What Is VAT?
Value Added Tax (VAT) is an indirect tax charged on the supply of goods and services at each stage of the production and distribution chain. In Ghana, VAT is administered by the Ghana Revenue Authority (GRA) under the Value Added Tax Act, 2013 (Act 870) as amended.
VAT is ultimately borne by the final consumer, but businesses registered for VAT act as collection agents — they charge VAT on their sales (output VAT) and can claim back VAT paid on their business purchases (input VAT).
VAT Registration Threshold
The mandatory VAT registration threshold is GHS 200,000 in taxable turnover per annum. Any business exceeding this threshold MUST register for VAT within 30 days.
The turnover threshold is based on your total taxable supplies (sales of goods and services that are subject to VAT) over any consecutive 12-month period. Exempt supplies are not counted towards the threshold.
Voluntary Registration
Businesses below the GHS 200,000 threshold may voluntarily register for VAT. This can be advantageous if you sell primarily to VAT-registered businesses, as it allows you to reclaim input VAT on your purchases. However, once registered, you must comply with all VAT obligations regardless of your turnover level.
Current VAT Rate and Levies
While the standard VAT rate is 15%, several additional levies are charged on the same tax base, bringing the total effective rate to 21%:
| Levy | Rate | Legislation |
|---|---|---|
| Standard VAT | 15% | Value Added Tax Act, 2013 (Act 870) |
| National Health Insurance Levy (NHIL) | 2.5% | National Health Insurance Act, 2012 (Act 852) |
| GETFund Levy | 2.5% | Ghana Education Trust Fund Act, 2000 (Act 581) |
| COVID-19 Health Recovery Levy | 1% | COVID-19 Health Recovery Levy Act, 2021 (Act 1068) |
| Total | 21% | — |
NHIL and GETFund Levy are NOT input-deductible. Only the standard 15% VAT component allows input credit recovery. The NHIL (2.5%), GETFund (2.5%), and COVID-19 levy (1%) are straight levies with no input recovery.
Step-by-Step Registration Process
- Obtain a Taxpayer Identification Number (TIN) — If you do not already have a TIN, apply at any GRA office or online via the GRA portal. You will need your business registration certificate from the Registrar General's Department.
- Complete the VAT Registration Form — Download from the GRA website or obtain from your nearest GRA office. The form requires details about your business, anticipated turnover, bank accounts, and directors/partners.
- Prepare Required Documents — Gather your Certificate of Incorporation or Business Registration, TIN certificate, proof of business address (utility bill or tenancy agreement), bank statements for the last 3 months, and identification documents for directors.
- Submit to GRA — Submit the completed form and supporting documents to the VAT office in your district. You may also submit online through the GRA Taxpayer Portal.
- GRA Verification — GRA may conduct a physical inspection of your business premises to verify the information provided. Cooperate fully with the verification team.
- Receive VAT Certificate — Upon approval, GRA will issue your VAT Registration Certificate, typically within 5 to 10 working days. Your certificate includes your VAT Registration Number, which must appear on all VAT invoices.
Input VAT vs. Output VAT
Understanding the difference between input and output VAT is critical for managing your VAT obligations:
| Type | Definition | Example |
|---|---|---|
| Output VAT | VAT you charge on your sales to customers | You sell goods for GHS 1,000 + GHS 150 VAT = GHS 1,150 invoice total |
| Input VAT | VAT you pay on purchases for your business | You buy materials for GHS 500 + GHS 75 VAT = GHS 575 paid to supplier |
| VAT Payable | Output VAT minus Input VAT | GHS 150 - GHS 75 = GHS 75 payable to GRA |
If your input VAT exceeds your output VAT in a given period (i.e., you paid more VAT on purchases than you collected on sales), you have a VAT credit. This credit can be carried forward to offset future VAT liabilities, or you may apply to GRA for a refund after 3 months.
VAT-Exempt and Zero-Rated Supplies
Exempt Supplies (No VAT Charged, No Input Credit)
- Financial services (banking, insurance premiums)
- Medical and dental services
- Educational services by approved institutions
- Residential rent
- Agricultural inputs (seeds, fertilizers, pesticides)
- Domestic transportation of passengers
Zero-Rated Supplies (0% VAT, Input Credit Allowed)
- Exports of goods and services
- International transport services
- Supplies to diplomatic missions
- Supplies to Free Zone enterprises (with valid exemption certificate)
Filing and Payment Obligations
VAT returns must be filed monthly by the 15th of the following month. For example, your January VAT return is due by 15th February. Payment must accompany the return.
- File a monthly VAT return even if there were no transactions in the period (a nil return)
- Issue proper VAT invoices for all taxable supplies showing your VAT registration number, the VAT amount, and the NHIL/GETFund/COVID levy amounts separately
- Maintain a VAT account recording all output and input VAT
- Keep all invoices, receipts, and records for at least 6 years
- Use approved Electronic VAT Invoicing (e-VAT) if required by GRA
Penalties for Non-Compliance
| Offence | Penalty |
|---|---|
| Failure to register | GHS 500 per month plus back-assessment of VAT owed |
| Late filing of returns | GHS 500 per month or part thereof |
| Late payment of VAT | Interest at 125% of BoG statutory rate per annum |
| Failure to issue VAT invoice | GHS 5,000 per offence |
| Issuing false VAT invoice | Fine up to GHS 60,000 and/or imprisonment up to 5 years |
| Failure to keep records | GHS 2,500 per offence |
How Nexus Ledger Helps
Nexus Ledger automatically applies the correct VAT rate (15%) and levies (NHIL 2.5%, GETFund 2.5%, COVID-19 1%) to your invoices. The system tracks your input and output VAT in real time, generates your monthly VAT return pre-populated with the correct figures, and alerts you before the filing deadline. Use the Invoicing module to issue GRA-compliant VAT invoices automatically.