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VAT Standard

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GRA⋅Domestic Tax⋅Tax Types⋅VAT Standard

VAT Standard

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 (GETFund) from VAT by removing their input tax deductibility. These changes have implications on the computation of tax for VAT Registered persons.  Click HERE to File and Pay for your NHIL/GETFund.

Rates

  • Value Added Tax (VAT) – Standard Rate  = 12.5%
  • National Health Insurance Levy (NHIL) = 2.5%
  • Ghana Education Trust Fund (GETFund) = 2.5%

Scope and Coverage

These rates are all chargeable on the value of:
  • Every supply of Goods and services in Ghana.
  • Importation of goods.
  • Supply of imported services, unless otherwise exempted in the VAT Act 2013 (Act 870) or Regulations made under it.

Key Features on the NHIL and GETFund

  • VAT Registered Taxpayers cannot claim the NHIL & the GETFund charged on their purchases (i.e. the levies are not subject to input tax deduction).
  • Goods charged at the VAT Flat Rate of 3% are not subject to the NHIL & GETFund.
  • The levies are to be charged at every stage that a VAT Standard rated supply is made by VAT Registered Taxpayer.
  • VAT Registered persons are now to account for NHIL and GETFund on imported services (which include management and technical services, patents, licenses, etc.) on monthly NHIL and GETFund returns.
  • Items that attract a zero rate of VAT also attract a zero rate of GETFund and the NHIL Levy.
  • VAT Registered Taxpayers who are on the Standard Rate Scheme (SRS) i.e. Manufacturers & Service providers are to account and pay for NHIL and GETFund.

The Base for Charging the Levies

  • The value of the supply, excluding the chargeable levies and the deductible VAT.
  • All non-deductible levies and taxes should be factored into the cost build up (i.e. treated as costs) to the base to which to compute NHIL and GETFund. These cost (levies and taxes) incurred can however be treated as deductible expenses in the financial statements.

Taxable Value for Charging VAT

  • The base for charging VAT is the value of the supply (Goods or services) Including the chargeable levies And excluding the deductible VAT
  • All levies that CANNOT be deducted should be factored into the cost building (i.e. treated as costs) and added to the base before computing the VAT.
  • The 2.5% NHIL and the 2.5% GETFund shall be computed on the value of the taxable supply which includes all costs incurred except deductible VAT.
  • The 12.5% VAT shall be computed on the NHIL and GETFund charged inclusive value of the taxable supply
  • These costs (levies and taxes) can be as deductible expenses in a financial statement.

Responsibilities of Standard Rate Supplier

  • Account for the full output tax at 12.5% on the monthly VAT return
  • Account for NHIL and GETFund 2.5% and 2.5% each on monthly NHIL and GETFund return.
  • Retain withholding VAT credit certificate issued to them by withholding VAT agents as proof for qualification for input tax deduction.
  • Discharge all other duties and obligations applicable to them under the VAT law.

Returns

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 and GETFund Return.

The returns must be submitted not later than the last working day of the month immediately following the month to which the return relates.

For example, October returns must be submitted by the last working day in November.

Payments

If payment is due on the returns submitted, it must be made not later than the date the return is submitted.

Offences and Penalties

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.

Invoices

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%, a line for the total of NHIL and GETFund and a line for the VAT at 12.5%.

Extracting The VAT and Levies from the Levies Inclusive Amount

The fraction for extracting the NHIL is by applying 4/189 to the inclusive amount.

The fraction for extracting the GETFund is by applying 4/189 to the inclusive amount.

The fraction for extracting the VAT (i.e. 12.5%, of the VAT inclusive price is applying 1/9 to the inclusive amount (selling price).

Calculate

The NHIL and GETFund to be stated on the monthly NHIL &GETFund Return. The NHIL & GETFund Rates are 2.5% % each.

The output VAT to be stated on the face of the contractor’s monthly VAT return. The VAT rate is 12.5%.

The tax payable by the contractor, if the total input tax incurred for the period was GHC 500 (the input tax incurred will be based on only the 12.5% VAT) Assumes that the equipment hired was the only job done by the contractor in August,2018)

Solution

STEP 1 NHIL & GETFund RETURN AUGUST,2018

                                                                                                           GHC

Value Excluding VAT/NHIL/GETFund                                       40,000.00    

NHIL (40,000*2.5/100)                                                                  1,000.00

GETFund (40,000*2.5/100)                                                           1,000.00

TOTAL NHIL & GETFund Payable by contractor to GRA        2,000.00

                                                                                                           GHC 

I   NHIL & GETFund exclusive value                                          40,000.00

ii   Add: NHIL (40,000*2.5/100)                                                 1,000.00

iii    GETFund (40,000*2.5/100)                                                  1,000.00            

                                                                                                          2,000.00

GROSS AMOUNT EXCLUSIVE   OF VAT                                    42,000.00  

Output of VAT to be shown on monthly return (12.5%*42,000) = 5,250.00

Total invoice value (VAT/NHIL/GETFund inclusive) =42,000.00+5,250.00

                                                                                                                = 47,250.00

STEP 2: VAT RETURN –AUGUST,2018                                              GHC

OUTPUT VAT                                                                                           5,250.00

Less: Input   Tax @ 12.5%                                                                      500.00              

VAT payable by contractors to GRA                                                    4,750.00

Total VAT and NHIL, GETFund payable by contractor to GRA

  1. VAT                                       4,750.00
  2. NHIL & GETFund               2,000.00

                                  TOTAL                                                                          6750.00

Transitional Provisions

Outstanding Standard VAT /NHIL Invoice Booklets

Registered VAT taxpayers should Continue to issue to their clients the VAT invoices in their possession while arranging for modified VAT invoices and authorized own computer-generated invoices.

Indicate on sales invoices issued to their clients “AMOUNT IS INCLUSIVE OF VAT/ NHIL AND GETFL OR VAT/ NHIL AND GETFund INCLUSIVE AMOUNT “

Outstanding VAT/NHIL Returns

All VAT registered persons who are supposed to charge the levies but have VAT /NHIL returns outstanding as at July 31, 2018 are required to file all such returns.

Unsold Stocks of Goods

Levies on the unsold stocks of goods as at August 1, 2018 CANNOT be deducted when such Goods are sold at the new VAT rates of 12.5% after August 1, 2018.

Impact on the Withholding VAT Scheme

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 and GETFund, 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.

Relevant VAT downloads

click below to download a VAT doc

Need Help ?

Please feel free to contact us for your Customs classifications and validation

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