Value Added Tax (VAT) is a tax applied on the value added to goods and services at each stage in the production and distribution chain. It forms part of the final price the consumer pays for goods or services. In some countries it is called ‘Goods and Services Tax’ or GST. Click HERE to File and Pay for your VAT Standard Rate.
The 2018 Mid-Year budget amended the VAT rate from 15% to 12.5% and delinked the National Health Insurance Levy (NHIL) and Ghana Education Trust Fund Levy (GETFund Levy) from VAT. Due to this, the NHIL and GETFund Levy cannot be deducted as input VAT. These changes have implications on the computation of tax for VAT Registered persons.
Note: A standard rated registered taxpayer who deals with a VFRS taxpayer, can deduct the 3% as input tax. Click HERE to File and Pay for your NHIL/GETFund.
The COVID-19 Health Recovery Levy Act, 2021 (Act 1068), imposes a special levy on the supply of goods and services, and the Import of goods and services into Ghana.
The levy is chargeable at a rate of 1% calculated on the value of taxable supply in respect of:
The COVID-19 Health Recovery Levy Act, 2021 (Act 1068), imposes a special levy on the supply of goods and services, and the Import of goods and services into Ghana.
The levy is chargeable at a rate of 1% calculated on the value of taxable supply in respect of:
The COVID-19 Health Recovery Levy is applicable to both Standard Rate and VAT Flat Rate registered persons.
The COVID-19 Health Recovery Levy is not subject to input tax deduction. However, it is an allowable deduction against profit.
Taxpayers are to file their returns and make payments by the last working day of each month immediately following the month to which the returns relate. For example, October returns must be submitted by the last working day in November. If payment is due on the returns submitted, it must be made not later than the date the return is submitted.
The return must be on the form prescribed by the Commissioner General. Copies of the tax returns form can be downloaded from www.gra.gov.gh.
The following returns will be submitted by the VAT registered taxpayer
• A VAT returns for standard rates supplies
• A VAT flat rate scheme (VFRS) Returns for (VFRS Taxpayer only)
• A NHIL, GETFund, and COVID-19 HRL Return.
Failure to register, failure to issue a VAT invoice, failure to submit returns, failure to maintain proper records, tax Evasion are all offences under the law. Taxpayers who go contrary to the law will face penalties as prescribed in the law.
A modified VAT invoice isolating the levies from VAT will be issued to taxpayers.
Own computer generated invoices –taxpayers authorized to use them must be modified to provide separate lines for NHIL at 2.5%, GETFund levy at 2.5%, COVID-19 HRL 1% and a line for the VAT at 12.5%.
a. The 2.5% NHIL and 2.5% GETFund Levy shall be computed on the value of the taxable supply exclusive of COVID-19 Levy and VAT.
b. The 1% COVID-19 Levy shall be computed on the value of the taxable supply exclusive of NHIL, GETFund Levy and VAT.
c. The 12½% VAT shall be computed on the value of the taxable supply inclusive of NHIL, GETFund Levy and COVID-19 Levy.
Dzolali Limited is a VAT registered textile manufacturing company. The company made the following sales during the month of May, 2021.
Compute the relevant taxes payable
Tax computation Taxable supply = 89,000.00
GETFund levy = 89,000.00 * 2.5% = 2,225.00
NHIL = 89,000.00 * 2.5% = 2,225.00
COVID-19 Levy = 89,000.00 * 1% = 890.00 5,340.00
Taxable Value 94,340.00
VAT @ 12.5% (94,340.00*12.5%) 11,792.50
106,132.5
Note: 1. Sales to the diplomatic community are relief supplies.
2. Exports to Togo is a zero rated supply; Hence their exclusion from the computation of the levy
To ensure a smooth transition, as VAT Registered Taxpayers should make arrangements to either acquire the modified Commissioner General’s Invoice or modify your accounting software to accommodate these levies. You should insert on your existing VAT invoices or approved Computer Generated invoices/ sales receipts: a field for COVID-19 Levy after the NHIL and GETFund Levy fields.
Where the amount is inclusive of NHIL, GETFund Levy, COVID-19 Levy & VAT, you must indicate the amount in the field labelled total tax inclusive value.
Authorized computer generated invoice must be modified to provide specifically for the following in addition to the VAT of 12½%:
The standard rate VAT fraction
C = Cost
1% = 0.01 = COVID-19 Levy
2.5% = 0.025 = NHIL
2.5% = 0.025 = GETFund Levy
12.5% = 0.125 = VAT
If C = the value of the service without taxes and the levies,
Then:
0.01C = the COVID-19 Levy charged
0.025C = the GETFund Levy charged
0.025C = the NHIL charged
(0.125) (1.06C) = 0.1325C= the VAT charged
Therefore:
Total Inclusive Value = C+0.01 + 0.025C + 0.025C + [ (1.06C) *(0.125)] = 1.1925C
Cost + (COVID-19 Levy + NHIL + GETFund Levy) + VAT =1.1925C
Given 1% = 0.01
1.1925 1.1925
then multiply both the numerator and the denominator by 10,000 to remove the decimals = 0.01 * 10000 = 100
1.1925*10000 11925
To reduce to the lowest fraction, divide both the numerator and the denominator by 25
= 100 / 25 = 4
11925/25 477
COVID-19 Levy fraction = 4/477
Illustration 1
Compute the relevant COVID-19 Levy tax payable
Tax computation – COVID-19 Levy
COVID-19 Levy fraction = 4/477
GH¢94,340.00 (excluding the tax)
4 *106,132.50 (including the tax) = GH¢ 890.00
477
Total COVID 19 Levy= GH¢ 890.00
Given 2.50% = 0.025
1.1925 1.1925
then multiply both the numerator and the denominator by 10,000 to remove the decimals = 0.025 * 10000 = 250
1.1925*10000 11925
To reduce to the lowest fraction, divide both the numerator and the denominator by 25
= 250 / 25 = 10
11925/25 477
NHIL fraction = 10/477
Illustration 2.
Dzolali Limited is a VAT registered textile manufacturing company approved by the Ministry responsible for Trade and Industry. The company made an all-inclusive tax payable of GH¢94,340.00 for the month of May, 2021.
Compute the relevant NHIL Levy tax payable.
Tax computation – NHIL
NHIL Levy fraction = 10/477
GH¢94,340.00 (excluding the tax)
10 *106,132.50 (including the tax) = GH¢ 2,225.00
477
Total NHIL Levy = GH¢ 2,225.00
Given 2.50% = 0.025
1.1925 1.1925
then multiply both the numerator and the denominator by 10,000 to remove the decimals = 0.025 * 10000 = 250
1.1925*10000 11925
To reduce to the lowest fraction, divide both the numerator and the denominator by 25
= 250 / 25 = 10
11925/25 477
GETFund Levy = 10/477
Illustration 3
Dzolali Limited is a VAT registered textile manufacturing company approved by the Ministry responsible for Trade and Industry. The company made an all-inclusive tax payable of GH¢94,340.00 for the month of May, 2021.
Compute the relevant NHIL Levy tax payable.
Tax computation – GETFund Levy
GETFund Levy Fraction = 10/477
GH¢94,340.00 (excluding the tax)
10 *106,132.50 (including the tax) = GH¢ 2,225.00
477
Total GETFund Levy = GH¢ 2,225.00
(12.5%) (1.06) = (0.125 1.06) = 0.1325
1.1925 1.1925 1.1925
then multiply both the numerator and the denominator by 10,000 to remove the decimals = 0.1325 * 10000 = 1325
1.1925*10000 11925
To reduce to the lowest fraction, divide both the numerator and the denominator by 25
= 1325 / 25 = 53
11925/25 477
VAT fraction = 53/477
Illustration 4
Dzolali Limited is a VAT registered textile manufacturing company approved by the Ministry responsible for Trade and Industry. The company made an all-inclusive tax payable of GH¢94,340.00 for the month of May, 2021.
Compute the relevant NHIL Levy tax payable.
Tax computation – VAT
VAT Fraction = 53/477
GH¢94,340.00 (excluding the tax)
53 *106,132.50 (including the tax) = GH¢ 11,792.50
477
Total VAT Payable = GH¢ 11,792.50
VAT Withholding agents will continue to withhold at the time of payment 7% of the taxable value (the base on which VAT is computed) of all local taxable supplies made by a standard rated taxable person/suppliers, and the difference of 5.5% of the taxable value, along with the taxable value, will continue to be paid to the taxable person /supplier.
The withholding VAT agent will continue to issue to the supplier withholding VAT certificate showing the amount of tax withheld. These Certificates are to be used for purposes of showing as proof of advanced payment of both the VAT and the levies.
The VAT registered taxpayer who has made supplies and has suffered withholding VAT will continue to file both their VAT and levy returns and account for these imposts in accordance with the provision of the VAT Act, 2013, (Act 870), NHIL, GETFund, and COVID-19 HRL Act respectively to the Ghana Revenue Authority.
Withholding VAT agents will continue to file withholding VAT returns by the 15th of the month immediately following the month to which a return relates and make payments of VAT withheld to the commissioner General.
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