VAT Flat Rate

Fairness| Professionalism| Service

GRA⋅Domestic Tax⋅Tax Types⋅VAT Flat Rate

Vat Flat Rate Scheme (VFRS)

The VFRS is a special method of collecting and accounting for VAT/NHIL. It is designed for all VAT-registered retailers of taxable goods with an annual turnover of more than GHC200,000 but not exceeding GHC500,000. These registered taxpayers shall charge VAT/NHIL and COVID-19 HRL at a marginal rate of 4% on the value of their taxable sales.

Purpose of VFRS

VFRS is simpler to operate
Eliminates the difficulty of obtaining invoices to support input tax claims and
Has the potential to expand the tax net and create a level playing field for all registered taxpayers

The VFRS is an alternative to the standard VAT/NHIL, and COVID-19 HRL and a simplified method of accounting for VAT/NHIL and COVID-19 HRL. This means that VAT registered taxpayers who are exclusively retailers of taxable goods cannot operate the standard VAT Scheme.

A Flat Rate of 3%

The tax payable at a flat rate of 3% is equivalent in value to the effective tax payable by traders on the current invoice-credit scheme at a rate of 12.5% which employs the input-output mechanism.

Illustration 1

Ent. operates as a fuel station with a mart. At the end of May, 2021, the taxpayer made the following sales.

Sales from fuel (pumps) – GHS 528,159.00
Sales from the mart – GHS 125,426.80

Compute the relevant taxes payable

Taxable supply = 125,426.80

COVID-19 Levy = 125,426.8*1% = 1,254.27

VAT = 125,426.8*3% = 3,762.80 5,017.07

130,443.87

Note: The fuel sale is exempt sales while flat rate would be applied to the sales from the mart.

Persons who Qualify to Operate the VFRS

All VAT registered retailers of taxable goods with an annual turnover equal to or more than GHC200,000 but not exceeding GHC500,000 qualify to operate the VFRS.

NOTE: It is important to note that persons who are not registered by GRA to operate either the VFRS at 3% or the standard VAT scheme at 12.5% cannot by law charge VAT or the associated levies NHIL, GETFL, COVID-19 HRL.

Sale with VAT Flat Rate

The VFRS does not change the tax status of goods and services supplied. Goods and services specified as exempt supplies under the VAT Act 2013 (Act 870) as amended remain exempt. In the same way, the status of zero-rated and relief supplies remain unchanged. Therefore, a VFRS operator is not required to charge the tax on exempt items such as:

Agricultural products in their raw state produced in Ghana
Agricultural inputs
Fishing equipment
Mosquito nets
Postage stamps
Goods designed for the exclusive use of the disabled
Petrol, diesel, kerosene and LPG
Medical services and Medical supplies

Issuance of VFRS Invoice

VFRS businesses and operators are required by the VAT law to issue the VAT/NHIL and COVID-19 HRL Flat Rate Scheme invoice for all transactions. However, businesses authorized by the Commissioner-General to operate the Special Retail Scheme could use electronic means to record their sales and issue till receipts for their sales. The till receipt will show the rate and amount charged for the VAT/NHIL/GETFL.

Relevant VAT downloads

click below to download a VAT doc