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.
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.
If payment is due on the returns submitted, it must be made not later than the date the return is submitted.
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%, a line for the total of NHIL and GETFund and a line for the VAT at 12.5%.
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).
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)
STEP 1 NHIL & GETFund RETURN AUGUST,2018
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
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
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
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
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 “
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.
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.
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.