Interests, penalties for non-payment of VAT by businesses
In 2013, the Parliament of Ghana passed the Value Added Tax Act, 2013 (Act 870), as amended (VAT Act) to repeal and replace an older Act. The VAT Act
became effective in January 2014.
The Value Added Tax Regulations, 2016 (L.I 2243), came into force on 3 August 2016.
The National Health Insurance Levy (NHIL) was also introduced on 4 November 2004 as a consumption tax, similar to VAT, to specifically secure the provision of basic healthcare services to persons resident in the country through mutual and private health insurance schemes.
The current National Health Insurance Act, 2012 (Act 852) as amended, was gazetted and became effective in November 2012.
Prior to 1 August 2018, the NHIL was fully administered alongside VAT by the Domestic Tax Revenue Division of the Ghana Revenue Authority (DTRD of GRA).
Effective 1 August 2018, the NHIL became a straight levy not subject to an input tax deduction. The Ghana Education Trust Fund (GETFund) was introduced on 1 September 2000 under the GETFund Act 2000 (Act 581), to provide finance to supplement the provision of education at all levels by the government.
Prior to 1 August 2018, a component of VAT was earmarked for the GETFund. Effective 1 August 2018, like the NHIL, the GETFund Levy (GETFL) became a straight levy not subject to an input tax deduction.
Effective 1 May 2021, a 1% COVID-19 Health Recovery Levy (CHRL) was introduced to be charged on all taxable supplies. Similar to the NHIL and the GETFL, CHRL is not deductible as an input tax.
The VAT Act provides for a standard rate of 12.5% for VAT, 2.5% for NHIL, 2.5% for GETFL and 1% for CHRL. These rates apply to all supplies of goods and services that do not qualify for an exemption, zero-rating or the VAT Flat Rate Scheme (VFRS).
Failure of businesses to file their VAT taxes to the GRA attract the following interests, penalties:
- late submission of a return – penalty of GH₵ 500
- for each additional day the return is not submitted – penalty of GH₵ 10
- late payment – interest of 125% of Bank of Ghana monetary policy rate compounded monthly and applied on the tax due
- failure to register – double the tax payable had the taxpayer registered when required
- failure to issue a tax invoice – up to GH₵ 1,200 (US$170) or thrice the amount of tax, whichever is higher.
The VAT Act does not provide an option for the waiver of interest for non-compliance.
