Important Tax Law Changes – effective January 2023

Highlights of assented tax policies from 2023 Budget Statement.

The government of Ghana outlined tax policy measures in the 2023 Budget statement. The proposed policy was brought into effect when the Parliament of Ghana assented Value Added Tax (Amendment) (N0 2) Act 2022 (Act 1087) and Electronic Transfer Levy (Amendment) Act 2022 (Act 1089).

In this update we highlight the key provisions in the amended acts and its impact on the taxpayer.

Value Added Tax (Amendment) (N0 2) Act 2022 (Act 1087)

Increase in rate for VAT Standard Scheme

The Amendment Act increased the VAT standard rate from 12.5% to 15%. Suppliers on the standard rate scheme are required to charge VAT in conjunction with the associated levies; National Health Insurance Levy (2.5%), Ghana Education Trust Levy (2.5%), Covid-19 Health Recovery Levy (1%) and Communication Service Tax (where applicable). As a result, the effective VAT rate has increased from 19.25% to 21%.

Taxpayers under the standard rate scheme are allowed deductible input VAT from the output VAT equal to the VAT paid for supplies due for the period as outlined in the principal Act 870.

The VAT flat rate scheme rate was however not revised. Suppliers on the scheme are required to charge VAT at 3% and Covid-19 Levy at 1%.

The revision in the VAT rate for the standard rate scheme means the cost of goods and services would increase.

Penalty for non-compliance with issuance of tax invoice

The Amendment to the VAT Act requires taxpayers to issue an electronic invoice through an approved electronic system known as the Certified Invoicing System. Suppliers are also required to integrate the Certified Invoicing System into the invoicing system of the Commissioner General. The provision also cautions taxpayers on tampering, manipulating, or interfering with the proper functioning of the Certified Invoicing System.

Non-compliance to the above requirements subjects taxpayers to an administrative penalty of an amount not more than fifty thousand currency points or three times the amount of tax involved, whichever is higher. This penalty is imposed in addition to the penalty imposed for failure to issue tax invoice as per Section 58 of the VAT Act, 2013 (Act 870).

Exclusion of betting and game of chance as taxable supply

Act 1087 has excluded betting; gaming machine and lottery stakes out of the scope of a taxable activity. Suppliers involved in the acceptance of wager or stake in the form of betting or lottery are no longer required to charge VAT on stakes.

Supplier may therefore de-register for VAT purposes after filing December 2022 VAT returns.

Revision of Imported Textbooks and supplementary readers from exempt supplies

The Amendment Act excluded imported textbooks and printed materials as exempt supplies. This excludes such supplies from the Ministry of Education approved exemption list. Supplies of such goods is subject to VAT.

Electronic Transfer Levy (Amendment) 2022 (Act 1089)

The Electronic Transfer Levy (Amendment) 2022 (Act 1089) assented by Parliament reduced the applicable rate from 1.5% to 1% of the value of electronic transfers. The initial budget statement proposed the removal of the daily threshold. However, Act 1089 did not include such provision.

The Amendment also introduces return filing obligation to charging entities of the electronic transfer levy as listed in the first schedule of Act 1075. The Amendment also requires charging entities to pay to the Commissioner General amounts charged as electronic transfer levy within twenty (24) hours after charging the amount.

Complete Reversal of Benchmark Policy

The revised Benchmark Value Discount Policy as of March 01, 2022, provided a discount of 30% on the delivery or benchmark value of all other imports and home delivery values for vehicles were reduced by 10%.

In a bid to raise more revenue the 2023 Budget Statement completely reversed the Benchmark Value Discount Policy. This implies that no discount was applied on delivery or benchmark value of all other imports and home delivery values for vehicles. This reversal policy is effective and applicable for all imports from January 01, 2023.

The complete reversal on the benchmark value discount means cost of duties for imports would increase, which would be passed on to the final consumer.