- Small Companies Could Enter Modified Tax Scheme Under GRA’s GH¢750,000 Turnover Proposal
The Ghana Revenue Authority is preparing to overhaul the taxation of small businesses by extending the Modified Taxation Scheme to qualifying limited liability companies with annual turnover of up to GH¢750,000, in a move aimed at reducing the compliance penalty entrepreneurs can face when they formalise their businesses.
The proposed reform would mark an important shift in Ghana’s tax administration by moving away from a system in which incorporation can automatically expose even very small businesses to the full requirements of corporate taxation, regardless of their commercial scale.
The GRA wants the tax system to place greater weight on the size and turnover of an enterprise rather than its legal form alone, potentially giving small incorporated companies access to the simplified regime currently associated largely with individuals and sole proprietors.
The policy was outlined by Elsie Appau-Klu, Technical Advisor to the Commissioner-General and Chairperson of the Modified Taxation Scheme Committee, at an MTS stakeholder workshop in Accra on September 9.
She said the Authority was seeking to resolve a contradiction within Ghana’s formalisation agenda: government agencies encourage entrepreneurs to register their businesses, yet incorporation can result in significantly more complicated tax obligations.
“The MTS should not be limited to individuals and sole proprietors,” Ms Appau-Klu said, arguing that qualifying businesses with annual turnover of no more than GH¢750,000 should eventually be allowed to benefit from the simplified framework.
Under the existing system, a small enterprise may incorporate for perfectly legitimate commercial reasons, including limited-liability protection, access to finance, stronger credibility with suppliers and customers, or to create a more durable structure for future growth.
But incorporation can also move that business into the standard corporate tax regime, bringing with it accounting, filing and compliance requirements that may be disproportionate to its turnover and administrative capacity.
For a small salon, bakery, laundry, carpentry business or provision shop, the additional cost of accountants, record-keeping and tax administration can become a powerful incentive to remain informal.
“We want a Ghana where a small business is not punished for becoming formal,” Ms Appau-Klu said.
That statement captures the wider policy significance of the proposal. For years, Ghana has sought to expand the number of businesses operating within the formal economy, both to improve revenue mobilisation and to deepen private-sector participation. But formalisation can only work sustainably if businesses perceive registration as economically beneficial rather than as the beginning of a heavier administrative burden.
The GRA’s proposed reform attempts to make that transition more gradual by allowing smaller limited companies to remain within a simplified tax framework until their turnover reaches a level that justifies more complex corporate compliance.
The GH¢750,000 threshold is also intended to bring greater consistency across the tax system.
The Authority wants the MTS threshold aligned with the goods registration threshold under the Value Added Tax Act, 2025 (Act 1151), reducing situations in which a taxpayer is treated as a small business under one tax rule but as a larger enterprise under another.
That harmonisation could be particularly important for entrepreneurs navigating a tax system that can become difficult to understand when different obligations apply different definitions of business scale.
The revenue implications are also more nuanced than simply charging small companies less.
At first glance, shifting more incorporated businesses into a simplified regime might appear to reduce tax collections from individual firms. But the GRA’s broader calculation is that lower compliance costs could encourage a much larger number of businesses to register, file returns and pay tax.
Ghana’s fiscal challenge has long involved not only tax rates but also coverage, compliance and the cost of collection.
A simplified regime that brings thousands of previously informal or partially compliant businesses into the tax system could ultimately generate a broader and more sustainable revenue base than a complex system applied to a comparatively narrow pool of formal taxpayers.
That principle is particularly relevant for micro and small enterprises owned by young entrepreneurs and women, groups that are already being encouraged to formalise through public programmes.
Ms Appau-Klu noted that institutions including the Youth Employment Agency, MASLOC and the Ghana Enterprises Agency were promoting business registration and formalisation. Excluding newly incorporated micro and small companies from simplified taxation could therefore work against those efforts.
The next challenge will be implementation. GRA’s Legal and Policy teams are expected to work with the Ministry of Finance on legislative amendments, with proposals targeted for December 2026.
Until Parliament approves the necessary changes, however, the inclusion of qualifying limited companies within the Modified Taxation Scheme remains a policy proposal rather than an operational right available to businesses.
The Authority is also planning to digitise the scheme through mobile applications, USSD platforms and potentially local-language interfaces.
That could reduce the administrative barriers facing small businesses, particularly those without easy access to professional tax advisers or GRA offices.
But digitalisation alone will not guarantee compliance. Entrepreneurs will still need to understand what they owe, how the system operates and why formalisation is commercially worthwhile.
Taxpayer education will therefore be as important as the technology through which payments and filings are made.
The reform ultimately represents an attempt to strike a more credible bargain between the state and small businesses: simpler taxation in exchange for wider compliance.
For government, the incentive is a broader domestic revenue base capable of financing public services and reducing pressure on borrowing. For businesses, the benefit is a regulatory system that allows them to formalise, survive their early years and grow without immediately facing compliance structures designed for much larger companies.
If implemented effectively, the proposal could begin to turn taxation from a disincentive to formalisation into an instrument for it, bringing more small companies into the formal economy while preserving a proportionate compliance burden.
For the GRA, the objective is therefore larger than collecting more tax from small firms. It is to build a system in which formalisation and business growth reinforce each other, rather than becoming competing choices.
