VAT ON IMPORTS/EXPORTS
This topic deals with the VAT procedures which apply to goods imported into and exported from Ghana. It also deals with the procedures to be used by exporters of services, the recipients of imported services and with goods entering and leaving the Free Zone. The law governing Value Added Tax Act, 2013 (Act 870) and Value Added Tax Regulations, 2016 (L.I.2243). Sections 35, 37 Sections 36 and 50, and Schedule 2 of the Act, and Regulation 39 and 42 deal with exports.Liability to VAT
The goods which attract VAT at importation are classified as such in the Customs Division Tariff in accordance with the Harmonized System (HS) Code classification which encompasses the ECOWAS Common External Tariff (CET). This classification also includes goods exempted under the law. The taxation of imported services is dealt with in Section 3 below.Payment
VAT is charged on all imports, other than those specifically exempted under the Act or classified as exempt under the Harmonized System (HS) Code , at the time of importation. However, VAT registered importers are entitled to claim this VAT as input tax, unless they make exempt supplies, in which case only the VAT incurred in making taxable supplies will be reclaimable.Time of importation
VAT purposes, the time of importation is when the customs and other duties and taxes become due.Value
The value for charging VAT on imports is the value for customs duty plus import duties and other taxes which may be chargeable.Responsibilities of freight forwarding, shipping and clearing agents
It is important for importers, exporters, freight forwarders and shipping and clearing agents to be aware of the changes brought about by the introduction of VAT. The services provided by freight forwarding, shipping and clearing agents and port authorities are liable to VAT and providers of these services will be required to register for VAT. The VAT on imports paid by a freight forwarding or shipping or clearing agent on behalf of an importer is an input tax which can be reclaimed by the importer and not the agent. This also applies to the VAT paid on any other services on behalf of the importer. To facilitate this, agents are required to supply importers with customs entries and assessment notices for imports and tax invoices for services supplied. However, where the agent is charged directly for a service and the tax invoice is in his name, he is entitled to recover the VAT as input tax but he must also account for output VAT in full on the services he rendered to the importer.Import evidence
Before an importer can reclaim the VAT paid on imports, he must be in possession of a valid customs entry, an assessment notice and any tax invoices for services. The importer should claim any VAT on imports to which he is entitled by including it in box 17 on his next VAT return.
- This applies to persons, VAT registered or otherwise, who receive supplies of taxable services from outside of Ghana.
- Section 1 of the Value Added Tax Act imposes VAT on the supply of any imported service, other than exempt services.
- Section 2 makes the recipient of the service liable to pay the VAT.
- Schedule 1 to the Act lists those supplies of services which are exempt.
- If you are registered for VAT and you receive supplies of services from outside Ghana, and you utilize or consume the service in making taxable supplies, you are not liable to account for the VAT on them. If you are not otherwise registerable for VAT (e.g. if your supplies are exempt from VAT), but receive supplies of imported taxable services, you must complete and submit the:
- Imported Services Schedule
- Imported Services Return
The value of the supply on which VAT must be accounted for is the total amount of the consideration, including any taxes levied abroad but excluding local VAT. However, it is necessary to note that the Commissioner-General can vary this amount using the open market criteria as provided in the Act.Time of supply
The time of supply for these services is the date on which you make payment or the last day of each tax period during which the services are performed, whichever comes first.How you must account for the tax
If you are a VAT registered person and utilizes or consumes the service in making taxable supplies, you do not charge the VAT on the imported service. However, if your supplies are exempt, you must record the value of these supplies in Box 2 of the Imported Services Return and the amount of VAT chargeable in Box 7. The NHIL and GETFund is accounted for with the Imported Services Return.
Under the VAT Act, VAT is chargeable at 2 positive rates – standard (currently 12.5%), Flat (currently 3%) and zero (0%). Schedule 2 of the Act provides for VAT to be charged at a rate of zero on the following supplies:
- Exports of taxable goods and services
- Goods shipped as stores on vessels and aircraft leaving Ghana
- Cocoa beans which are specifically exempt under Schedule 1 of the Act
- Supply to a free zone developer or free zone developer
- Supply of goods as part of the transfer of a taxable activity as a going concern by one taxable person to another taxable person
The legal entitlement to zero-rating applies only to direct exports. If you supply goods to a customer in Ghana who then exports them, the supply you make is taxable at the standard rate. The services provided by freight forwarders, stevedore entities and shipping and clearing agents are taxable at the standard rate of 12.5% VAT and NHIL and GETFund at 2.5% eachEntitlement to input tax
VAT registered exporters of goods entitled to zero-rating will qualify to claim input tax deduction on purchases and expenses incurred in supplying these exports.Export evidence
Exporters must issue VAT invoices, showing a tax rate of zero, for all export transactions. To qualify for zero-rating, exporters must hold evidence of export in the form of valid export entries certified by the Customs Division of the Ghana Revenue Authority. As a further validation of an export, control officers of the Domestic Tax Revenue Division (DTRD) of the Ghana Revenue Authority (GRA) may make selective checks on supporting documents, such as:
- Customers’ orders
- Sales contracts
- Inter-company correspondence
- Copy export invoices
- Advice notes/consignment notes/packing lists
- Insurance and freight charges
- Evidence of payment
- Evidence of receipt of goods abroad
This is without prejudice to checks on any other business records.Responsibilities
Exporters who use freight forwarding and shipping and clearing agents must ensure that the agents supply them with the necessary export evidence to enable them to claim input tax credit and refunds, where applicable. If this is not held by the exporter when the relevant VAT return is due to be submitted, the supply is taxable at the standard rate.
Freight forwarding and shipping and clearing agents appointed by exporters must:
- take reasonable steps to ensure that the goods are as described by the exporter;
- ensure that the necessary pre- or post-shipment customs requirements are fulfilled;
- keep records of each export transaction;
- provide the exporter with valid export evidence once the goods have been exported.
Traders who export more than 25% of their supplies within or during any month and whose VAT on purchases (input tax) exceeds the VAT on sales and show evidence of repatriation of export proceeds will, on submission of the VAT return for that month, normally be entitled to a refund of the excess amount by the Commissioner-General of GRA on submission of a refund claim. Other exporters will be credited with the excess, unless they remain in a credit situation for Three (3) consecutive months, in which case they will also be entitled to a refund on submission of a refund claim.Goods shipped as stores on ships and aircraft
VAT registered businesses which make these supplies direct to airline and shipping companies will be entitled to zero-rate them provided they hold evidence of export certified by the Customs Division. Where the goods are first placed in a bonded warehouse of the shipping or airline company, Customs Division certification of receipt will be the required evidence of entitlement.
FREE ZONE GOODS
Goods supplied locally to Free Zone operators are taxable supplies but are treated as if they were exports. Such supplies are entitled to VAT zero-rating provided the procedures required by Commissioner of the Customs Division Order No.3/98 are properly completed and the supplier holds certified evidence of export as defined in Paragraph 4.3 above, plus the Free Zones Board Form 9, certified and endorsed by the proper officer of the Customs Division.Goods supplied locally by Free Zone operators
Unless qualified for exemption under Schedule 1 of the VAT Act, goods supplied within Ghana by Free Zone operators are liable to VAT at the standard rate. Free Zone operators do not need to register for VAT in Ghana if all their local supplies are properly cleared through Customs Division and are covered by the Customs Division documentation as imports into Ghana. VAT registered local customers of Free Zone operators, who must ensure that their importations are properly cleared through Customs Division, are entitled to reclaim the VAT paid at importation as input tax provided they hold the evidence referred to in paragraph 2.6 above.