Implementation Of The Value Added Tax Act, 2013 (Act 870): What You Must Know

The Commissioner-General of the Ghana Revenue Authority wishes to bring to the attention of all taxpayers, stakeholders and the general public the following changes to the Value Added Tax (VAT) regime due to the enactment of the Value Added Tax Act 2013 (Act 870) which received Presidential assent on 30th December, 2013 and notification in the Gazette on 31st December, 2013

1. VAT Rate
All persons registered for the Value Added Tax (VAT) and are currently operating the standard rate scheme are required to charge and account for VAT and the National Health Insurance Levy (NHIL) simultaneously at the rates of 15% and 2⅟₂% respectively of the taxable value of their supplies. This in effect amounts to a total charge of 17⅟₂% of the taxable value of the supply.

2. VAT/NHIL Invoices
The Commissioner-General’s VAT/NHIL invoices must be issued for all taxable supplies with the rate for VAT manually adjusted to indicate 15% instead of 12⅟₂%. The rate of the NHIL remains 2⅟₂%.

Taxpayers who have been authorized by the Commissioner-General to use their own computer-generated invoices as well as those authorized to use electronic cash registers are required to re-programme their equipment to ensure that VAT is charged at the rate of 15% and NHIL at 2⅟₂% and their customers invoiced accordingly. Such registered persons must use the Commissioner-General’s VAT/NHIL invoices adjusted as indicated in any instance where they are unable to use their computer-generated invoices or electronic cash register receipts.

3. VAT/NHIL Returns
For the avoidance of doubt a tax return shall be submitted to the Commissioner General not later than the last working day of the month immediately following the month to which the return relates, whether or not tax is payable for the period.

4. Credit for Deductible Input Tax
By the provisions of the VAT Act 2013, (Act 870), allowable period for deducting input tax has been reduced from three (3) years to six (6) months.

Accordingly all registered persons who are in possession of valid VAT/NHIL invoices for input tax claims which are more than six (6) months (i.e. before 31st July 2013) are to claim them on the December 2013 returns. This must be submitted not later than the last working day of January 2014 (i.e. 31st January 2014).

5. Scope and Coverage of the Value Added Tax
The Value Added Tax 2013, (Act 870) extends the coverage of the tax to some business activities which were hitherto outside the tax net. These include the following business activities;

a) The sale of immovable property by an estate developer.

(“estate developer” means a commercial establishment engaged in the business of the construction and sale of immovable property)

b) The supply of financial services that are rendered for a fee, commission or a similar charge.

“Financial services” means provision of insurance; issue, transfer, receipt of, or dealing with money whether in domestic or foreign currency or any note or order of payment of money; provision of credit; or operation of a bank account or an account of a similar institution

Life insurance and reinsurance services are however exempt from the tax whether or not such services are rendered for a fee, commission or a similar charge

c) A supply of domestic transportation of passengers by air; and the supply of haulage as well as the rental or hiring of passenger and other vehicles.

d) The business activities of auctioneers and promoters of public entertainment

e) The business of gymnasium and spa
f) The manufacture or supply of pharmaceuticals listed under Chapter 30 of the Harmonized Systems Commodities Classification Code, 2012 other than supplies at the retail stage.

All businesses engaged in these activities but have not registered for VAT/NHIL are obliged to contact their GRA local offices for registration for VAT/NHIL in accordance with the provisions of the VAT Act.

6. Taxpayers Registered under the VAT Flat Rate Scheme

All persons registered for VAT/NHIL and are authorized to operate under the VAT Flat Rate Scheme (VFRS) are required to continue to charge and account for the tax at the rate of 3% of the taxable value of their supplies until otherwise advised by the Commissioner-General in writing. Such registered persons are to issue the VFRS VAT/NHIL invoices.