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Ghana - Indirect Tax Guide

Ghana - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Ghana.

Explore the requirements and rules that apply to indirect taxes in Ghana.

Colorful shirts at market in Accra, Ghana

General

Types of indirect taxes (VAT/GST)

Valued Added Tax (VAT).

*Ghana Education Trust Levy (GetFund Levy)

*National Health Insurance Levy (NHIL)

NB:* These levies were hitherto not straight levy. The levies were applied in the same manner as the VAT. However, these have been converted into straight levies, which are not subject to the input-output method of accounting for VAT.

What is standard VAT/GST rate?

The standard VAT rate is 12.5 percent calculated on the value of the taxable supply of goods or services or the value of import. Value of the taxable supply shall consist of:

  • the sales amount
  • GetFund Levy (2.5 percent)
  • NHIL (2.5 percent) and all other taxes excluding the VAT itself.

Are there any reduced rates, zero rates or exemptions?

Reduced rates include:

  • 3 percent VAT flat rate scheme for retailers and wholesalers. The scheme is not applicable to manufacturers and service providers. Taxable person under the scheme are not entitled to input tax deduction.
  • 5 percent VAT flat rate scheme for real estate develops who are into the taxable supply of an immovable property other than those in the provision of immovable property, including land, used or intended to be used for a dwelling.

Zero-rated supplies include:

  • export of goods and services including those from Free Zone under the Free Zones Act, 1995 (Act 504) 
  • goods shipped as stores on vessels and aircrafts leaving Ghana
  • transportation of passengers on vessels or aircrafts leaving Ghana
  • supply to a free zone developer or free zone enterprise in compliance with the requirement of Free Zones Act, 1995 (Act 504)
  • transfer of a going concern: supply of goods as part of transfer of business as going concern by one taxable person to another taxable person
  • services directly related to land, personal property situated outside the country and intellectual property right for use outside the country
  • services consumed outside the country
  • freight and insurance directly attributable to the export of goods.

Exempt supplies include:

  • all live animals bred and raised in Ghana
  • animal products in their raw state produced in Ghana
  • agricultural and aquatic food product in its raw state produced in Ghana
  • certain medical and pharmaceutical products
  • basic food items usually in their raw state
  • textbooks and supplementary readers approved by Ministry of Education and newspapers produced locally
  • crude oil and hydrocarbon products
  • immovable property, including land, used or intended to be used for the purpose of a dwelling 
  • life insurance and reinsurance
  • civil engineering public works
  • land used or to be used for agricultural purposes
  • medical and education services
  • supply of financial services
  • goods for exclusive use by disabled
  • machinery and parts of machinery specifically designed for certain activities such as dredging, manufacturing, railway, tramway, etc.
  • domestic transportation, excluding the supply of haulage or the rental or hiring of passenger and other vehicles
  • domestic use of electricity up to a certain maximum level
  • water, excluding bottled and other packaged water
  • specified fishing equipment
  • specified agricultural inputs
  • postage stamp, mosquito nets and salt for human consumption
  • paper for the production of exercise books and textbooks 
  • mild carbon steel for the manufacture of machetes
  • stake in National Lotto organized by the National Lottery Authority.

Special relief applies for supplies:

  • to the president
  • for Commonwealth, foreign embassy, mission or consulate personnel or a permanent member of such service (VAT relief on imported goods)
  • for use by an international agency or technical assistance scheme where exemption from domestic taxes has been granted by the government
  • emergency relief items approved by Parliament
  • VAT-registered manufacturers for raw materials at importation.

VAT/GST registration

Who is required to register for VAT/GST?

Persons making taxable supplies of goods must register if the following turnover thresholds are met:

  • 200,000 Ghanaian cedi (GHS) at 12-month period or less; or
  • if there are reasonable grounds that GHS200,000 threshold will be met at the end of any month.

Despite the above, a taxable person shall register if:

  • turnover is GHS150,000 at the end of any period of 3 months; and
  • there are reasonable grounds that supplies made and to be made will exceed the GHS200,000 threshold during the next 9 consecutive months.

Persons making taxable supplies of services must register — there is no threshold.

Voluntary registration for a business with a turnover below the registration threshold is possible.

Unregistered, non-resident persons who provide telecommunication services and electronic commerce for enjoyment or use in Ghana, other than through a VAT-registered agent, must register for VAT provided the person meets the threshold (clarification on implementation still to be provided by authorities).

Irrespective of the threshold rule, a promoter of public entertainment; an auctioneer; or a national, regional or other authority or body, which carries on any taxable activity, shall apply for registration.

Is voluntary VAT/GST registration possible for an overseas company?

No. An overseas company must have a permanent establishment and make taxable supplies to register.
Clarification on how non-resident providers of telecommunication services and electronic commerce should register and pay VAT still to be provided by authorities.

Does an overseas company need to appoint a fiscal representative?

As stated above, an overseas company must have a permanent establishment and engage in taxable supplies to register. Where this is the case, the managers of the permanent establishment will act on behalf of the permanent establishment to discharge all VAT compliance obligations.

Is VAT/GST grouping* possible?

Yes.

A group of taxable persons may, with the approval of the Commissioner-General, be treated as one designated taxable person. However, each member of the group shall be jointly and severally liable for any liability or contravention under law.

What are the general and specific place of supply rules, if applicable?

Generally, the place of supply of goods is where the goods are delivered or made available by the supplier or, if the delivery or making available of goods involves it being transported, the place where the goods are when the transportation commences.

The place of supply of services is the location of the place of business of the supplier from which the services are supplied.

Specific place of supply rules include the following:

  • in case of a service connected with movable goods, the place where the service is physically carried out
  • in case of a service connected with immovable property, the place where the property is situated
  • in case of telecommunication services, where the facility or instrument for the emission, transmission re reception of the service, in respect of which the invoice for the supply is issued, or is to be issued, is ordinarily situated in Ghana
  • in case of cultural, sporting, artistic, educational or similar activities, the place where the service is physically carried out
  • in case of a recharge card or other similar mode of recharging, the place where the product is supplied.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly, due by the last day of the following month to which the returns relate. Normally, filed within 25 days after the end of the tax period.

Can returns be filed and payments be made electronically?

Currently, Ghana Revenue Authority has initiated steps in ensuring that taxpayers can file electronically. However, the process is at the piloting stage. Therefore, returns cannot be filed electronically but payment can be made through direct transfer of funds into Ghana Revenue Authority’s bank account.

What are the exchange rate rules?

Invoicing a local company in foreign currency is only permissible with prior approval from the Bank of Ghana.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No. However, where input tax is claimed in a tax period where no output tax is declared, the input tax credit will be carried forward to the next tax period.

Are there any exemptions with the right to recover or deduct input VAT?

Input VAT cannot be deducted on the following:

  • entertainment, except if in the entertainment business
  • motor vehicles or spare parts, except if dealing in or hiring vehicles or selling vehicle parts
  • payment of fees or subscription with respect to membership of club, association, or society of a sporting, social or recreational activity
  • expenses for making exempt supplies.

Input VAT on goods acquired by a newly-registered person cannot be claimed if the goods were acquired more than 4 months before the effective date of registration and, in the case of capital goods, more than 6 months before the effective date of registration.

Input VAT on capital goods acquired by a newly-registered person cannot be claimed if the capital goods were acquired more than 6 months before the effective date of registration.

Where expenses incurred are used in the making of both exempt and taxable supplies, the input VAT claim is determined by the ratio of taxable supplies to total supplies.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

6 months after the date where input tax deduction accrued.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

Refunds are used as credit against future tax payments. A taxpayer is entitled to a refund where the excess amount remains outstanding for 3 or more months for engaging in taxable supplies within the country. In relation to exportation, a refund of the excess credit will be granted where the exports exceed 25 percent of total supplies for the specific tax period.

Invoices

Is a business required to issue tax invoices?

Yes.

Is it possible/mandatory to issue invoices electronically?

It is possible.

Permission can be obtained from the Commissioner-General to issue electronic invoices.

Is it possible to issue recipient-created tax invoices?

No.

Audits

Do tax audits take place on a regular basis?

Yes, usually on a 2-3-year cycle.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

The following penalties/interest are charged upon non-compliance:

  • GHS500 for late submission of a return
  • GHS10 for each day the return is not submitted
  • failure to register makes a person liable to pay the tax payable for the period of non-registration and a fine of no more than two times the amount payable or an amount of GHS1,200, whichever is higher. 
  • failure to pay taxes by the due date will amount to the payment of interest, which is calculated as 125 percent of the statutory rate, compounded monthly and applied to the amount outstanding at the start of the period
  • failure to issue a tax invoice makes a person liable on summary conviction to a fine of no more than GHS200 or to a term of imprisonment of no more than 6 months or both
  • making a false or misleading statement which leads to understatement of taxes in excess of GHS600 will amount to a fine of no less than GHS300 and no more than GHS2,400 or an imprisonment of no less than 3 months and no more than 2 years or both. In any other case, a fine of no less than GHS60 and no more than GHS600 or a term of imprisonment of no less than 1 month and no more than 3 years or both.
  • impeding tax administration which involves fraud, or undue force shall amount to a fine which is the greater of twice the amount evaded or GHS2,400. In any other case will amount to a fine of no less than GHS120 and no more than GHS2,400.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

Yes. There will be an addition of the National Health Insurance levy of 2.5 percent and the Ghana Education Trust Fund levy of 2.5 percent to the taxable supply value before applying the VAT of 12.5 percent.

Does a reverse charge mechanism apply?

Yes.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

Reverse charge does not apply on imported services where the services are used by the taxable person in making taxable supplies.

A person only making exempt supplies is required to pay VAT on imported services. The VAT paid, however, is not recoverable by the person.

For a taxable person who engages in mixed supplies, VAT paid on imported services is claimable to the extent that the expense on which the reverse VAT is accounted for is used for taxable purposes. Where exempt supplies are less or equal to 5 percent of total supplies, reverse charge VAT is claimed in full.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

Yes.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

No. However, exemptions may be granted when negotiated for, and approved by, the Parliament of Ghana.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes, for a formal ruling. An informal ruling is not provided for in the VAT law.

Are rulings and decisions issued by the tax authorities publically available?

No. Rulings are only binding on the person who requested the ruling.

Other indirect taxes

Are there other indirect taxes not commented on above?

Yes, other indirect taxes include:

  • import duty
  • excise duty
  • stamp duty.

For further information please contact

Emmanuel Asiedu
Partner
KPMG in Ghana
T: + 233 20 432 2256
E: easiedu@kpmg.com

Kofi Frempong-Kore
Partner
KPMG in Ghana
T: + 233 50 132 4342
E: kfkore@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Ghana, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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