highs of nearly 5%, with the fear that an increase in prices from introducing VAT will undermine public support for wider tax reforms. In addition, the spiralling oil price, as a result of Russia’s invasion of Ukraine, now stands at around $100 per barrel, which has taken the pressure off Kuwait to broaden its tax base.