Value added tax (VAT) was introduced in Ghana on 18 March 1998 to replace sales tax under the Customs, Excise and Preventive Service (Management) (Amendment) (No. 2) Act 1995 (Act
, and Service Tax Act 1995 (Act
, as amended.
The National Health Insurance Levy (NHIL) was also introduced on 4 November 2004 as an additional consumption tax similar to VAT specifically to secure the provision of basic healthcare services to persons resident in the country through mutual and private health insurance schemes. NHIL is administered alongside VAT by the VAT Service.
Rates and scope
The standard rate of 12.5% for VAT and the rate of 2.5% for NHIL apply to all supplies of goods and services not qualifying for an exemption or zero- rating. Under the VAT flat rate scheme (VFRS), a rate of 3% is charged by retailers for the supply of goods.
VAT and NHIL are charged on the supply of taxable goods and services.
VAT is charged on the supply of all goods and services by a taxable person (except when the goods and services are specifically exempt).There are no territorial jurisdictions which do not belong to the VAT territory.
The following registration thresholds currently apply in respect of taxable persons supplying goods:
GHS10,000 over a twelve-month
GHS7,500 over a nine-month period;
GHS5,000 over a six-month period; or
GHS2,500 over a three-month
whichever is achieved the earlier.
In the case of businesses supplying services there is no registration threshold. As a result, these businesses need to register straight away.
Any business with a turnover below the registration threshold may apply voluntarily to be registered by the Commissioner.
VAT flat rate scheme registration
Under the VAT flat rate scheme (VFRS), which was introduced on 1 September 2007, operators are required to register with the VAT Service and be issued with the regular VAT certificate of registration. VFRS operators are required to apply a rate of 3% on the value of taxable supplies for each sale transaction.
Group and branch registration
Two or more corporate bodies may be registered as members of a group if each member is a registered corporate body in Ghana and has an established place of business in Ghana, and one of them controls the others in the group or one company controls all the members of the group.
A taxable person in his application for separate branch registration must state the branches and divisions, including self-accounting branches where the business has more than two branches or divisions.
A nonresident business needs a physical representative to register. If requested, and where permissible by internal independence requirements, PricewaterhouseCoopers will act as representative in the processing of VAT returns and advise on issues relating to VAT compliance and the submission of cheques of agreed VAT liability to the VAT Service.
Application for registration
Anyone who qualifies to register has to apply to the Commissioner for registration as a taxable person. The registration form requires the following information:
name of business or proprietor;
trading name (if different);
postal and physical address;
date of commencement of trading;
tax identification number;
type of business and description of business activity;
value of total sales or turnover for the last 12 months, value of taxable sales and turnover (including zero- rated) during the last 12 months; and
a declaration by the person completing the registration form certifying that the information provided is true and accurate to the best of his knowledge.
Failure to register attracts a penalty of GHS500 to GHS1,000.
The VAT identification number format is: 999 V 999999
Businesses who no longer qualify can be deregistered and would have to reregister again when qualified.