Ghana pushes through con­tro­ver­sial tax bill

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

De­spite protests, new VAT Act comes into ef­fect, push­ing tax up by 2.5 points

THE con­tro­ver­sial Value Added Tax (Amend­ment) Bill that was ap­proved by the Ghana­ian par­lia­ment on 15 Novem­ber 2013 de­spite a walk­out by mi­nor­ity mem­bers, re­ceived pres­i­den­tial as­sent on 30 De­cem­ber and was gazetted on 31 De­cem­ber.

As a re­sult, the VAT Act, 1998 (Act 546) as amended, has been re­pealed and re­placed by the VAT Act, 2013, (Act 870) (the new VAT Act). The new VAT Act does not pro­vide for an ef­fec­tive date of com­mence­ment and so be­came ef­fec­tive on 31 De­cem­ber 2013.

One of the most sig­nif­i­cant amend­ments is the in­crease in the stan­dard VAT rate from 12.5% to 15%. The Na­tional Health Insurance Scheme Levy (NHIL) charged on goods and ser­vices sup­plied in or im­ported into Ghana and col­lected with VAT re­mains at 2.5%. As a re­sult, the stan­dard ag­gre­gate VAT and NHIL rate on the tax­able sup­ply of goods and ser­vices is in­creased from 15% to 17.5%.

Ac­cord­ing to guide­lines on the ap­pli­ca­tion of the new VAT Act is­sued by the Ghana Rev­enue Au­thor­ity (GRA) last month, the VAT rate on GRA VAT/NHIL in­voices is­sued in re­spect of tax­able sup­plies is to be man­u­ally ad­justed from 12.5% to 15%.

Tax­pay­ers au­tho­rised by the GRA to use their own com­puter-gen­er­ated in­voices or elec­tronic cash reg­is­ters are re­quired to re-pro­gramme their equip­ment to en­sure that VAT is charged at the rate of 15%. Where they are un­able to use such com­puter-gen­er­ated in­voices or elec­tronic cash re­ceipts, they must use the man­u­ally ad­justed GRA in­voices as set out above.

A sec­ond sig­nif­i­cant change ef­fected by the new VAT Act is the re­duc­tion of the al­low­able pe­riod for claim­ing in­put VAT in re­spect of ex­penses in­curred from three years to six months. In prac­tice, all tax­pay­ers who are in pos­ses­sion of valid VAT/NHIL in­voices for in­put claims which are more than six months old (ie dat­ing from be­fore 31 July 2013) should claim such amounts in their De­cem­ber 2013 VAT re­turns, which were due for sub­mis­sion by 31 Jan­uary 2014.

The new VAT Act also ex­tends the ap­pli­ca­tion of VAT to the fol­low­ing busi­ness ac­tiv­i­ties which hith­erto fell out­side the VAT net:

The sale of im­mov­able prop­erty by an es­tate de­vel­oper. “Es­tate de­vel­oper” is de­fined as a com­mer­cial es­tab­lish­ment en­gaged in the busi­ness of the con­struc­tion and sale of im­mov­able prop­erty;

The sup­ply of fi­nan­cial ser­vices ren­dered for a fee, com­mis­sion or sim­i­lar charge, in­clud­ing the pro­vi­sion of insurance, is­sue trans­fer, re­ceipt of, or deal­ing with money, whether in do­mes­tic or for­eign cur­rency or any note or or­der of pay­ment of money, pro­vi­sion of credit, or op­er­a­tion of a bank ac­count or an ac­count of a sim­i­lar in­sti­tu­tion. Life insurance and rein­sur­ance ser­vices are ex­empt;

A sup­ply of do­mes­tic trans­porta­tion of pas­sen­gers by air and the sup­ply of haulage as well as the rental or hir­ing of pas­sen­ger and other ve­hi­cles;

The busi­ness ac­tiv­i­ties of auc­tion­eers and pro­mot­ers of pub­lic en­ter­tain­ment;

The busi­ness of a gym­na­sium and spa; and

The man­u­fac­ture or sup­ply of phar­ma­ceu­ti­cals listed un­der Chap­ter 30 of the Har­monised Sys­tems Com­modi­ties Clas­si­fi­ca­tion Code, 1999, other than sup­plies at the re­tail stage.

All busi­nesses en­gaged in th­ese ac­tiv­i­ties that have not been reg­is­tered for VAT/NHIL are obliged to con­tact their GRA lo­cal of­fices for VAT/NHIL in ac­cor­dance with the pro­vi­sions of the VAT Act.

All per­sons reg­is­tered for VAT/NHIL that are au­tho­rised to op­er­ate un­der the VAT Flat Rate Scheme (VFRS) are to con­tinue charg­ing and ac­count­ing for VAT at the rate of 3% of the tax­able value of their sup­plies un­til oth­er­wise ad­vised by the GRA in writ­ing.

In other re­cent tax­a­tion de­vel­op­ments in Ghana, the par­lia­ment has re­jected the Na­tional Fis­cal Sta­bil­i­sa­tion Levy (NFSL) (Amend­ment) Bill pre­sented to it last Novem­ber. The NFSL, levied at 5% on prof­its be­fore tax of spec­i­fied com­pa­nies, was rein­tro­duced in June last year to ap­ply to the 2013 and 2014 years of as­sess­ment. The bill sought to re­vise the ef­fec­tive end date of the NFSL Act, 2013 from De­cem­ber 2014 to June 2014.

The par­lia­ment passed the Cus­toms and Ex­cise Du­ties and other Taxes Amend­ments No 2 Bill on 13 De­cem­ber, amend­ing the Cus­toms and Ex­cise (Du­ties and Other Taxes) Act, 1996 (Act 512). In terms of the amend­ment, raw ma­te­ri­als used for the man­u­fac­ture of HIV/AIDS drugs and the print­ing of text­books and ex­er­cise books are to be ex­empted from im­port duty.

The bill is aimed at in­creas­ing com­pet­i­tive­ness of lo­cal man­u­fac­tur­ers. Cur­rently, the im­por­ta­tion of raw ma­te­ri­als used in the man­u­fac­ture of HIV/AIDS drugs and the print­ing of text and ex­er­cise books are sub­ject to sig­nif­i­cant im­port du­ties, while the im­por­ta­tion of the cor­re­spond­ing fi­nal prod­ucts are zero rated. The rel­e­vant ex­emp­tions will be un­der the su­per­vi­sion of the min­is­ters of health and ed­u­ca­tion re­spec­tively.

Fur­ther pro­posed tax­a­tion amend­ments pre­sented for par­lia­men­tary ap­proval as part of the 2014 bud­get and fi­nan­cial state­ment on 19 Novem­ber 2013 in­clude in­creas­ing the with­hold­ing tax rate on rental in­come from com­mer­cial build­ings from 8% to 15% and the with­hold­ing tax rate on man­age­ment and tech­ni­cal ser­vice fees from 15% to 20%, ex­pand­ing the scope of cap­i­tal gains tax to cover petroleum op­er­a­tions, in­creas­ing the road fund levy, rein­tro­duc­ing the Windfall Tax Bill on min­ing ac­tiv­i­ties in for par­lia­men­tary con­sid­er­a­tion af­ter due con­sid­er­a­tion with rel­e­vant stake­hold­ers, in­tro­duc­ing a Con­struc­tion In­dus­try Scheme to reg­u­late pay­ments made by con­trac­tors to sub­con­trac­tors in the build­ing and con­struc­tion in­dus­try and har­mon­is­ing and sim­pli­fy­ing tax laws un­der a sin­gle Tax Ad­min­is­tra­tion Act.

An of­fi­cial at the Small Tax Of­fice of the Do­mes­tic Tax Rev­enue Di­vi­sion of the Ghana Rev­enue Au­thor­ity also an­nounced at a sem­i­nar on 4 De­cem­ber that, with ef­fect from the end of the year, the pos­ses­sion of an 11-digit unique tax­payer iden­ti­fi­ca­tion num­ber would be a pre­req­ui­site for in­di­vid­u­als earn­ing tax­able in­come to, among oth­ers, ob­tain travel visas.

The gov­ern­ment seems se­ri­ous about im­ple­ment­ing its pol­icy aimed at rev­enue mo­bil­i­sa­tion through tax ef­fec­tive­ness and ef­fi­ciency and de­liv­er­ing on its pledge to nar­row the bud­get gap by boost­ing rev­enue.

Celia Becker is an ex­ec­u­tive in the tax depart­ment at ENSafrica.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.