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May 7, 2021
2021-5527

Ghana Revenue Authority issues administrative guidelines on various tax measures

Executive summary

In April 2021, the Commissioner-General (CG) of the Ghana Revenue Authority (GRA), the officer responsible for the administration of the tax laws, issued multiple administrative guidelines on the application and administration of the new tax laws passed pursuant to the tax measures introduced by the Government in the 2021 Budget Statement and Economic Policy (the 2021 Budget). The new tax measures were introduced to raise revenue to support the financial sector reforms and for other public finance matters.

This Alert highlights the key provisions set forth in the guidelines.

Detailed discussion

Pursuant to the CG’s powers to issue directives for the implementation of tax laws under the Revenue Administration Act, 2016, Act 915, as amended, the CG issued administrative guidelines covering the following:

  • COVID-19 Health Recovery Levy Act, 2021, Act 1068
  • The Penalty and Interest Waiver Act, 2021, Act 1065
  • The Financial Sector Recovery Levy (FSRL) Act, 2021, Act 1067

Administrative Guidelines (GRA/AG/21/0003) on COVID-19 Health Recovery Levy

This administrative guideline was issued on 28 April 2021.

The COVID-19 Health Recovery Levy, 2021, Act 1068, was enacted by the Parliament of Ghana to impose a special levy (the Levy) on the supply of goods and services and imports to raise revenue to support the COVID–19 expenditures and other related matters.

The Levy is chargeable at the rate of 1% calculated on the value of the taxable supply in respect of the supply of goods and services made in Ghana except for exempt goods and services. and the Levy is also imposed on the import of goods and services into Ghana.

The Levy applies to both Standard Rate and Flat Rate registered persons. A supply or import of goods or services, as provided under the First Schedule to the Value Added Tax Act, 2013, Act 870 (as amended), is not subject to the Levy. A supply in respect of any of the matters set out in the Second Schedule to Act 870 is zero-rated for Levy purpose. Individuals and organizations entitled to relief under the Third Schedule to Act 870 are also entitled to relief from payment of the Levy. The Levy is not subject to input tax deduction. It may, however, be deductible against profit.

Determination of the taxable value

To determine the taxable value subject to the Levy:

  • The 1% COVID-19 Levy shall be computed on the value of the taxable supply exclusive of the National Health Insurance Levy (NHIL), the Ghana Education Trust Fund Levy (GETFund Levy) and Value-Added Tax (VAT).
  • The 12.5% VAT shall be computed on the value of the taxable supply inclusive of NHIL, GETFund Levy and COVID-19 Levy.

In the case of the Flat Rate, the CG, per the examples cited, requires that the Levy and VAT be applied on the tax exclusive value of the supplies.

The form of the VAT, NHIL, GETFUND Levy & COVID-19 Levy invoice

The CG’s invoice must contain fields for NHIL, GETFund Levy, COVID-19 Levy and VAT.

No invoice other than the new VAT/NHIL invoice is acceptable for use by registered traders as from the Effective Date of Collection (EDC) of the COVID-19 Levy.

In completing the invoice, the field for the total of NHIL, GETFund Levy, COVID-19 Levy and VAT is mandatory. Taxpayers are encouraged to complete the separate fields for NHIL, GETFund Levy, COVID-19 Levy and VAT, however, failure by taxpayers to segregate the two will not be sanctioned. Nonetheless, every taxpayer is required to enter on the invoice, the total of NHIL, GETFund Levy, COVID-19 Levy and VAT, without which the verifying of invoices during audit visits will be made extremely tedious.

The above guidelines (relating to NHIL, GETFund Levy, COVID-19 Levy and VAT) regarding the invoice apply to the Hotel and Restaurant Receipt/Invoice as well.

Return filing and payments

Taxpayers are required to file their returns in the form prescribed by the CG and make payments by the last working day of each month immediately following the month to which the returns relate.

Transitional provisions

To ensure a smooth transition, as VAT-registered taxpayers make arrangements to either acquire the modified CG’s invoice or modify their accounting software to accommodate these levies, taxpayers are advised to insert on their existing VAT invoices or approved sales receipts:

  • A field for the COVID-19 Levy after the NHIL and GETFund Levy fields.

Where the amount is inclusive of NHIL, GETFund Levy, COVID-19 Levy and VAT, the taxpayer must indicate the amount in the field labelled total tax inclusive value.

Approved sales receipts must be modified to provide specifically for the following in addition to the VAT of 12.5%:

  • A separate line for NHIL at a rate of 2.5%
  • A separate line for GETFUND Levy at a rate of 2.5%
  • A separate line for COVID-19 Levy at a rate of 1%
  • A line for the total of NHIL, GETFund Levy and COVID-19 Levy

Administrative Guidelines (GRA/AG/21/0001) for the implementation of the Penalty and Interest Waiver Act, 2021, Act 1065

This administrative guideline was issued on 15 April 2021.

The administrative guideline gives clarity and provides guidance to officers of the GRA as well as taxpayers on the procedures to be followed in waiving a penalty and/or interest.

Persons qualified for the waiver

A waiver of penalty and/or interest applies to a person who meets one of the following conditions:

  • Has not previously registered with the GRA
  • Has registered with the GRA but:
    • Has not submitted returns, or
    • Is in arrears for the submission of returns, or
    • Is in arrears for the payment of taxes

Persons not qualified for the waiver

A waiver shall not apply:

  • Where the person fails to comply with the provisions of an enactment administered by the CG that relates to the furnishing of a return or payment of a tax due from 1 January 2021
  • To payments and returns due from 1 January 2021 under an enactment administered by the CG

Period covered by the waiver

The waiver covers penalty and interest on accumulated tax arrears up to 31 December 2020.

Application for waiver

A person who qualifies for the waiver under the law may apply to the CG in writing using the GRA’s prescribed form (Appendix 1, available at all GRA Offices and the GRA website - www.gra.gov.gh).

Where a person has already been assessed by the GRA, the application must be accompanied with evidence of the assessed penalty and interest.

Where the penalty and interest have not been assessed by the GRA, the CG may make an assessment before the waiver can be granted.

Where a person has defaulted in filing a return(s) or payment of taxes due, the person must submit the outstanding return(s) and indicate the tax liability involved, together with the penalty and interest thereon.

Where a person has already filed a return(s) and wishes to amend the return(s), the person may apply to file an amended return(s) with the necessary disclosures in order to benefit from the waiver.

Where a person has not registered with the GRA but wants to benefit from the waiver, that person must apply for registration as a taxpayer and make full disclosure of the necessary information for assessment.

The completed application form must be submitted to the taxpayer’s registered tax office or in the case of applications relating to Customs, to the Office of the Commissioner, Customs Division.

Period for submission of application

An application for waiver must be submitted to the GRA between 1 April 2021 and 30 September 2021.

Conditions for grant of the waiver

A person shall only qualify for grant of the waiver where that person:

  • Submits return(s) or amended return(s), containing a full disclosure of undisclosed liabilities relating to the period up to 31 December 2020
  • Pays or makes the necessary arrangements to pay all resulting taxes
  • Pays or makes the necessary arrangements to pay assessed and outstanding taxes

Immunity from recovery or prosecution

Where a person has applied and been granted a waiver of penalty and interest under the Act, the CG shall not:

  • Recover the assessed penalty and interest on the tax paid or tax due
  • Commence prosecution or enforcement action in respect of that person on the penalty and interest waived

Administrative procedures

Timelines for communication of the decision

The CG is required to serve notice of his/her decision on an applicant within 30 days after receipt of an application.

Application for the waiver may be submitted at a Taxpayer Service Center, an Area Office or the Head Office of the GRA. In the case of customs, all applications must be submitted to the Office of the Deputy Commissioner, Operations, or Deputy Commissioner, Post Clearance Audit, for processing and submission to the Commissioner of the Customs Division.

Waiver Certificate

A waiver certificate shall be issued to an applicant only after completion of payment of the principal amount.

Payment arrangement

Where a person applies for installment payments of the principal amount, the GRA office is required to follow the designated procedures in respect of the threshold duration prescribed in the revised operational manual:

  • The installment payment plan application shall be submitted not later than 30 September 2021.
  • A taxpayer who fails to comply with a proposed installment payment plan shall not be entitled to the waiver and the tax outstanding becomes payable immediately.
  • The installment arrangement plan shall be signed by the person and attached to the application.
  • All re-scheduled payment plans shall not go beyond 31 December 2021.

Complaint and Determination of Complaint

An applicant who is dissatisfied with a decision of the CG in respect of the refusal or denial of the waiver of penalty and interest may, within 30 days after receipt of the decision, file a written complaint with the CG for a determination of the matter.

The CG shall, within 30 days after receipt of the complaint, make a determination and notify the applicant accordingly.

Where the applicant is dissatisfied with the determination made under subsection (2) above, the applicant may pursue the matter in court.

Administrative Guidelines (GRA/AG/21/0002) on Financial Sector Recovery Levy

This administrative guideline was issued on 28 April 2021.

The Financial Sector Recovery Levy (FSRL) Act, 2021, Act 1067, imposes a special levy (the Levy) on banks to raise revenue to support the financial sector reforms and to provide for related matters.

The Levy is 5% on the profit before tax of a bank. It applies to all banks despite any provision to the contrary in an enactment relating to a tax holiday or an exemption from a direct tax or an indirect tax applicable to a bank. It is payable by a bank other than a rural bank or a community bank. The Levy is not an allowable deduction for the purpose of ascertaining the chargeable income of a person under the Income Tax Act, 2015, Act 896 (as amended).

Assessment of the Levy

  • The Levy is payable on profit before tax.
  • A bank covered under the Act is required to submit an estimate of the Levy due for that year of assessment together with the annual income tax estimate of that bank.
  • Where a bank has not been assessed for tax in the two preceding years of assessment, or furnished a return or an estimate in accordance with Act 896 or a statement of the estimated Levy payable, the CG may proceed to make an assessment of the Levy payable by that bank.

Payment of the levy

The Levy assessed for a year of assessment is payable on or before the following dates of each quarter of the year of assessment:

  • 31 March
  • 30 June
  • 30 September
  • 31 December

However, payment of the Levy for the 2021 year of assessment shall be made in three instalments on or before:

  • 30 June 2021
  • 30 September 2021
  • 31 December 2021

 Computation of the levy

The Levy of 5% shall be computed on the profit before tax of affected banks. Where there is a discrepancy in the profit before tax as a result of an audit, an adjustment must be made to the profit before tax before the computation of the Levy.

_________________________________________

For additional information with respect to this alert, please contact the following:

Ernst & Young Advisory Services Limited, Accra

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York

 
 

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