GHANA VALUE ADDED TAX (VAT) ON IMPORTS

GHANA VALUE ADDED TAX(VAT) ON IMPORTS 

1 INTRODUCTION

1.1 What this topic covers
This topic deals with the VAT procedures which apply to goods imported into and exported from Ghana. It also deals with the procedures to be used by exporters of services, the recipients of imported services and with goods entering and leaving the Free Zone.



1.2 The law
The law governing VAT is the Value Added Tax Act 1998 (Act 546) and Value Added Tax Regulations 1998 (L.I.1646). Sections 1, 2, 16 and 22 of the Act and Regulation 18 deal with imports. Sections 13, 15 and 25 and Schedule 2 of the Act and Regulation 14 deal with exports.

2 IMPORT OF GOODS

2.1 Liability to VAT
The goods which attract VAT at importation are classified as such in the Customs Division Tariff in accordance with the Harmonised System (HS) Code classification. This classification also includes goods exempted under the law. The taxation of imported services is dealt with in Section 3 below.

2.2 Payment
VAT is charged on all imports, other than those specifically exempted under the Act, at the time of importation. However, VAT registered importers are entitled to claim this VAT as input tax, unless they make exempt supplies, in which case only the VAT incurred in making taxable supplies will be reclaimable.

2.3 Time of importation
For VAT purposes, the time of importation is when the customs and other duties and taxes become due.

2.4 Value
The value for charging VAT on imports is the value for customs duty plus import duties and other taxes which may be chargeable.

2.5 Responsibilities of freight forwarding, shipping and clearing agents
It is important for importers, exporters, freight forwarders and shipping and clearing agents to be aware of the changes brought about by the introduction of VAT.

The services provided by freight forwarding, shipping and clearing agents and port authorities are liable to VAT and providers of these services will be required to register for VAT.

The VAT on imports paid by a freight forwarding or shipping or clearing agent on behalf of an importer is an input tax which can be reclaimed by the importer and not the agent. This also applies to the VAT paid on any other services on behalf of the importer. To facilitate this, agents are required to supply importers with customs entries and assessment notices for imports and tax invoices for services supplied. However, where the agent is charged directly for a service and the tax invoice is in his name, he is entitled to recover the VAT as input tax but he must also account for VAT in full on the services he invoices to the importer.

2.6 Import evidence
Before an importer can reclaim the VAT paid on imports, he must be in possession of a valid customs entry, an assessment notice and any tax invoices for services. The importer should claim any VAT on imports to which he is entitled by including it in box 10 on his next VAT return.

3 IMPORTED SERVICES

3.1 General
This applies to persons, VAT registered or otherwise, who receive supplies of taxable services from outside of Ghana.

Section 1 of the Value Added Tax Act imposes VAT on the supply of any imported service, other than exempt services.

Section 2 makes the recipient of the service liable to pay the VAT.

Schedule 1 to the Act lists those supplies of services which are exempt.

If you are registered for VAT and you receive supplies of services from outside Ghana, you must account for VAT on them as if you had supplied them in Ghana, provided that:

(a) the services are received in Ghana; and
(b) the services would be taxable if supplied in Ghana to a local customer.

3.2 Reverse Charge
A registered person receiving and accounting for VAT on imported services may claim the amount paid as input tax (i.e. reverse charge)

The provision is designed to prevent unfair competition against local supplies of taxable services by avoiding similar imported services being free of VAT.

Even if you are not otherwise registerable for VAT (e.g. if your supplies are exempt from VAT), but receive supplies of imported taxable services, you must apply for registration.

3.3 Value
The value of the supply on which VAT must be accounted for is the total amount of the consideration, including any taxes levied abroad but excluding local VAT. However, it is necessary to note that the Commissioner-General can vary this amount using the open market criteria as provided in the Act.

3.4 Time of supply
The time of supply for these services is the date on which you make payment or the last day of each tax period during which the services are performed, whichever comes first.

3.5 How you must account for the tax
You must account for any tax due by recording the value of these supplies in Box 2 and the amount of VAT chargeable in Box 3 on your VAT return and on the VAT PAYABLE (OUTPUT TAX) side of your VAT account. Unless the imported services relate to exempt supplies, this tax is also deductible as input tax and the value should be included in Box 9 and the VAT recoverable in Box 10 on your VAT return and on the VAT DEDUCTIBLE (INPUT TAX) side of your VAT account.

If you make exempt supplies, you must account for all the tax due but may be entitled to reclaim only the part that relates to taxable supplies. To establish the amount of tax deductible you should refer to Public Notice No. 8. (Partial Exemption)

To support the amounts shown on your VAT return and in your VAT account you should hold an invoice issued by the person supplying the services.