Ghana: Moving towards a Digitized Tax System

The government of Ghana, in partnership with Melchia Investments, a private Ghanaian technology company, is moving towards a digitized tax system that will boost domestic revenue generation. Earlier in 2021, the Ghana Revenue Authority (GRA) indicated that it is the part of its strategy to increase the revenue portfolio with a vigorous taxation of the e-commerce sector which has been a challenge for the tax authorities over the years, mainly, due to local tax laws being ineffective in addressing the administration of e-businesses. In its 2021 Budget Statement, the Ghanaian government has implemented initiatives to digitize its tax system such as:

CASHLESS POLICY

To modernize payments and improve tax compliance through a centralized system, the government directed that GRA went cashless. As a result, from May 1,2021 the domestic taxpayers pay their taxes using the Ghana.gov platform and at any of the 22 designated banks listed on the GRA’s website; from June 1,2021 all cheques must be paid at the banks. From July 1, 2021 GRA  no longer received cash at its offices.

THE INTRODUCTION OF GHANA CARD PIN

As a measure to widen the tax net and provide easy access to taxpayers’ information, from April 1,2021, the Ghana Card Unique Identification Number (called the Ghana Card PIN) replaced four different identification numbers: the Tax Identification Numbers (TIN), Social Security and National Insurance Trust (SSNIT) biometric numbers as well as the National Health Insurance numbers.

The Ghana Card PIN is also linked to SIM cards, bank accounts,the Births and Deaths registry,the Driver and Vehicle Licensing Authority (DVLA) documents and passports.

ADMINISTRATIVE GUIDELINES FOR  TELECOMMUNICATION SERVICES AND ELECTRONIC COMMERCE
The government is reviewing the current legislation to strengthen relevant laws and provide additional regulations and administrative guidelines for the taxation of telecommunication services and electronic commerce. As no formal guidelines are provided yet, the most recent point of reference for taxing the telecommunication services and electronic commerce is the Ghana’s VAT Act (read below).

GHANA VAT ACT

Ghana’s VAT Act, section 16 (2) provides that non-resident telecommunication or e-commerce service providers must register for VAT if they make taxable supplies exceeding the threshold under the following conditions:

• at the end of any period of twelve or less months, the person made, during that period, taxable supplies

  exceeding 120 000 GH₵ (~17 000 EUR) in the last 12 months or

• at the end of any month, there are reasonable grounds to expect that that person will make taxable supplies in the next twelve or less months exceeding 120 000 GH₵ (~17 000 EUR) in the last 12 months

Despite the section above, a person shall register if

• at the end of any period of 3 months, the person made, during that period, taxable supplies exceeding 30 000 GH₵ (~4 250 EUR); and
• there are reasonable grounds to expect that the total value of taxable supplies made by that person during that (3 month) period and to be made during the next consecutive 9 months will exceed 120 000 GH₵ (~17 000 EUR).

Definitions of services

The act provides that telecommunications services are services related to the “transmission, emission or reception of signals, writing, images and sounds of information of any nature by wire, radio, optical or other electromagnetic systems, including the provision of access, transmission, emission or reception”. The electronic commerce covers business transactions that “take place through the electronic transmission of data over communications networks like the internet”.

Place of Supply

Ghana’s VAT Act states that, in the case of “electronic commerce” supplies, the place of supply is “the place where the effective use and enjoyment occurs”.

Supply of telecommunication services and electronic commerce
The act states that the supply of telecommunication services and electronic commerce include:

• website supply
• web-hosting
• distance maintenance of programmes and equipment
• images, text and information and making databases available
• music and games, games of chance and gambling games
• political, cultural artistic, sporting, scientific and entertainment broadcasts and events; and
• distance teaching

DIGITAL SERVICES TAX (DST) IN GHANA

As of November 2021, Ghana has not introduced a direct tax on digital services yet but it may do so in a matter of a very short time, given the development of DST in African countries.

The aim of  taxing the e-commerce sector was to aid the GRA in meeting its revenue target for 2021. Though Ghana’s revenue fell short of target by 12% in the first seven months of the year, the local tax collection through technology is still seen as a key enabler for growth and the improvement of compliance. The introduction of the Digitized Tax System would help with the identification and collection of taxes related to these activities.

Source: gra.gov.gh, mofep.gov.gh, Bloomberg 

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.