Worldwide VAT, GST and Sales Tax Guide
Accra GMT
EY
Mail address:
Street address:
60 Rangoon Lane
P.O. Box KA 16009 Cantonments City
Accra Accra
Ghana Ghana
Indirect tax contacts
Isaac N. Sarpong
Godwin K Matachor
A. At a glance
Name of the tax
+233 (577) 653 377 +233 (302) 772 088
isaac.sarpong@gh.ey.com
+233 (249) 666 377
godwin.matachor@gh.ey.com
Value-added tax (VAT)
Local name Value-added tax (VAT)
Date introduced 18 March 1998
Trading bloc membership Economic Community of West African States (ECOWAS) African Continental Free Trade Area (AfCFTA)
Administered by Ghana Revenue Authority (GRA)
VAT rates
Standard 15%
Reduced 3%, 5%
Other Zero-rated (0%) and exempt
VAT number format C000XXXXXXX
VAT return periods Monthly
Thresholds
Registration
GHS200,000 (annual)/GHS50,000 (quarterly) with expectation to exceed GHS150,000 in next 9 months
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• Taxable supplies made in Ghana
• Imported goods or imported services other than goods or services that are exempt
A “taxable activity” is defined as an activity carried on by a person wholly or partly in Ghana that involves or is intended to involve, in whole or in part, the supply of goods or services to another person for consideration, whether or not for a pecuniary profit.
Effective 1 January 2023, the acceptance of a wager or stake in any form of betting or gaming, including lotteries and gaming machines is excluded from being a taxable activity under the VAT Act.
Each group member is jointly and severally liable for any VAT debts and penalties that may arise.
Fixed establishment. In Ghana, there is no legal definition of a fixed establishment for VAT purposes, nor is a fixed establishment required to trigger VAT registration. However, making any taxable supply in Ghana will necessitate VAT registration. Once a taxable supply is made and the registration threshold is met, the individual must register and charge VAT. Therefore, the place of supply rules, rather than the presence of a fixed establishment, determine whether a person has a VAT registration obligation in Ghana. In addition, having a permanent establishment in Ghana may result in a VAT registration where the person engages in a taxable activity and satisfies the registration threshold. A Ghanaian permanent establishment includes the following:
• A place in Ghana where a nonresident person carries on business or that is at the disposal of the person for that purpose
• A place in Ghana where a person has, is using or is installing substantial equipment or substantial machinery
• A place in Ghana where a person is engaged in a construction, assembly or installation project for 90 days or more, including a place where a person is conducting supervisory activities in relation to that project
• The provision of services in Ghana
• A place in Ghana where an agent performs any function on behalf of the business of a nonresident person
– Including, in the case of an insurance business, the collection of premiums or the insurance of risks situated in Ghana –
Excluding a case involving a general agent of independent status with its own legal personality acting in the ordinary course of business
Non-established businesses. Except as stated herein, a “non-established business” is a business that does not have a fixed establishment in Ghana and cannot register for VAT purposes in Ghana. A nonresident person is not required to register for VAT unless it undertakes a taxable activity in Ghana and satisfies the threshold for registration and, in the case of a nonresident person that provides telecommunication services or electronic commerce services, provides those services through a VAT-registered agent who makes taxable supplies of goods and services in Ghana.
VAT on imported goods is generally paid by the importer of record at the point of customs clearance.
Tax representatives. In Ghana, a taxable person can appoint a representative to be responsible for paying any taxes owed by the taxable person and handling other related duties. Additionally, the Commissioner-General (CG) has the authority to designate a person as a representative of a taxable person if deemed necessary.Where a taxable person appoints a representative, the appointment shall not relieve the taxable person from performing any duty that the representative fails to perform.
Reverse charge. The reverse-charge mechanism of accounting for VAT is applicable to importation of services into Ghana. A VAT-registered person that imports services from a nonresident person is required to reverse-charge itself:
• VAT at a rate of 15%
• NHIL at a rate of 2.5%, GETFUND Levy at a rate of 2.5%, and COVID-19 Health Recovery Levy (COVID-19 Levy) at a rate of 1%
There is no requirement to reverse charge VAT where the imported services are to be used to make taxable supplies.
The levies, however, apply even where the imported services are used to make taxable supplies. This follows a judgment of the High Court on 9 November 2023 in Scancom Plc vs. the Commissioner-General, Suit No. CM/TAX/0008/22.The output tax charged shall be paid to the CG
within 21 days after the end of the month within which the transaction occurred. The payment shall accompany a service import declaration in a prescribed form stating the details of the import. The input tax on imported services is not claimable.
Domestic reverse charge. There are no domestic reverse charges in Ghana.
Digital economy. A nonresident person who is not registered for VAT and supplies telecommunication services or electronic commerce (e-commerce) to persons for use or enjoyment in Ghana is required to register and account for VAT. However, where the services are provided through a VAT-registered agent, the nonresident person is not required to register.
An unregistered, nonresident person who provides telecommunication services or electronic commerce to persons for use or enjoyment in Ghana (other than through a VAT-registered agent) must register for VAT. The GRA commenced the enforcement of the above from 1 April 2022. Nonresident persons who provide telecommunication services or electronic commerce for use in Ghana must submit a return to the Commissioner General (CG) not later than the last day of the month immediately following the month to which the return relates, whether or not tax is payable for the period, and pay the tax due to the CG by the same day that the return is due. A nonresident person who contravenes a provision of the VAT Act and Regulations made under the Act is (in addition to any other penalty imposed under the VAT Act or Regulations) liable to a restriction of access in the country until the person fulfills the obligations under the VAT Act and VAT Regulations. The Act defines “digital service” to include:
• Social networking
• Online gaming
• Cloud services
• Video or audio streaming
• Digital marketplace operations
• Online advertisement services
“Electronic commerce” is defined in the Act to include a business transaction, including a digital service, that takes place through the electronic transmission of data over a communication network such as the internet.
“Telecommunication services” include services that relate to:
• The transmission, emission or reception of signals
• Writings, images and sounds of information of any nature by wire, radio, optical or other electromagnetic systems, including the provision of access, transmission, emission or reception
• Political, social, cultural, artistic, sporting, scientific or entertainment broadcasts, or events
In addition, effective 12 September 2022, the place of supply of a digital service is the place where the service is supplied, used or enjoyed in the country if any two of the following circumstances exist:
• The recipient of the service is a resident person.
• The payment, including mobile money, credit card, debit card or bank account, for the supply of a digital service originates from a payment platform in the country or a registered or authorized financial institution as provided for under the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930).
• The recipient of the supply of a digital service has either a business, residential or postal address, internet proxy address or phone number in the country.
• The service is received on a terminal located in the country, including a computer, tablet, mobile phone or similar device. There are no other specific e-commerce rules for imported goods in Ghana.
Online marketplaces and platforms. A nonresident person who is not registered for VAT and supplies electronic commerce to persons for use or enjoyment in Ghana is required to register and
• If the goods or services are applied to the taxable person’s own use, the tax point is the date on which the goods or services are first applied to the taxable person’s own use.
• If the goods or services are supplied by way of a gift, the tax point is the date on which ownership of the goods passes or the performance of the service is completed.
For all other cases, the time of supply is the earliest of the following events:
• The goods are removed from the taxable person’s premises or from the premises where the goods are under the taxable person’s control.
• The goods are made available to the taxable person to whom they are supplied.
• The services are supplied or rendered.
• Payment is received.
• A tax invoice is issued.
Deposits and prepayments. The time of supply for deposits and prepayments is when the deposit or prepayment is forfeited, unless the goods or services are returnable. If the goods or services are returnable, the tax point follows the rules specified in the Goods sent on approval for sale or return subsection below. This rule applies regardless of whether the deposits and prepayments are refundable or nonrefundable, and even if the supply does not occur. The time of supply rules for deposits and prepayments are consistent for both goods and services.
Continuous supplies of services. The time of supply for continuous supplies for each successive supply is the earlier of the date for which payment is due or received or the invoice is issued. This applies to both goods and services.
Goods sent on approval for sale or return. The tax point is the earliest of the following:
• The date when the purchaser chooses to keep the goods
• The issue of tax invoice by the seller
• The receipt of payment by the seller, other than a deposit
• The expiry of the period within which the customer may return the goods Or
• 12 months after the date of dispatch by the seller
Reverse-charge services. A taxable person who buys a service from outside Ghana is required to account for VAT by way of the reverse-charge mechanism, unless the services are used to make taxable supplies. The tax point is the earlier of the date the supply occurs, an invoice is issued, or payment is made for the services. The VAT is required to be paid within 21 calendar days after the month in which the services were imported.
The reverse-charge mechanism does not apply on the purchase of goods from outside Ghana.
Leased assets. The supply of goods under a finance lease, hire purchase or operating lease agreement occurs on the date the goods are made available under the agreement or lease. The time of supply for goods supplied under a rental agreement is the date payment is due or received or the invoice issued for each successive supply, whichever date is earlier.
Imported goods. The time of supply for imported goods is either the date on which customs clear or the date on which the goods leave a bonded warehouse (in the case of goods warehoused without the payment of duty).
F. Recovery of VAT by taxable persons
A taxable person may usually recover input tax incurred on goods and services purchased for business purposes. Input tax is claimed by deducting the input tax credits from output tax, which is VAT charged on taxable supplies. Taxable persons must claim input tax within six months after making an expenditure.
incurred in Ghana. Ghana does not have a regime for the recovery of VAT paid by nonresidents leaving the country. However, the VAT Regulations provide that a refund of VAT charged on goods purchased by a taxable person not resident or domiciled in Ghana for consumption outside Ghana may be authorized by the CG subject to such written conditions that the CG may impose.
H. Invoicing
VAT invoices. On making a supply of goods and services, a taxable person must issue to the recipient of the goods or services a preprinted VAT invoice in a form prescribed by regulations, unless the CG permits otherwise. A taxable person that issues VAT invoices must retain copies of them in serial order for inspection by the GRA. The invoice must contain specific information detailed in the VAT Act.
Certified invoicing system. Effective 12 September 2022, a taxable person is required to issue a tax invoice through a certified invoicing system (CIS) and to ensure that the CIS of the taxable person is integrated into the invoicing system of the CG. The CG may access the CIS of a taxable person to ensure compliance with the provisions of the VAT Act.
A taxable person is required to issue only one tax invoice or sales receipt for each taxable supply. Where a recipient who is a taxable person has not received a tax invoice, the recipient may, within 48 hours after the date of the supply, obtain a copy of the invoice from the CIS of the taxable person. A taxable person is required, within 24 hours, to inform the CG and ensure that the CIS of the taxable person is restored online and accessible by the CG where the CIS of a taxable person goes offline or is inaccessible by the CG.
Where a recipient who is a taxable person has lost a tax invoice for a taxable supply, the recipient may obtain a copy of the tax invoice from the invoicing system of the CG.
Effective 29 December 2022, a taxable person is required, to comply with the provisions relating to the CIS.
Credit notes. A VAT credit note may be issued where any of the following circumstances leads to the output tax actually accounted for exceeding the output tax that should have been properly charged for the supply:
• When the supply is canceled.
• The nature of the supply has been fundamentally varied or altered.
• The previously agreed consideration for the supply has been altered by agreement with the recipient of the supply, whether due to an offer of a discount or for any other reason.
• The goods or services or part have been returned to the supplier.
Electronic invoicing. Electronic invoicing is mandatory in Ghana for all taxable persons.
Scope of electronic invoicing. For B2B, B2C and business-to-government (B2G) supplies, electronic invoicing is mandatory for all taxable persons in Ghana. There is no threshold beyond which taxable persons are required to adopt electronic invoicing in Ghana. E-invoicing is mandatory for all taxable persons making taxable supplies.
Electronic invoicing is being implemented in three phases. Phase one, for large taxable persons, has been rolled out. Phase two focuses on 600 large taxpayers and more than 2,000 small and medium taxable persons. Phase three is expected to be completed by the end of 2024 and will cover all other taxable persons. However, at the time of preparing this chapter, a taxable person may apply to the CG to be signed onto the CIS voluntarily.
The definitions of the size of the taxable persons are as follows:
• A large taxable person is a company or individual that has an annual turnover of GHS5 million (approx. USD312,695) and above.
• A medium taxable person is a company or individual with annual turnover between GHS90,000 and GHS5 million (approx. USD5,629 to USD312,695).
• A small taxable person is a company or individual with annual turnover of less than GHS90,000 (approx. USD5,629).
Taxable persons are required to issue a tax invoice through a CIS and to ensure that the CIS of the taxable person is integrated into the invoicing system of the CG. All VAT-registered persons are required to comply with e-invoicing (or CIS). The CIS approved by the CG include the following:
• E-invoicing software (certified ERPs or POS) – which applies to persons who have their own accounting software in place.
• Free invoicing software (mobile, online, desktop) – applies to persons without accounting software of their own.
A taxable person may make an application to the CG for their permission to use the business’s own computer-generated VAT invoice. This application will trigger an inspection of the company’s accounting generating invoicing system. Permission may only be given upon the CG satisfying themselves of the robustness of the system.
Once the application is made to the CG, the CG shall reply to the application acknowledging receipt of the said application. Thereafter, the CG shall send a letter indicating the time period for the inspection and the appointed officer to carry out the assignment. Where the CG is satisfied, they shall grant the business permission in writing to proceed with the use of its own computer-generated VAT invoices.
Taxable persons issuing the manual VAT invoices will be provided with the CG’s free invoicing software at no cost. The CG will access the online invoicing system through the taxable person’s own internet and devices such as desktops, laptops and smart electronic devices, such as phones, iPads, etc.
Simplified VAT invoices. The CG may authorize a taxable person who makes a taxable supply to issue a sales receipt instead of a tax invoice. The dispensation is available to taxable persons who make low-value, high-volume supplies; supplies are paid for in cash and taxable persons who use electronic devices approved by the CG for the issue of the sales receipt. The authorization shall be for a period determined by the CG and may be renewed. A sales receipt does not qualify for input tax deduction.
Self-billing. Self-billing is not allowed in Ghana.
Proof of exports. Exports are zero-rated. To zero-rate exports, all exports must be supported by evidence proving that the goods have left Ghana. The GRA requires detailed documentation for exports. Documentation required includes:
• Customers’ orders
• Sales contracts
• Intercompany correspondence
• Export invoices
• Advice notes/consignment notes/packing lists
• Insurance and freight charges
• Evidence of payment
• Evidence of receipt of goods abroad
This is without prejudice to checks on any other business records.
Foreign currency invoices. Ghana does not have a mandatory rule regarding foreign currency invoices that have been converted into the domestic currency, which is the Ghanaian cedi (GHS). The general practice is to use the interbank exchange rate prevailing on the date of the transaction
J. Penalties
Penalties for late registration. A taxable person that is not registered but is required to apply to be registered under the VAT Act is considered to be a taxable person from the beginning of the tax period immediately following the period in which the duty to register arises. A taxable person that fails to apply for registration commits an offense.
A taxable person that fails to register is liable to a penalty of not more than two times the amount of tax on the taxable supplies payable from the time the taxable person is required to apply for registration until the taxable person files an application for registration.
Penalties for late payment and filings. A taxable person who fails to submit tax returns to the CG without justification by the due date is liable to a pecuniary penalty of GHS500 and a further penalty of GHS10 for each day after the due date that the return is not submitted.
A taxable person who fails to pay tax by the due date on which the tax is payable is liable to pay interest for each month or part of a month for which any part of the tax is outstanding. The interest is calculated as 125% of the statutory rate, compounded monthly, applied to the amount outstanding at the start of the period.
Effective 29 December 2023, an appointed withholding VAT agent who fails to withhold VAT and remit same to the CG by the 15th of the month following the month to which the payment relates, is liable to pay the VAT that should have been withheld and a penalty of 30% of the amount.
Nonresident persons. A nonresident person who contravenes a provision of the VAT Act and Regulations made under the Act (in addition to any other penalty imposed under the VAT Act or Regulations made under the Act) is liable to a restriction of access in Ghana until the person fulfills the obligations under the VAT Act and Regulations.
Penalties for errors. Failure to issue a VAT invoice may result in a penalty not more than GHS1,440 or a term of imprisonment of not more than six months or both.
A taxable person who makes a statement to an officer of the GRA that is false or misleading, omits from a statement any matter or item without which the statement is misleading, is liable to a penalty of:
• 100% of the tax shortfall where the statement was made without reasonable excuse Or
• 30% of the tax shortfall in any other case
Effective 1 January 2023, in addition to the above penalty for failing to issue a tax invoice, a taxable person who meets any of the below conditions for the CIS will be subject to pay a penalty of an amount of no more than GHS50,000 or three times the amount of tax involved, whichever is higher:
• Issues a false tax invoice or sales receipt
• Fails to issue a tax invoice or sales receipt
• Fails to issue a tax invoice through a CIS
• Tampers, manipulates or interferes with the proper functioning of a CIS
• Fails to integrate the CIS of the taxable person into the invoicing system of the CG
• Fails to reconnect the CIS of that person to the invoicing system of the CG
For further details on the CIS, see the subsection Section H. Invoicing, VAT invoices, Certified invoicing system above.
The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details may result in a penalty. Such penalty would fall under the general penalty
provision, i.e., the failure to comply with the tax law. This is an offense and, where a specific penalty is not provided for, a fine of no less than GHS12,000 and no more than GHS30,000 shall be payable upon summary conviction. The taxable person may also be sentenced to a term of imprisonment of between two to five years, or to both a fine and a term of imprisonment. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. Making a statement to an officer of the GRA that is false or misleading, omitting from a statement any matter or item without which the statement is misleading, may result in a penalty where the inaccuracy if undetected, would have resulted in an underpayment of tax exceeding GHS50, to a fine of not less than GHS300 and not more than GHS2,400 or to a term of imprisonment of not less than three months and not more than two years or to both. In any other case, the taxable person shall be liable to a fine of not less than GHS60 and not more than GHS600 or to a term of imprisonment of not less than one month and not more than three months or to both.
Falsification and alteration of documents may result in a penalty where the inaccuracy if undetected, would have resulted in an underpayment of tax exceeding GHS50, to a fine of not less than GHS300 and not more than GHS2,400 or to a term of imprisonment of not less than three months and not more than two years or to both. In any other case, the taxable person shall be liable to a fine of not less than GHS60 and not more than GHS600 or to a term of imprisonment of not less than one month and not more than three months or to both.
Evasion of tax payments may result in a fine not exceeding three times the tax that is being evaded or imprisonment for a term not exceeding five years or both.
Obstruction of officer of the GRA, where the offense involves fraud or undue force, to a fine of twice the amount sought to be evaded or recovered or GHS2,400, whichever is greater or a term of imprisonment not less than two years and not more than four years or to both. In any other case, to a fine of not less than GHS120 and not more than GHS2,400 or to a term of imprisonment not less than three months and not more than two years or to both.
Personal liability for company officers. Where an entity commits an offense, a manager (which includes directors) of the entity is also treated as having committed the same offense and vice versa.
However, this does not apply to a manager who has exercised the degree of care, diligence and skill that a reasonably prudent taxable person in the position of the manager would have exercised in preventing the commission of the offense.
In addition, as outlined above under the subsection Penalties for errors, a taxable person who makes a statement to an officer of the GRA that is false or misleading or omits from a statement any matter or item without which the statement is misleading, is liable to a penalty of:
• 100% of the tax shortfall where the statement was made without reasonable excuse Or
• 30% of the tax shortfall in any other case
In extreme cases, prison terms may be imposed with or without the fine.
Statute of limitations. The statute of limitation in Ghana is six years. The CG may, however, go beyond the said period where there is fraud, willful default or serious omission by or on behalf of a taxable person. For taxable persons, there is no statute of limitation to correct a return. For VAT purposes, however, it should be noted that the six-month limitation in respect of claiming an input deduction remains.