(GRA GHANA REVENUE AUTHORITY ADMINISTRATIVE GUIDELINES FOR IMPLEMENTATION OF THE VAT FLAT RATE SCHEME Guideline Number: AG/2022/001 Date of Issue: 28" January, 2022ADMINISTRATIVE GUIDELINES FOR IMPLEMENTATION OF THE VAT FLAT RATE SCHEME 1.0. INTRODUCTION ‘Among the tax Policy measures announced by the Minister of Finance in the 2022 Budget Statement i a review ofthe VAT Flat Rate Scheme (VFRS), Paragraph 3 of the Memorandum to the VERS Bil provides inte ala, thatthe ‘new policy seeks to “address the inequies that domestic producers of local Substitutes face vis-a-vis importers of similar products, create a level playing fed for al taxpayers and bring addtional efcieny tothe Tax administration” ‘The object of these guidelines isto steamine the implementation ofthe VERS in ts curent form as captured in ts establishing enactment, VAT Amendment Act, 2021(Act 1072) 2.0 TAX LAWILEGISLATION ‘These Guidelines apply to the supply of goods by a taxable person who is a retailer with an annual TURNOVER rom a taxable supply made atthe end of ‘any period of twelve months not less than GHS200,000 but rot exceeding {GHS500,000 and itis based on Section 3(2) ofthe Value Added Tax Act, 2013 (Act 870) as amended by VAT (amendment) Act, 2021 (Aet 1072. 3.0 INTERPRETATION In these Guidelines the word "Act’ means the Value Added Tax Act, 2013 (Act 870) as amended Defnitons and expressions used inthe Guidelines have the same meaning as they are in the Act,3.1 VATFLAT RATE SCHEME ‘A VAT Flat Rate Scheme (VERS) is a VAT collecion and accounting ‘mechanism under which a registered taxpayer who isa retaler of goods with ‘an annual taxable turnover not less than GHS200,000 but not exceeding {GHS500,000, applies @ marginal rate of 3% onthe value of goods supple, 3.2 “RETAILING” For purposes of these Guidelines, “Retaling” is the resale (sale without transformation) of new and used goods mainly to the public, individual or household for consumption or utiizaton. This Includes retaling by shops, department stores, sts, malLorder houses, door-to-door sales. persons, hawkers and peddlers, consumer cooperatives, auction houses etc. 4.0 THE PURPOSE OF THE GUIDELINES “These guidelines are to give clay tothe provisions of the Value Added Tax Amendment Act 2021 (Act 1072) and to achieve consistency in the administration ofthe Act inline with Section 1(2) ofthe Revenue Administration Act, 2016(Act 915) Itis also to address administrative and operational challenges that may aise from the interpretation and scope ofthe VAT Flat Rate Scheme. 5.0 SOME FEATURES OF THE VFRS ‘The VERS is differentiated from the standard VAT scheme by the under listed features: @ Ithas a marginal tax rate of 5% applod tothe value of taxable supply of goods, (i) VERS Operators are also required to charge 1% COVID-19 Health Recovery Levy onthe value ofthe taxable susp of goods, ii) I.does not allow input tax credit ie, VERS operators shal nat be ented to input tax claims, ™ Itis restricted to retalers of taxable goods with an annual taxable turnover not less than GHS200,000 but not exceeding ‘GHs500,000. Taxpayers operating the VERS shall issue a simplifed Commissioner- Generals Tax Invoice (see Appendix 1)6.0 SCOPE AND COVERAGE @ @ (ii) w The VFRS is restricted tothe category of retalers of taxable goods wth an annual tur-over from taxable supplies made at the end of any period of ‘twelve months not less than GHS200,000 but not exceeding GHS500,000 {and does not cover wholesalers, manufacturers, service providers, et. as provided for by section 32) of VAT Act, 2013 (Act 870) as amended by VAT (amendment) Act, 2021 (Act 1072) which provides that: “Unless otherwise directed by the Commissioner General, in writing, a taxable person who (a)is a retailer of goods and, (b) Makes at the end of any period of twelve months, a taxable supply ‘not ess than GHS200,000 but not exceeding GHS 600.000 ‘shall account for the Value Added Tax payable under this section at a {at rate of three percent calculated on the value of the taxable supply” ‘covers the supply ofall taxable goods, excopt the supply of any form of Power, heat, refrigeration or ventilation (se2 section 1 (6) of VAT (amendment) Act 2017 (Act 948). All other provisions relating to supply of goods under the VAT Act, 2013 (Act £870) and L1. 2243 shall apply appropriately to the VERS, except the right to deduct input tax. VERS operators are therefore not entities to input tax creat as provided for in section 48(7A) of Act 870 as amended by VAT Act 948 as follows: “A taxable person to whom subsection (2) of section 3 applies does not qually for input tax deduction in respect of a supply of goods”. Retallers of taxable goods whose annual turnover exceeds the {GHS500,000 statutory threshold but who are curently registered to operate the VAT Flat Rate Scheme (VFRS) under the old dispensation are ‘automatically converted othe Standard Rate Scheme (SRS) ~ fer to (9.0).7.0 REGISTRATION OF VFRS TRADERS “There are some categories of retallers of taxable goods who qual to be registered to operate the VFRS. These categories are: o ® Retailers of taxable goods who qualify but have not yet registered to ‘operate the VAT Flat Rate Scheme Retailers of taxable goods who are currently not registred to operate the VERS because they do not meet the VAT threshold, may voluntarily apply to be registered forthe VERS, 7.4 APPLICATION FOR REGISTRATION o 0 w, ‘All retalers of taxable goods who have not registered but who are registrable and hence qualiy to operate the VFRS shail apply to be registered using the registration form tited “Application For Registration For VAT (Flat Rate Scheme)” (see appersix 2), ‘Taxpayers who double as wholesalers and retalers are fo operate the ‘Standard Rate Scheme (SRS). All newly cegistored VERS operators should be issued with the VAT Certificate of Registration NOTE : ALL OTHER PROVISIONS OF ACT 870 AND LJ. 2243 RELATING TO RETURN FILING, TAX PAYMENT AND ANY OTHER TAXPAYER OBLIGATIONS APPLY.80 84d ‘THE MECHANICS OF THE VFRS . COMPUTATION OF VAT PAYABLE UNDER THE VFRS. ILLUSTRATION 1 ‘The Seling Prce(Exclusive of taxes) ofan item tobe soldat aretal outlet to 2 consumer i given as GHS1000.00. Compute the tax at Fat Rate of 3% and COVID-19 Health Recovery levy payable, Solution cus (a) Seling price (Exclusive of taxes) 1000.00 (b) VER (@%) 3000 (©) COV 19Heath Recovery Ley 49.00 GROSS AMOUNT PAYABLE 1040.00 8.1.2 Illustration 2 Extracting the Tax from Tax Inclusive Amount. ‘The seling price ofan item (tax incusive) is given as GHS104000. Compute the VAT at Flat Rate of 9% and COVID levy payable. To obtain the COVID-19 Health Recovery Levy rom the tax inclusive value of {an item sold under the VERS therefore, the COVID Levy fraction (1/104) is applied tothe tax inclusive amount. “Therefore, forthe VERS tax inclusive amount of (GHE1040.00) above, ‘The COVID-19 Heath Recovery Levy = (1/104 x GH¢1040.00) = GHet0.00 To obtain the VAT of 3% from the tax inclusive value ofan item sold under the VERS therefore, the VERS fraction (3104) Is applied to the tax Inclusive amount ‘The VAT of 3% (21104 x GHe1040.00) (GHe 40.00)9.0 GUIDELINES FOR TAXPAYERS MIGRATED FROM VFRS TO SRS Taxpayers affected include: > ALL RETAILERS WHOSE ANNUAL TURNOVER EXCEEDS ‘GHS00,000.00 > WHOLESALERS, DISTRIBUTORS AND IMPORTERS OF GOODS ‘The following guidelines wl apply to al the Taxpayers mentioned above () VAT Certitcate of Registration issued under the VFR Screme is stl val. it) Taxpayers migrated to the Standard Rate Scheme are required fo charge the taxa the Standard Rate as folows: Seling Price (Tax Excuse) sox GETFund Levy =m NL - mm COVID-19 Heath Recovery Lewy- x00 Taxable Value = mx VAT (12.5%) nox Gross Amount = eee (i) Taxpayers granted the dispensation to use own invoices (including computer generated invoices, electronic cash register etc) are required 0 configure ther systems to reflect the Standard Rate; (iv) Newly migrated SRS Taxpayers are required to submit /le a monthly ‘SRS retun. The return form may be downloaded from the GRA website or obtained manually from the nearest GRA TSC. (9) All other provisions of Act 870 and Lt 2243 relating to retums fing, tax payment and any other taxpayer obigations apply. (vi) Taxpayers are required to submit all outstanding VAT Returns Felating to the VERS prior to their migration to the SRS to ther respective “Taxpayer Service Centers (TSCs) on or before 31% January, 2022(i) Taxpayers are also requires to pay up all Outstanding VAT liabilities ‘owed to the Commissioner General to avoid INTERESTS & PENALTIES. 10.0 TRANSITIONAL ARRANGEMENTS ON RECOVERY OF INPUT VAT ON STOCKS BY AFFECTED TAXPAYERS MIGRATED TO STANDARD RATE SCHEME (Taxpayers who migrate tothe SRS are to claim input VAT Crediton their unsold merchandised stock which are on hand at the time of migration, (il) Such taxpayers are required to furish the Commissioner-General (le the Tax Offce where they have ther Tax fle) details ofthe stock nthe format attached as Appendix 3 (ii) Taxpayers ae also to note that failure to submit the details referred to in (above wil result inthe forfeiture ofthe related input VAT onthe stock (iv) Taxpayers who claim Input VAT Credit on such unsold stecK/inventory ‘are however to note thatthe total value of their input VAT claim cannot ‘exceed the total value of the deductible input VAT embedded in their stock on hand as atthe time of migration. (W) It should also be noted that, the value of stock on hand submitted as per Appendix 3, will be validated as and when tax audits or compliance ‘exercises are conducted on the taxpayers who have claimed such input VAT credit. (Vi) The Commissioner-General reserves the right to revise the input VAT credit Claimed on such unsold stock where grounds are perceived far dolng £0 during vaidation, 10.1 OTHER TRANSITIONAL ARRANGEMENTS. €) Al fuly used Commissioner Genera's VERS VAT invoice booklets skould be kept at the Taxpayer's business premises for future auct purposes by authorised officers of GRA, ') Partly used VERS VAT invoice booklets should also be sent to Taxpayer Service Centres(TSCs) for review. These would be retuned to the taxpayer for Keeps thereafter,(©) Unused Commissioner General's VERS VAT invoice booklets shoud be sent to the respective TSCs to be replaced with SRS invoices at NO COST or they should be adjusted manually to reflect the standard rate for imrovised use 10.2 VAT Return Form ‘Taxpayers ( VFRS, SRS operators) shall be requied to file monthly VAT return form which has been modified to incorporate the VFRS (See Appendix 4 10.3 RETURN FILING AND PAYMENTS “Taxpayers are to fe thelr returns online and make payments by the last working day of each month immediately following the month to which the returns relate, The return must be on the form prescribed by the Commissioner ‘General, Copies ofthe tax retums form can be downloaded from wonw.gra.gov.gh 11.0 MECHANICS OF THE VAT STANDARD RATE ‘SCHEME(SRS) 11.1. COMPUTATION OF VAT PAYABLE UNDER THE SRS ILLUSTRATION + ‘The Selling Price (Tax exclusive) of items to be sold at a wholesale outet to a consumer is given 2s GHS12,000.00. Compute the VAT and Levies payable by the SRS taxpayer ‘SOLUTION: Hs Selling Price (Tax exclusive) = 12,000.00, (a) COVID LEVY1% = 12,000°1%) 1120.00 (b)NHIL=25% of 12000 25%) = 300.00 (C)GETFUND LEWY= 12000°25%) = 300.00 (dTaxable value (12,000+a+b+<) 2,720.00 (0)VAT=12.8% of 12,720.00) 1590.00 (9) Seling Price tax inclusive) = 12,720+1,590 = 18,310.00,11.2 Extracting the VAT, NHIL, GETFUNDL AND COVID 19 Health Recovery Levy from the Tax Inclusive Amount To obtain the Tax and Levis from the txinclusveseling price GHS14.310 of items sod under the SRS we appl the Levies and Tax ractons.as folows 1, To obtain the COVID Levy The COM Levy =(4477) “W47TxGHS14,310) 2. To obtain the NHL: “The NHIL. = (101477 x GHS14310) 3. To obtain the GETFL: ‘The GETFL = (40/477 x GHS14,310) 4. To obtain the VAT: ‘The VAT = (19 xGHS14,310) =oHs1,590 2fa.f22 Signed: Rev. Dr. Ammishaddai Owusu-Amoah Commissioner-GeneralAPPENDIX 4 GHANA REVENUE AUTHORITY FRANO V21/26 40001APPENDIX 2 12‘SRS TAXPAYERS MIGRATED FROM VERS -MERCHANDISED INVENTORY ON HAND AS AT 31°T DECEMBER 2021 (IMPORTS) APPENDIX 34, ‘DECLARATION | DECLARATION No. Dare ‘QUANTITY DECLARED TAXABLE VALUE INPUT VAT PAID ‘stock @ a1” Dec. 2021 REMARKS‘SRS TAXPAYERS MIGRATED FROM VERS APPENDIX 38 INVOICE | INVOICE | DESCRIPTION OF no. |pate | coons QUANTITY DECLARED TAXABLE VALUE INPUT TAX PAID stock @ 31” ec. 2021, REMARKS+ NAME OF TAXPAYER... NUMBER. SIGNATURE /STAMP OF DIRECTOR * FOR OFFICIAL USE ONLY ‘MERCHANDISED INVENTORY ON HAND AS AT 315° DECEMBER 2021 (LOCAL PURCHASES) seed TAX IDENTICATIONGHANA REVENUE AUTHORITY GRA ovesncraxsevenueninsion verre mcomeieennns Oe cease errno rn ES ao Cour enc rn ereny Cumnent Tax orrce [UTD 1SC PeRtop Tak) — Woe ERT canny [NB Sole proprstos shoo ONLY one Retr forall snes fr the Ta ero for VAT Flat ate CURRENCY (G15) vege Tee palo eee eco , - TaxAmEVALE] OT ‘ouIPUTS DURING als MONTH SCOVIDS LEVY CORD TOTAL VAT & COVIDSIV LEVY PAYAREE “TOTAL VALUE OF TAXKBLE SUPPLIES: fXEMFT TOTAL VAD PURCHASES AND EXPENSES DESCRIPTION OF INPUTS VALUE ORNATE TOTAL panuruoRis DDH) DECLARATION 1 ey éelare that the ae of as {information provided sbove is complet and aceurte Designation! Poston | Signature ‘Vetted By Fulntame Signature rosy yer‘COVID:19 LEVY COMPLETION NOTES ‘The return should be completely le (Note insructons for Box. 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