The landscape of indirect taxation in Ghana has undergone a significant transformation with the passage of the Value Added Tax Act, 2025 (Act 1151). Effective from January 1, 2026, this Act repeals and replaces the old VAT Act, 2013 (Act 870) to simplify the tax regime, eliminate cascading costs, and foster a more business-friendly environment.
As businesses transition to this new framework, understanding the structural shifts is critical for compliance and cash flow management. Here is our breakdown of the most relevant changes.
- Abolition of the "Cascading" Effect
The most significant relief for businesses is the "re-coupling" of levies. Previously, the National Health Insurance Levy (NHIL) and GETFund Levy were "straight levies" that were added to the cost before VAT was applied and which were not deductible as input tax.
- The Change: Under Act 1151, NHIL and GETFund are now fully integrated into the VAT base and are deductible as input tax.
- The Impact: This eliminates the "tax on tax" effect, reducing the overall cost of doing business and theoretically lowering prices for the final consumer.
- A New Effective Tax Rate
While the standard VAT rate remains at 15%, the removal of the 1% COVID-19 Health Recovery Levy has changed the total tax burden.
- Total Effective Rate: The new aggregate rate is 20% (15% VAT + 2.5% NHIL + 2.5% GETFund).
- Note: This is a reduction from the previous effective rate of 21.9%, providing a much-needed reprieve for taxable supplies.
- Revised Registration Threshold
To protect micro and small enterprises, the government has significantly raised the bar for mandatory VAT registration.
- New Threshold: GH₵750,000 per annum (up from GH₵200,000).
- Service Providers: Note that the threshold applies primarily to those dealing in goods. Service providers remain registrable regardless of turnover unless specifically exempted by the Commissioner-General.
- Sunset of the Flat Rate Scheme
The VAT Flat Rate Scheme (VFRS) which previously allowed certain retailers and wholesalers to charge a flat 3% has been abolished.
- The New Reality: All businesses previously under the Flat Rate or the 5% Immovable Property rate must now transition to the Standard Rate Scheme. This means charging the full 20% effective rate but gaining the ability to claim back input VAT on all business purchases.
- Digitization and Compliance: The FED & E-Invoicing
The Ghana Revenue Authority (GRA) is doubling down on the Fiscal Electronic Device (FED) and the E-VAT system.
- Mandatory E-Invoicing: Large and medium-sized taxpayers are required to integrate their billing systems with the GRA’s software for real-time reporting.
Summary of Key Rate Changes
|
Component |
Old Rate (Approx.) |
New Rate (Act 1151) |
|
Standard VAT |
15% |
15% |
|
NHIL |
2.5% (Non-deductible) |
2.5% (Deductible) |
|
GETFund |
2.5% (Non-deductible) |
2.5% (Deductible) |
|
COVID-19 Levy |
1% |
Abolished (0%) |
|
Effective Total |
21.9% |
20.0% |
Strategic Recommendations for Businesses
- Update Invoicing Systems: Ensure your ERP or accounting software separates the 15% VAT from the NHIL 2.5% and Getfund 2.5% levies on distinct lines.
- Review Pricing: With the new ability to claim NHIL and GETFund as input credits, your cost structure has changed. Evaluate if these savings can be passed on to stay competitive.
- Review Your Suppliers: Since levies are now creditable, ensure you are only dealing with VAT-registered suppliers to maximize your input tax claims.
