Reconsider 3% VAT Flat Rate Scheme (“VFRS”) – Recommendations by AMCHAM Ghana and supported by GNBCC


Reconsider 3% VAT Flat Rate Scheme (“VFRS”) – Recommendations by AMCHAM Ghana and supported by GNBCC

The GNBCC has had contact with the American Chamber of Commerce (Ghana) and supports its stand on the 3% VAT Flat Rate Scheme.

GNBCC is also planning to liaise with other business organizations in Ghana to make a coalition to convince the government to change this scheme to its initial set-up (intended for small and micro businesses). Already at the start of this scheme GNBCC was approached by a number of its Membership to find out more about the actual implementation and its consequences.

The full text of the AmCham Ghana in the B&FT from Wednesday the 30th of August 2017 is as follows:

At an AmCham meeting of 18th July to discuss the New 3% VAT flat rate, AmCham members commended the Government of Ghana for re-introducing VAT Flat Rate Scheme with the objective to expand the tax base and get most businesses in the SME sector to pay taxes. However, they observed that the introduction of this tax and expanding it to cover manufacturers who sell to end users or retailers, large wholesalers and retailers has resulted in unintended outcomes which is likely to affect businesses in a negative way.

The new VFRS does not allow businesses that have paid input VAT to be reimbursed as was done previously, forcing these businesses to either absorb the 3%, thereby reducing their margins or pass it on to final consumers, thereby increasing prices to consumers.

The new VFRS seems to also favour importers and distributors, than manufacturers who import intermediate goods for value addition and subsequently wholesale and retail.

AMCHAM Members recommended that Government should consider the following options:

•     Re-implementing the VFRS provision in the VAT Act, 2010 (Act 810) repealed, with slight modifications. Act 810 provided for thresholds which made it easier to administer. As such, the threshold should be reintroduced and this could be based on the presumptive tax threshold provided for in the Income Tax Act, 2015 (Act 896).

•     Limiting the VFRS to only micro and small enterprises as it has proven to be a useful way to expanding the tax net.

•     For  manufacturers  whose  businesses  span  more  than  one  sector  (i.e.  wholesaling  and retailing), for whom both 17.5% and 3% will apply, Government should put in place methods that allow such manufacturers to apportion supplies made and account for VAT separately under both VFRS and standard rate scheme. The dominant business line could also be considered in determining the VAT scheme such manufacturers should operate. To this end, the definition provided for a “wholesaler” and “retailer” should be updated to consider the status of such manufacturers who operate multiple business lines and the general deductible input tax in respect of the apportionment should be made public in a practice note.

•     There is a technical/legal gap in the GRA Practice Note with regards to treatment of the non- deductible 17.5% input VAT under the scheme. The Practice Note provides guidance to the effect that the non-deductible 17.5% input VAT should be added to the cost of the product prior to computing the 3% output VAT.

•     The guidance may appear to contradict the VAT Act, 2013 (Act 870) in section 43(1a), where the value of a taxable supply is defined to exclude “the tax” (where “the tax” here refers to VAT).  The extent of the contradiction in the Practice Note, is causing so much confusion between vendors and buyers in practice and this must be resolved immediately.

•     Businesses should be given the opportunity to choose whether to exclusively operate the standard rate scheme or the flat rate scheme to make accounting easier.

This was signed by Simon Madjie, the Executive Secretary of the AmCham

  All Members of GNBCC are invited to comment on the 3% VAT FLAT RATE SCHEME or on the AmCham recommendations.

Please contact Tjalling Wiarda at

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