Executive summary

The Ghana Revenue Authority (GRA) has announced that, effective 1 April 2025, value-added tax (VAT) applies to non-life insurance services in accordance with the Value Added Tax (Amendment) Act, 2023, Act 1107 (the VAT Amendment Act). Although the VAT Amendment Act came into force on 29 December 2023, the GRA had not been enforcing it. This announcement serves to inform stakeholders that the implementation of VAT on non-life insurance services is now being enforced.

(For background on the VAT Amendment Act, see EY Global Tax Alert, Ghana's 2024 Budget Statement tax proposals passed into law, dated 23 January 2024.)

Detailed discussion

Suppliers of non-life insurance services must charge VAT

On 29 December 2023, the VAT Amendment Act was enacted, ushering in significant changes including the reclassification of non-life insurance services as a taxable supply. Despite the enactment, the GRA did not enforce this provision. However, in a recent announcement, the GRA informed the general public, insurance companies, insurance brokerage firms, agents, payment gateways, insurance policy holders and all other relevant persons in the industry that, effective Tuesday, 1 April 2025, it would commence the implementation of this provision under the VAT Amendment Act.

According to the GRA, this change aligns insurance taxation with the overarching principles of VAT, facilitating enhanced revenue collection and optimizing the input-output tax mechanism under the VAT regime.

The implementation of this provision in the VAT Amendment Act means that affected suppliers/insurers:

• Must register for VAT upon meeting the VAT registration threshold
• Must charge VAT at the standard rate on policy premiums for non-life insurance supplies and operate the input-output VAT mechanism, if registered for VAT
• May claim input VAT on qualifying expenses incurred in providing the taxable non-life insurance supply

In addition, it is anticipated that the VAT implementation will result in an increase in the cost of non-life insurance supplies for policy holders.

Bill to exempt the supply of motor vehicle insurance laid before Parliament

Upon its enactment, the VAT Amendment Act rendered the supply of motor vehicle insurance a taxable supply. However, a bill currently before Parliament is purposed to amend the Value Added Tax Act, 2013, Act 870 (as amended) to classify the supply of motor vehicle insurance as non-taxable. This proposal is in line with the tax policies put forth by the Minister responsible for Finance during the 2025 budget statement presentation.

When the bill ultimately is passed and receives presidential assent, the supply of motor vehicle insurance will be exempt from VAT. This exemption will reduce the cost of purchasing motor insurance.