February 4, 2022
Ghana Revenue Authority issues administrative guidelines on certain provisions of the VAT Amendment Act
The Commissioner-General (CG) of the Ghana Revenue Authority (GRA), the officer responsible for the administration of the tax laws, has issued administrative guidelines on the application and administration of the Value Added Tax (VAT) (Amendment) Act, 2021, Act 1072, which was enacted pursuant to the tax measures introduced by the Government in the 2022 Budget Statement and Economic Policy (the 2022 Budget) to raise revenue to support the financial sector reforms and for other matters. For background on the 2022 Budget, see EY Global Tax Alert, Ghana issues Budget Statement and Economic Policy for 2022 Financial Year, dated 19 November 2021.
This Alert highlights the key issues set forth in the guidelines.
Pursuant to the CG's powers to issue directives for the implementation of tax laws under the Revenue Administration Act, 2016, Act 915 (as amended), the CG has issued administrative guidelines for the implementation of the VAT flat rate scheme.
These administrative guidelines were issued on 28 January 2022.
The administrative guidelines address:
Implementation of the VAT flat rate scheme
- The administrative guidelines clarify the provisions of the VAT (Amendment) Act, 2021, Act 1072, and aim to achieve consistency in the administration of the Act in line with section 1(2) of the Revenue Administration Act, 2016, Act 915 (as amended) which gives the CG the powers to issue written directives necessary for the implementation of tax laws. It also addresses administrative and operational challenges that may arise from the interpretation and scope of the VAT flat rate scheme (VFRS).1
- The administrative guidelines apply to the supply of goods by a taxable person who is a retailer2 with an annual turnover from a taxable supply made at the end of any period of 12 months that is not less than GHS200,000 but does not exceed GHS500,000.
Some features of the VFRS
- It has a marginal tax rate of 3% applied to the value of the taxable supply of goods.
- VFRS operators are also required to charge a 1% COVID-19 Health Recovery Levy on the value of the taxable supply of goods.
- The regime does not allow an input tax credit i.e., VFRS operators shall not be entitled to input tax claims.
Taxpayers who meet the threshold and are therefore operating the VFRS under the Act are required to issue a simplified CG's Tax Invoice.
Registration of the VFRS traders
The category of retailers who qualify to be registered to operate the VFRS include:
- Retailers of taxable supplies who qualify but have not yet registered to operate the VFRS.
- Retailers who do not meet the threshold and are, therefore, not qualified but voluntarily apply to be registered for the VFRS.
Application for registration
- All retailers of taxable supplies who qualify to be registered to operate the VFRS but have not registered shall apply to be registered.
- All newly registered VFRS operators should be issued a VAT certificate of registration.
- Taxpayers who double as wholesalers and retailers are required to operate the Standard Rate Scheme (SRS).
Guidelines for taxpayers migrated from the VFRS to the SRS
- These guidelines apply to:
- All retailers whose annual turnover exceeds GHS500,000
- Wholesalers, distributors and importers of goods
- A VAT certificate of registration issued under the VFRS is still valid.
- Taxpayers migrated to the SRS are required to charge tax at the standard rate as follows:
Selling price (tax exclusive)
Ghana Education Trust (GET) Fund Levy
National Health Insurance Levy (NHIL)
COVID-19 Health Recovery Levy
- Taxpayers granted permission to use their own invoices (including computer-generated invoices, electronic cash register, etc.) are required to configure their systems to reflect the SRS.
- Newly migrated SRS taxpayers are required to file a monthly SRS return.
- All other provisions of the VAT Act (as amended) and the VAT Regulations, 2016 (L.I. 2243) relating to returns filing, tax payment and any other taxpayer obligations apply.
- Taxpayers are required to file all outstanding VAT returns relating to the VFRS prior to their migration to the SRS on or before 31 January 2022.
- Taxpayers are also required to pay up all outstanding VAT liabilities owed to the CG to avoid interests and penalties.
Transitional arrangements on recovery of input VAT on stocks by affected taxpayers migrated to the SRS
- Taxpayers who migrate to the SRS are required to claim input VAT credit on all unsold merchandised stock on hand at the time of migration, and furnish the CG with details of the unsold merchandised stock in the required format under the administrative guidelines.
- Failure of taxpayers to submit the details of unsold merchandise stock will result in forfeiture of the related input VAT on the stock.
- Taxpayers who claim input VAT credit on such unsold stock or inventory should not exceed deductible input VAT embedded in their stock on hand at the time of migration.
- The value of stock on hand submitted to the CG will be validated as and when tax audits or compliance exercises are conducted on the taxpayers who have claimed such input VAT credit.
- The CG reserves the right to revise the input VAT credit claimed on such unsold stock where grounds are perceived for doing so during validation.
Other transitional arrangements
- All fully used CG's VFRS VAT invoice booklets should be kept at the taxpayers' business premises for future audit purposes by authorized officers of the GRA.
- Partly used VFRS VAT invoice booklets should be sent to the Taxpayer Service Centers (TSCs) for review and would be subsequently returned to the taxpayer.
- Unused CG's VFRS VAT invoice booklets should be sent back to the respective TSCs for replacement to reflect the SRS (at no cost) or should be manually adjusted to reflect the standard rate for improvised use.
VAT return form
- Taxpayers (VFRS and SRS operators) are required to file the monthly VAT return form which has been modified to incorporate the VFRS.
- All retailers of taxable supplies who qualify to be registered to operate the VFRS but have not registered must apply to be registered.
- Taxpayers who migrate to the SRS should claim input VAT credit on all unsold merchandised stock on hand at the time of migration, and furnish the CG with details of the unsold merchandised stock in the required format under the administrative guidelines.
- Partly used VFRS VAT invoice booklets should be sent to the TSCs for review.
- Unused CG's VFRS VAT invoice booklets should be sent back to respective TSCs for replacement to reflect the SRS (at no cost) or should be manually adjusted to reflect the standard rate for improvised use.
- Taxpayers (VFRS and SRS operators) must file the monthly VAT return form which has been modified to incorporate the VFRS.
For additional information with respect to this alert, please contact the following:
Ernst & Young Chartered Accountants, Accra
Ernst & Young Société d'Avocats, Pan African Tax – Transfer Pricing Desk, Paris
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
Ernst & Young LLP (United States), Pan African Tax Desk, New York
1 A VFRS is a VAT collection and accounting mechanism under which a registered taxpayer who is a retailer of goods with an annual taxable turnover of not less than GHS200,000 but not in excess of GHS500,000 applies a marginal rate of 3% on the value of goods supplied.
2 A retailer is one who engages in the resale (sale without transformation) of new and used goods mainly to the public, individual or household for consumption or utilization.