VALUE ADDED TAX (VAT )

Value Added Tax was first introduced in the country in March 1995, after passing the VAT bill into Law
(ACT 486). However, due to insufficient public education and misapplication of the law, the VAT ACT
was repealed on 14th June, the same year. It was again re-introduced in the year 1998 after the passage
of the Value Added Tax Act, 1998 (ACT 546) and the Value Added Tax Regulations, 1998 (L.I. 1646).
This was also repealed and the new Value Added Tax 2013 (Act 870) introduced. VAT as the name
implies is the taxation of value added in the production-distribution chain. In this unit we are going to
look at the very important issues of the VAT.

Definition of VAT
In production there is the need to procure inputs from other firms, pass the inputs through a process and
turn out outputs, which are sold for higher prices than the inputs. In passing the inputs through a
process, some value is added to the inputs to turn out the outputs. The value added, therefore, is the
addition made by the firm through its own activity, to the value of the inputs procured from other firms
to turn out the output. From this explanation of value added, how then do you define value added tax?

VAT in its simplest term, can be defined as the taxation of the Value Added to the inputs to turn out
outputs. It can also be defined as a tax applied to the costs and profits which a firm incurs in producing
goods and services. VAT is included in the final price of the outputs and it is the consumer who pays
the VAT.

Characteristics of VAT
VAT has the following characteristics which distinguish it from the other taxes.
i. It is a general tax on consumption expenditure
ii. VAT is a tax on the final consumer
iii. VAT is a multi-stage tax, collected in little bits at the various stages in the
production-distribution chain.
iv. At each stage of the production ­distribution chain, VAT is effectively levied on the “value
added” created, and not the full value of the product.
v. VAT though a consumption tax is collected by registered businesses that act as agents of the
VAT authorities at all the points in the production-distribution chain.

Reasons for Introducing VAT in Ghana

1. To improve efficiency and equity in tax collection.
2. To expand the tax base
3. To adopt a uniform basis for collecting the general consumption taxes
4. To control smuggling
5. To raise revenue for development
6. To control inflation
7. To reduce government borrowing

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EXPLANATION OF TERMS
Taxable Supply
A taxable supply is any sale of goods or provision of service not specifically exempt or relieved under
the VAT Act 2013 (Act 870) and its subsidiary legislation, the VAT Regulations. Taxable supplies
include exports which under the VAT law are taxed at a rate of zero to permit a full recovery of input
tax by the exporter.

By virtue of the Act, a taxable supply is a supply of goods or services made by a taxable person for
consideration in the course of or as a part of his business activities and include:
(a) The processing of data or supply of information or similar service
(b) The supply of staff
(c) The acceptance of a wager or stake in any form of betting or gaming including lotteries
and gaming machines.
(d) The making of a gift of any taxable goods or taxable service in the course of business
(e) The letting of goods on hire, leasing or other transfers.
(f) The appropriation of goods for personal use or consumption by the taxable person or by
any other person;
(g) The sale, transfer, assignment, or licensing of patents, copyrights, trademarks, computer
software, and other propriety information and export of non-traditional products.
(h) Any other disposal of taxable goods or provision of taxable services.

Supply of Goods
A supply of goods means any arrangements under which the owner of the goods parts with or will part
with possession of the goods including provision of goods by sale, batter, lease, transfer, exchange, gift
or similar disposition.

Supply of Services
Supply of Services means any supply, which is not a supply of goods or money and includes:
(a) The performance of service for another person
(b) The making available of any facility or advantage or
(c) Tolerating any situation or refraining from the doing of any activity.
It should be noted, however, that supply of services made by an employee to his employer because of
the employment is not a supply made by the employee.

Taxable Person
The definition of a taxable person includes a sole proprietor, partnership (including husband and wife
partnership), limited company, Government institution and non-profit organizations.

Taxable Value
The amount of VAT payable is the value of the supply multiplied by the tax rate for the commodity or
service. The value of the supply is referred to as the taxable value. In general, the value of a particular
supply depends on what is given in exchange for that supply. This is called consideration and may be
given in money and/or in kind.

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EXEMPT SUPPLY
Exempt supplies do not attract any VAT even when sold or supplied by a VAT registered person. In
effect, exempt supplies are considered to fall outside the scope of VAT, therefore traders engaged
exclusively in the sale or supply of exempt goods or services are not obliged to register for VAT
irrespective of their turnover.

Since the supply of exempt goods or provision of exempt service is considered by law to be outside the
scope of VAT, dealers in exempt supplies cannot recover any input tax that may have been paid on
inputs relating to exempt supplies. In other words, where taxable inputs are used in the production of
exempt supplies, the firm can only teat the input tax as cost and pass it on to the consumer as part of the
selling price. The price of an exempt supply includes any VAT that may have been paid on the inputs.

Goods and Services Exempt from VAT

The following Goods and services are exempt supplies and not subject to VAT.
Live animals
This classification includes all live animals such as cattle, sheep, goats, swine and poultry, but excludes
horses, asses, mules, hinnies and similar exotic animals.

Goods for the disabled

Articles designed exclusively for use by the disabled.

Educational Items / Services

The supply of educational services at any level by an educational establishment approved by the
Minister for Education. Laboratory equipment for educational purposes and library equipment.

Medical supplies and services – Pharmaceuticals

Medical services, essential drugs as listed under Chapter 30 of the ‘HS Code’ produced or supplied by
retail in Ghana, specified active ingredients for essential drugs, and selected imported special drugs
determined by the Minister for Health and approved by Parliament.

Transportation
Includes transportation by bus and similar vehicles, train, boat and air.

Machinery
Machinery, apparatus, appliances and parts thereof, designed for use in
a) agriculture, veterinary, fishing and horticulture
b) industry
c) mining (as specified in the mining list) and dredging; and
d) railway and tramway.

Crude oil and hydrocarbon products

Petrol, diesel, liquefied petroleum gas, kerosene and residual fuel oil.

Land, Building and Construction

Land and buildings; the granting, assignment or surrender of an interest in land or buildings; the right to
occupy land or buildings excluding hotel accommodation, warehousing, storage and similar occupancy
incidental to the provision of the related services. Civil engineering works.
This exemption excludes professional services such as architectural or surveying (i.e. these are taxable
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services).

Financial Services
Provision of insurance; issue, transfer, receipt of, or dealing with money (including foreign exchange)
or any note or order of payment of money; provision of credit; operation of any bank (or similar
institution) account.
This exemption excludes professional advice such as accountancy, investment and legal services (i.e.
these are taxable services).

Animals, livestock, poultry and fish imported for breeding purposes

Live asses, mules, and hinnies, live bovine animals, live swine; live sheep and goats; live marine
mammals, live fish and aquatic invertebrates.

Animal product in its raw state produced in Ghana

Edible meat and offal of the animals, livestock and poultry earlier listed, provided any processing is
restricted to salting, smoking, freezing or similar simple processes of preparation or preservation.
This exemption excludes pate, fatty livers of geese and ducks and similar products (i.e. these are
taxable).
NOTE: These items are considered to be in their raw state even if they have undergone simple
processes of preparation or preservation such as freezing, chilling, drying, salting, smoking, stripping or
polishing.

Agricultural and aquatic food product in its raw state produced in Ghana.
Fish, crustaceans and molluscs, vegetables, fruits, nuts, coffee, cocoa, shea butter, maize, sorghum,
millet, tubers, guinea corn and rice.
This exemption excludes ornamental fish (i.e. the supply of ornamental fish is taxable).

Seeds, bulbs, rooting, and other forms of propagation;

Of edible fruits, nuts, cereals, tubers and vegetables.

Agricultural inputs
Chemicals including all forms of fertilizers, acaricides, fungicides, nematicides, growth regulators,
pesticides, veterinary drugs and vaccines, feed and feed ingredient.

Fishing equipment
Boats, nets, floats, twines, hooks and other fishing gear as well as imported inputs for fishing nets and
twines.

Water
Supply of water. The exemption excludes packaged and distilled water (i.e. they are taxable).

Electricity
Domestic use of electricity up to a specified consumption level prescribed in regulations by the
Minister (i.e. all commercial use of electricity and domestic consumption above the limit specified is
taxable).

Printed matter (books and newspapers)

These must be fully printed or produced by any duplicating process. It includes atlases, books, charts,

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maps and music.
The exemption excludes imported newspapers, plans and drawings, scientific and technical works,
periodicals, magazines, price lists, greeting cards, almanacs, calendars and stationery. These are
taxable.

Transfer of a Going Concern

The supply of goods as part of the transfer of a business as a going concern by one taxable person to
another taxable person.

Postal Services
Supply of postage stamps (i.e. other commercial services rendered by postal agencies are taxable).
VAT/NHIL is not chargeable on the sale of exempt supplies but at the same time no credit may be
allowed to the business making exempt sales for the VAT/NHIL paid on purchases or expenses applied
for the purpose of the exempt sales – S. 24(3). The business can however recover these input taxes by
including it in the cost of production and distribution. It must be noted that businesses which make only
exempt supplies cannot register for VAT.

Zero-Rated Supplies
In contrast with exemption, zero-rating ensures a complete relief of VAT on the target product.

A transaction is zero-rated when the supply, though taxable, the rate of tax is zero, resulting in no tax
being charged to the buyer. Since zero-rated supplies are taxable any input tax incurred in relation to
them is recoverable.

Unlike exempt supply, zero-rated supply is wholly within the VAT system and the registered trader
making zero-rated supplies is required to submit returns to the VAT service.

From the zero tax on sales, the trader dealing exclusively in zero-rated supplies must deduct the input
tax, ending up with a claim on the VAT service equal to the VAT paid on inputs.
Under VAT ACT, 2103(ACT 870) the following supplies destined for consumption outside the
territorial boundaries of Ghana are zero-rated
(a) Exports of taxable goods and services
(b) Goods shipped as stores on vessels and aircrafts leaving the territories of Ghana.

The Value Added Tax Amendment Act, 2006 (Act 546) added the following to the zero-rated list:
(c) Locally produced Textbooks and Exercise books
(d) Locally manufactured Agricultural Machinery and other Agricultural Implement or tools.

Mixed and Composite Supplies

Sometimes different goods and services are invoiced together at an inclusive price. Such is called a
mixed supply. Some items may be chargeable at standard rate, some at zero rate and others exempt.
When this happens the supplier must account for tax separately on the standard rated and zero rated
items by splitting the total amount payable in proportion to the different items and applying the
appropriate rate.
How can this be done?

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This can be done either by using the cost to the supplier of each item or by using the open market value
of each item. If a supply, however, cannot be split into different components then it is a composite
supply to which one VAT rate must be applied.

Tax Invoice
VAT registered businesses need to charge the tax on all sales that are taxable under the VAT Law. The
VAT registered person is required by VAT law to issue a tax invoice in duplicate for every taxable
supply made. The original is given to the buyer and the duplicate retained in the booklet.

The tax invoice is a document showing information on the supply of taxable goods or taxable service to
another person. The tax invoice is needed to reclaim input tax.

The tax invoice must show the following information;

(a) The supplying taxable person’s name, address and VAT registration number
(b) The time of supply
(c) The number of the invoice taken from a consecutive series
(d) The customer’s name or business name and VAT registration number if a taxable person
(e) A description of the goods or services supplied including the quantity of the goods or the
extent of the services supplied
(f) The type of transaction by reference to the following:
(i) sale
(ii) hire purchase, hire, lease or rental
(iii) exchange
(iv) goods and services supplied from the customer’s own supplies
(g) The tax exclusive charge for each description of goods or services supplied
(h) The rate of tax
(i) The total charge on the invoice, exclusive to tax
(j) The rate of any discount
(k) The total tax charge and
(l) The total charge inclusive of the tax

Registration as Taxable Person

All persons who make taxable supplies of goods and/or services are required to register as taxable
persons.
(1) Except as otherwise provided in this Act, a person who is engaged in a taxable activity and is not
registered for tax purposes shall register if
(a) at the end of any period of twelve or less months, the person made, during that period, taxable
supplies exceeding one hundred and twenty thousand Ghana Cedis; or
(b) 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 one hundred and twenty thousand Ghana
Cedis.
(2) Despite subsection (1), a person shall register if
(a) at the end of any period of three months, the person made, during that period, taxable supplies
exceeding thirty thousand Ghana Cedis; and
(b) there are reasonable grounds to expect that the total value of taxable supplies made by that person
during that period and to be made during the next consecutive nine months will exceed one hundred
and twenty thousand Ghana Cedis.

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(3) For the purpose of determining the thresholds under subsections (1) and (2), the
Commissioner-General may have regard to the value of taxable supplies made by another person, if that
other person is a related person or the taxable person and that other person are acting in concert in
making the taxable supplies.
(4) A person who is required to register under this Act shall apply for Value Added Tax registration in
the form and manner prescribed by the Commissioner-General.
(5) A person required to register under subsection (1) shall file the application for registration within
thirty days after the end of (a) the period under paragraph (a) of subsection (1); or (b) the month under
paragraph (b) of subsection (1).
(6) A person required to register under paragraph (a) of subsection (2) shall file the application for
registration within thirty days after the three-month period.

Voluntary Registration
A retailer of goods may apply to be voluntarily registered, if he or she so wishes, even when his
or her annual taxable turnover falls below the registration threshold. This is usually done to
enable such a business to take advantage of the benefit of input tax credits.

CALCULATION OF VAT
Input and Output VAT
Every registered person is required to do three things:
(i) Pay VAT (called input tax) on all taxable purchases of goods and services and obtain tax
receipts called tax invoice for them.
(ii) Charge VAT (called output tax) on all taxable sales of goods and services and issue tax
invoice for them.
(iii) At the end of the month deduct the total input tax from the total output tax and remit only the
difference to VAT office.

Input Tax is the VAT charged by Suppliers on Purchases made by Customers and include
(a) Goods and services supplied
(b) Goods imported
(c) Goods removed from a wholesale

It also includes the VAT on things like

(i) Office equipment for a business
(ii) Telephone bills for business purposes
(iii) Payments for services for a business, e.g. accountants and legal fees

Output Tax
Output tax is the VAT a registered person charges his customers when he makes taxable supplies of
goods and services at the rate specified by law which is currently 12.5%.

Example 1
Koo Nimo purchased raw materials at GHC20,000 and manufactured a product K, which is sold at
GHC30,000. Compute the input and output VAT taking the rate to be 12.5%. How much will be paid to
the GRA office?

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Solution 1 GHC
(a) Input 20,000
VAT 2,500

(b) Output 30,000

VAT 3,750

VAT to be paid to GRA office = Output tax - input tax

= 3,750- 2,500
= GHC1,250

The VAT to be paid to GRA office can also be calculated by applying the rate to the value added by
Koo Nimo.
GHC
Sales 30,000
Purchases 20,000
Value Added 10,000

: . VAT @ 12.5% = 12.5% x GH10,000

= GHC1,250

The VAT mechanism

The following formula can be deduced from
Example 1
VAT = t (S –P) = t S – t p
= tax on sale - tax on Inputs
=12.5% x GHC30,0000 – 12.5% x GHC20,000
= GHC1,250

Example 2
An importer imports raw material worth GHC150,000 sells the raw materials to a manufacturer at
GHC280,000. The manufacturer converts the raw materials into finished goods and sells to a
distributor at GHC420,000. The distributor in turn sold the finished goods to a registered retailer at
GHC600,000. The registered retailer sold to the final consumer at GHC750,000.
Compute the VAT payable at each stage of the production – distribution chain.

Assume VAT rate of 12.5%

Solution 2
Stage 1
Importer Value VAT
Imports 150,000 18,750
Value Added 130,000
Sales to manufacturer 280,000 35,000

Stage 2
Manufacturer
Purchases from importer 280,000 35,000

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Value Added 140,000
Sales to distributor 420,000 52,500

Stage 3
Distributor Value VAT
Purchases from manufacturer 420,000 52,500
Value Added 180,000
Sales to registered retailer 600,000 75,000

Stage 4
Retailer
Purchases from distributor 600,000 75,000
Value Added 150,000
Sales to final consumer 750,000 93,750

VAT Treatment of Amounts Calculated

Stage 1
VAT on Sales (output tax) 35,000
Less: VAT reclaimed on purchases (imports) 18,750
Payment to GRA office 16,250

Stage 2
VAT on sales (output tax) 52500
Less VAT on purchases 35,000
Payment to GRA office 17,500

Stage 3
VAT on sales (output tax) 75,000
Less VAT on purchases 52,500
Payment to GRA office 22,500

Stage 4
VAT on sales (output tax) 93,750
Less: VAT on purchases 75,000
Payment to GRA office 18,750

Illustration 1
(a) The following are the transactions that took place in the month of July 2019 in respect of Koo
Badu, a VAT registered trader:
● Purchased 250 bags of cement @ GHC32.00 each
● Sold 30 packets of roofing sheets @ GHC720.00 each
● Purchased 150 packets of roofing sheets @ GHC610.00 each
● Sold 210 bags of cement @ GHC35.00 each
● Purchased 420 pieces of iron rods @ GHC22.00 each

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 ● Purchased 650 bags of rice @ GHC150.00 each
● Sold 135 packets of roofing sheets @ GHC735.00 each
● Sold 380 pieces of iron rods @ GHC26.00 each
● Sold 600 bags of rice @ GHC168.00 each

You are required to compute the :

(i) input VAT
(ii) output VAT
(ii) the net tax payable by Koo Badu for the month of July, 2019

SOLUTION TO ILLUSTRATION 1
Descriptions Quantity Price/Unit Amount (GHȻ) VAT
(GHȻ) (GHȻ)

Cement 250 bags 32.00 8,000.00 1,000.00

Roofing Sheets 150 pkts 610.00 91,500.00 11,438.00

Iron Rods 420 22.00 9,240.00 1,155.00
Rice 650 bags 150.00 97,500.00 12,188.00
Total Input VAT 25,781.00

Descriptions Quantity Price/Unit Amount VAT

(GHȻ) (GHȻ) (GHȻ)
Roofing Sheets 30 pkts 720.00 21,600.00 2,700.00
Cement 210 bags 35.00 7,350.00 919.00
Roofing Sheets 135 pkts 735.00 99,225.00 12,403.00
Iron Rods 380 26.00 9,880.00 1,235.00
Rice 600 bags 168.00 100,800.00 12,600.00
Total Output VAT 29,857.00

Deductible Input Tax Credit for Mixed, Taxable and Exempt Supply
Where a taxable person supplies both taxable and exempt goods, the input tax to be reclaimed is
calculated as follows (Standard Method):

𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (𝐸𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑉𝐴𝑇)

𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (𝐸𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑉𝐴𝑇)
×𝐼𝑛𝑝𝑢𝑡 𝑇𝑎𝑥

Value of Total Supplies = Taxable supplies + Exempt Supplies

It must be noted that that, this is for a case where the taxable person is unable to directly attribute the
input tax to the taxable supplies.

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Illustration 2
The purchases and supplies details of “At Long Last” Ventures for the month of August 2019 showed
the following:
GHC
Input tax on exempt supplies 4,500
Value of relief supplies 8,000
Input tax on taxable supplies 6,000
Input tax that cannot be attributed
directly to supplies 3,000
Value of exempt supplies 45,000
Value of taxable supplies
(including 12.5% of VAT) 101,250
You are required to compute input tax claimable by “At Long Last” Ventures.

Solution to Illustration 2
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (𝐸𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑉𝐴𝑇)
Deductible input tax = 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑇𝑜𝑡𝑎𝑙 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (𝐸𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑉𝐴𝑇)
×𝐼𝑛𝑝𝑢𝑡 𝑇𝑎𝑥
Value of taxable supplies (including VAT) 101,250.00

Value of taxable supplies (excluding VAT) =100 x 101250

112.50
= GHC 90,000.00
Therefore deductible input tax = GHC 90,000.00 x 3,000.00
90,000.00 +45,000.00
= GHC 2,000.00
Total Input Tax Claimable GHC

Input tax on taxable supplies 6,000.00

Input tax on common supplies 2,000.00
Total 8,000.00

Illustration 3
The following information relate to Kofi Asuma a VAT registered trader for the month of May, 2020.
He deals in both taxable and exempt supplies:
GHC
Exempt Supplies 250,000
Input tax on taxable supplies 38,150
Input tax on exempt supplies 30,250
Input tax on common supplies 25,000
Value of taxable supplies
(including 12.5% VAT) 103,500
You are required to compute the input tax claimable for the month of May, 2020

Solution to Illustration 3
Value of taxable supplies (including VAT) 103,500.00
Value of taxable supplies (excluding VAT) = 100 x 103500.00
112.50
= GHC 920,000.00

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:. Input tax claimable on common supplies = 920,000.00 x 25,000.00
920,000.00 + 250,000.00
= GHC 19,658.00
Total input tax claimable GHC
Input tax on taxable supplies 38,150.00
Input tax on common supplies 19,658.00
Total 57,808.00

Assignment 1
The following information was extracted from the VAT Account and other business
records/documents of Kofi Kwakye Enterprise, a VAT registered person, for the month of
September 2019.
The enterprise makes both taxable and exempt supplies. The enterprise sells on both cash and
credit basis.

Purchases/Expenses GHC
(i) Cost of VAT invoice booklets bought 600
(ii) Purchases relating solely to exempt supplies (VAT inclusive) 28,750
(iii) Expenses for which no VAT invoices received 18,000
(iv) Purchases relating solely to relief supplies (VAT inclusive) 23,000
(v) Purchases relating solely to taxable supplies on credit (VAT
inclusive) 34,500
(vi) Purchases relating to entire business (VAT inclusive) 46,000

Supplies Made
(i). VAT-inclusive sales of taxable supplies on credit 41,400
(ii). VAT-exclusive cash sales of taxable supplies 48,000
(iii). Cash sales of exempt supplies 20,000
(iv). Amount received for relief supplies made
(necessary documents received from customers) 15,000

You are required to compute the following for the purposes of completing Kofi Kwakye
Enterprise’s VAT return for September, 2019 using a rate of 12.5%:
A. Total output tax
B. Total deductible tax
C. Net payment or Net credit due

Relief Supply
The VAT Act provides relief from the tax on a taxable supply to the following individuals,
organizations and businesses specified in schedule 3 to Act 546.
A. The President of the Republic of Ghana
B. For the official use of any commonwealth or foreign embassy, mission or consulate (relief
applies only to VAT on imported goods.)

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 C. For the use of a permanent member of the Diplomatic Service of any commonwealth or foreign
country, exempted by Parliament from the payment of customs duties (relief applies to VAT on
imported goods.)
D. For the use of an international agency or technical assistance scheme where the terms of the
agreement made with the government include exemption from domestic taxes.
E. Emergency relief approved by Parliament
F. VAT-registered manufacturers for raw materials at importation, subject to the available
conditions.

Assignment 2
The information below relates to the records of Fakye Enterprise, a VAT registered trader, for the month
of June, 2019. You are required to calculate the amount of VAT due to the VAT service or due to be
refunded to the trader, using an applicable rate of 12.5%

Items Purchased Value (GHC)

Imported leather 15,000
Glue 100
Cardboard Sheet 15,000
Cotton Bales 10,000
Dye 2,500
Brown Paper 15,000

Items Sold
Bags 5,000
Complimentary Cards 250
Diaries 20,000
Wax Print (Exported to Nigeria) 10,000
Seminar Folders 25,000

Additional Information
● GHC2,500 Diaries and GHC1,000 Bags were supplied to the President.
● GHC50 glue and GHC5,000 cardboard sheets were purchased from petty traders not registered
with the VAT Service

Conditions for a Refund of VAT paid on Business Inputs

The following conditions have to be satisfied before a registered VAT trader can get a refund of VAT
paid on his/her inputs for business purposes:

(a) The business must be registered for VAT, that is, he/she must be a registered VAT trader.
(b) The business must submit returns for all months for which it has been in operation
(c) The business must complete and submit a prescribed VAT claim form for the refund of the VAT
paid to the VAT service
(d) The business must be engaged in the export of 25% or more of its output.
(e) Total export proceeds should have been repatriated by importer’s bank to exporter’s authorized
dealer banks in Ghana
(f) The VAT paid should qualify as a deductible input VAT
(g) The input VAT paid should exceed the output VAT paid.

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OFFENCES AND PENALTIES RELATING TO VAT

Offences Relating to Officers

(a) Offence: any officer who seeks directly or indirectly any payment or reward commits an offence.
Penalty: 3 x the value of tax or 5 years imprisonment or both plus dismissal from VAT service
(b) Offence: Any person who directly or indirectly offers to any officer
any part or other reward to induce an officer not to perform
his duties commits an offence.
Penalty: 3 x the value of tax or 5 years imprisonment or both.
(c) Offence: Any person who impersonates an officer of the service in any way commits an
offence.
Penalty: The person is liable on summary conviction to imprisonment for a term not less than 6
months and not exceeding 3 years.

Other Offences and Penalties

(a) Offence: Failure to register
Penalty: (i) Where the failure is deliberate or reckless, the person shall be liable on summary
conviction to a fine not exceeding ¢10million or imprisonment for a term not
exceeding 5 years or to both
(ii) Where the failure is for any other reason, to a fine not exceeding ¢5million or
imprisonment for a term not exceeding 1 year or to both.
(b) Offence: Failure to issue tax invoice as required under the VAT Act for goods supplied or
services rendered is an offence.
Penalty: Liable on summary conviction to a fine not exceeding ¢10 million or imprisonment for
a term not exceeding 5 years or to both.
(c) Offence: A person who in any matter relating to the tax (i) makes a statement to an officer of the
service which is false or misleading in any material particular or (ii) omits from a
statement made to the officer any matter or thing without which the statement is
misleading in any material particular commits an offence.
Penalty: (i) Where the statement or omission was made knowingly or recklessly the person
shall be liable on summary conviction to a fine not exceeding ¢10 million or
imprisonment for a term not exceeding 5 years or to both; and (ii) in any other case,
be liable on conviction to a fine not exceeding ¢5 million or imprisonment for a term
not exceeding 1 year.
(d) Offence: Falsification or alteration of documents. Any person, who falsifies, forges, alters any
document in relation to the tax commits an offence
Penalty: Liable on summary conviction to a minimum of ¢2 million and not exceeding
¢10million or imprisonment for a term not exceeding 5 years or to both and any
goods involved in the commission of the offence shall be forfeited to the state.

Taxation Notes compiled by Asante, Agyei, Arhin and Adela SOB-UCCPage 14

(e) Offence: Evasion of tax payment. Any person who tries to evade the payment of tax in any
form commits on offence.
Penalty: Liable on summary conviction to a fine not exceeding 3 times the amount of tax
involved or to imprisonment for a term not exceeding 5 years or to both.
(f) Offence: Failure to maintain proper records.
Any person who fails to maintain proper records as required under the law commits
an offence.
Penalty: Liable on summary conviction to
(i) a fine not exceeding ¢10 million or imprisonment for a term not exceeding 5
years or to both where the failure was deliberate or reckless; or
(ii) in any other case, to a fine not exceeding 1 year or to both.
(g) Offence: Obstruction of an officer of the VAT service. Any person who obstructs the
commissioner or an officer authorized by the commissioner in the performance of his
duties under the Act; assaults or refuses to grant access to his premises to the officer
in the performance of his duties commits an offence.
Penalty: Liable on summary conviction to a fine of not less than ¢500,000 and not exceeding ¢5
million or imprisonment for a term not exceeding 1 year or to both
(b) Offence: Failure to Submit Returns on Due date. A taxable person who without justification
fails to submit to the commissioner his tax return on the due date commits an offence.
Penalty: Liable to a pecuniary penalty of ¢1 million and a further penalty of ¢5000 for each day
that the return is not submitted.

Assignment 3
The under-mentioned figures represent extracts from the books of Respect Enterprise, a VAT registered
trader, for the month of May, 2020.
Purchases Value (GHC)
Leather (imported) 15,000
Paper 15,000
Glue 200
Cardboard sheet 15,000

Sales
Leather Handbags 10,000
Children’s Books 10,000
Newsprint 45,000
Diaries 25,000
Newsprint (Export) 10,000

Calculate the amount of VAT due to the VAT Service or due to be refunded to the trader, assuming a
VAT rate of 12.5%

Taxation Notes compiled by Asante, Agyei, Arhin and Adela SOB-UCCPage 15

The Facts of Life: There is a story told about four people named: Everybody, Somebody, Anybody and Nobody. There was
an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it but Nobody
did it. Somebody got angry about that, because it was Everybody’s job. Everybody thought Anybody could do it, but
Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what
Anybody could have done!

Taxation Notes compiled by Asante, Agyei, Arhin and Adela SOB-UCCPage 16