Compliance Issues in Value Added Tax (VAT) Audit in Ghana
Introduction
The Commissioner General (CG) of the Ghana Revenue Authority (GRA) may conduct either a comprehensive audit or a desk review on a VAT-registered taxpayer to ensure compliance with the requirements of the Value Added Tax Act, 2013 (Act 870, as amended).
There are a number of challenging areas that may result in the payment of avoidable interest and penalties to the GRA. Our aim in this Tax Focus issue is to help readers identify those areas and save costs.
Non-registration for VAT
Under Section 15 of the Value Added Tax Act, 2013 (Act 870), a person who fails to apply to the CG to be registered for VAT is liable to pay a penalty of up to twice the amount of taxable supplies. This is computed from the time the person was required to apply for registration until the time the person actually files an application for registration with the Commissioner-General.
Apart from the penalties imposed, VAT will be computed on all taxable sales from the date the person qualified to register to the date of actual registration.
Penalty for late filing of returns
Once registered with the CG, VAT returns must be filed on or before the last day of the ensuing month, whether or not sales or services were rendered during that period. Filing returns is not the same as paying taxes. A nil return should be filed even when no sale is made within the filing period.
Failure to file a VAT return by the due date attracts a penalty of GHS 500 plus GHS 10 for each day the return remains unfiled.
VAT is payable when the taxpayer takes goods or services for personal use, provides goods or services as a gift, or on the earliest of these events:
- Goods are removed from the premises of the taxable person.
- Goods are made available to the customer or performance of services is completed.
- A VAT invoice or sales receipt is issued, whether or not payment is made.
- Actual payment is received by the taxpayer.
An obligation to file and pay VAT exists once any of the above takes place, regardless of whether payment has been received. Taxpayers are therefore advised to declare and file VAT returns whether payments have been received or not. Another option is to ask customers to pay the VAT component so the taxpayer can file and make payment by the due date.
Understatement of revenue
The accuracy of revenue disclosed in the financial statements is important. The CG may authenticate the amounts by comparing them with VAT returns filed. Where the audit reveals that revenue in the financial statements exceeds total revenue on VAT returns, the difference may be treated as an under-declaration of VAT.
Variations may result from failing to declare zero-rated or exempt supplies. Another common mistake is cancelling only the book copies of VAT invoices without retrieving and attaching the original cancelled invoice to the invoice booklet. A cancelled invoice without the original copy attached may be considered a sale by the CG. Taxpayers should therefore retrieve all cancelled invoices from customers, as the burden of proof rests with the taxpayer.
Disallowed input VAT
Only input tax on goods and services purchased in Ghana, or goods imported and used wholly, exclusively and necessarily in the course of the taxable activity, qualifies for deduction under Section 48 of the VAT Act. Items that may not qualify include:
- Vehicles or spare parts, unless the taxable person deals in, hires or sells motor vehicles or vehicle spare parts and uses them in that business.
- Input tax relating to exempt supplies.
- An input tax deduction claimed more than once or more than six months after the deduction accrued.
- Entertainment, restaurant, meals and hotel expenses, unless the taxable person provides entertainment as a taxable activity.
- Fees or subscriptions for membership of a club, association or society of a sporting, social or recreational nature.
- Imported goods without relevant customs entries proving that tax was paid.
- Purchases from an unregistered supplier or purchases without a valid VAT invoice.
Conclusion
Sanctions for non-compliance can be avoided if taxpayers engage experts or consultants to conduct periodic tax health checks. A tax health check reduces potential tax exposure and identifies tax-risk areas that require attention, minimising the possibility of recurrence.
Key Tax Highlights: 2026 Budget Statement and Economic Policy
Resetting for Growth, Jobs and Economic Transformation
The 2026 Budget Statement and Economic Policy, presented to Parliament by the Minister for Finance, focuses on robust fiscal consolidation and accelerating economic transformation under the theme “Resetting for Growth, Jobs, and Economic Transformation.”
The tax policy initiatives aim to broaden the tax base, streamline the indirect tax regime and improve compliance, particularly within the digital economy and the informal sector.
Key tax reforms in Ghana's 2026 budget
These reforms are subject to parliamentary approval:
- COVID-19 Health Recovery Levy abolished.
- Decoupling of the GETFund and NHIL levies from the VAT base removed, allowing these levies to be subject to input tax deductions.
- VAT on mineral exploration and reconnaissance abolished to boost investment in mining.
- Effective VAT rate reduced from 21.9% to 20%.
- VAT registration threshold raised from GH¢200,000 to GH¢750,000, easing burdens on small businesses.
- VAT zero-rating on the supply of locally manufactured textiles extended to 2028.
Measures to improve VAT administration
- Digital tax-collection solutions to monitor and collect VAT on cross-border transactions conducted on digital platforms owned by non-resident taxpayers.
- Fiscal Electronic Devices (FED) to enhance compliance and facilitate monitoring of taxable transactions by VAT taxpayers.
- A VAT reward scheme to encourage the public to support compliance by collecting VAT receipts for purchases, allowing taxpayers to benefit from a VAT promotion and reward scheme.
Pay Less Tax Legally: Claim Your Personal Tax Reliefs Today
Welcome to the February issue of Tax Focus. Here is what you need to know about personal tax reliefs.
Under the Income Tax Act, 2015 (Act 896) of Ghana, resident individuals are entitled to claim Personal Income Tax Reliefs to reduce their taxable income and overall tax burden. If you are a resident individual, you may be paying more tax than necessary.
How to claim your relief
- Complete a Tax Relief Card.
- Obtain employer endorsement if you are an employee.
- Ensure your PAYE deductions have been fully remitted to the Commissioner-General of the Ghana Revenue Authority.
- File your Annual Personal Income Tax Return.
- Submit the endorsed Tax Relief Card to your Taxpayer Service Centre (TSC) for approval.
- Provide the approved card to your employer for payroll adjustment.
Important
Tax reliefs are not automatic. You must apply and obtain approval. Both employees and self-employed persons must file annual returns.
Don't overpay tax. Claim what the law allows you. It is your right.