Introduction
A difference between bank receipts, project revenue and a VAT return needs investigation before it is described as underreporting. Developers should establish what the figures represent and whether the comparison uses the same periods and transaction basis. The response should explain the evidence rather than simply deny the discrepancy.
Reconcile the figures on a consistent basis
Start with the transactions identified in the allegation. Match receipts to invoices and consider advances, deposits, credit notes and intercompany movements. Separate accounting recognition from the applicable VAT tax point. Keep a clear explanation for each reconciling item and identify any genuine omissions.
Explain project-specific differences
Connect retention balances to certificates and release schedules. Compare approved variations with final-account adjustments and distinguish a payment dispute from a price reduction. Property sales, construction works and related services should not be grouped together merely because they concern the same development.
Respond accurately and preserve options
Preserve original records and avoid altering source documents to make totals agree. Where an error is confirmed, obtain advice on the appropriate correction procedure. If an assessment follows, review the notice, grounds and deadline separately from the earlier audit correspondence.
Conclusion
Respond accurately and preserve options by keeping the contract, supporting evidence and reporting process aligned. Manal Dhahi Legal Group can review the documents and advise on the next steps through its tax law services in Bahrain.
Frequently asked questions
Does every unexplained bank receipt represent omitted taxable revenue?
No. Establish the source and legal nature of the receipt, then compare it with the relevant records and tax treatment.
Should a business deny all differences before investigating?
No. A transaction-level reconciliation allows it to explain genuine timing differences and address actual errors accurately.
Useful links
- Manal Dhahi Legal Group
- Legal Remedies Against VAT Reassessments by the National Bureau for Revenue (NBR) in Bahrain
- Tax Risks in Phased Billing and Milestone Payments for Construction Projects in Bahrain
- Contact our legal team