Ghana Digital Services Taxes
Ghana revises its Value Added Tax (VAT) and other charges on non-resident digital services to remove minimum thresholds and increase VAT rate.
Summary: The Ghana Revenue Authority announced in April 2022 that it will begin collecting Value Added Taxes (VAT) and other domestic charges from non-resident companies or persons that conduct business transactions in Ghana via the electronic transmission of data over communications networks like the internet. As of September 2022, Ghana has removed the minimum thresholds announced in April for the application of these taxes and charges. As a result, all taxable supplies are now subject to the VAT and charges. Further, Ghana increased its VAT from 12.5% to 15% in November 2022; that increase is now applied digital services transactions from non-resident suppliers, as well.
The Value Added Tax Act of 2013 (as amended), specifies that the VAT should affect persons and companies in the following lines of business:
• website supply;
• distance maintenance of programs and equipment;
• images, text and information and making databases available;
• music and games, games of chance and gambling games;
• political, cultural artistic, sporting, scientific and entertainment broadcasts and events; and
• distance teaching.
Generally, for companies or persons in Ghana’s domestic market, these same activities are subject to the VAT and charges, as well.
Industry has raised concerns about the way that the VAT and other charges are calculated and the complicated mechanics of complying with payment and invoicing charge-by-charge. To calculate the effective tax rate, companies need to start by assessing the following levies on the value of the taxable supply of the goods or services: the National Health Insurance Levy (NHIL) 2.5%; Ghana Educational Trust Fund Levy (GETFL) 2.5%; and the Covid 19 Health Recovery Levy (CHRL) 1%.
The cumulation of those charges added to the value taxable supply forms, in turn, the basis for assessing the new 15% VAT. This results in an overall tax rate of more than 22%.
The need to itemize the levies in invoices creates an administrative burden. Further, this complex structure that blends the levies and the VAT taxes also makes it difficult for customers in Ghana to claim these costs back as credits in the VAT system.
The Ghana Revenue Authority has created a special portal for non-resident companies to formally register with the Commissioner-General and to remit VAT payments via money transfer, bank cards, etc. There are penalties and interest payable for: failing to register; incorrectly declaring VAT, NHIL, GETFL and CHRL; submitting returns late; late payments; and other infringements of VAT law. Companies located abroad are expected to collect VAT from their customers and then remit those fees to the Ghana Revenue Service.
For more information on the digital services sector in Ghana, contact Victoria Agbai or Laurie Kelleher in the Commercial Section of U.S. Embassy Ghana at email: Office.Accra@trade.gov or Tel: +233(0)30-274-1870.