Ghana VAT Reform 2026: A Practical Guide for Businesses
Background and Policy Context
In the 2025 Budget Statement and Economic Policy, the Government announced comprehensive reforms to Ghana’s Value Added Tax (VAT) system as part of broader measures to strengthen domestic revenue mobilisation, eliminate inefficiencies, and modernise tax administration.
These reforms are anchored in the enactment of the Value Added Tax Act, 2025 (Act 1151) and the COVID-19 Health Recovery Levy Repeal Act, 2025, both of which take effect from 1 January 2026. Act 1151 repeals and consolidates the previously fragmented VAT legislative framework, enhances clarity and legal certainty, and corrects long-standing structural distortions within the VAT regime. The COVID-19 Repeal Act, on the other hand, abolishes the COVID-19 Health Recovery Levy introduced under the COVID-19 Health Recovery Levy Act, 2021 (Act 1068).
Executive Summary
The Value Added Tax Act, 2025 (Act 1151) introduces far-reaching changes to Ghana’s VAT system. Key reforms include the removal of cascading taxes, a reduction in the effective VAT burden to 20%, an increase in the VAT registration threshold for suppliers of taxable goods, the abolition of the VAT Flat Rate Scheme (VFRS), and significantly stricter compliance obligations.
Businesses that fail to respond promptly to these changes face heightened exposure to penalties, interest, cash-flow pressures, and margin erosion. Proactive and informed preparation is therefore critical.
Headline Changes at a Glance
| Area | Old VAT Regime (Act 870) | New VAT Regime (Act 1151) |
|
Standard VAT Rate |
15% | 15% (unchanged) |
|
NHIL & GETFund |
Decoupled and non-deductible | Recoupled and deductible as input tax |
|
COVID-19 Levy |
1% applicable | Abolished |
|
Registration Threshold |
GH¢200,000 | GH¢750,000 for taxable goods only; no threshold for services |
|
VAT Flat Rate Scheme |
3% (retailers); 5% (real estate) | Abolished |
|
Effective VAT Burden |
21.9% | 20% |
|
Upfront VAT on Imports by Unregistered Persons |
12.5% | 20% |
Key Changes Introduced
The VAT reform is underpinned by the enactment of the Value Added Tax Act, 2025 (Act 1151) and the COVID-19 Health Recovery Levy Repeal Act, 2025.
The principal changes include the following:
· Abolition of the COVID-19 Health Recovery Levy following the repeal of Act 1068.
· Reversal of the decoupling of NHIL and GETFund to the VAT base, thereby allowing both levies to be deducted as input tax.
· Reduction in the effective VAT rate from approximately 21.9% to 20%.
· Introduction of relief treatment for goods and services supplied in connection with mineral reconnaissance and prospecting activities conducted under valid licences.
· Increase in the VAT registration threshold from GH¢200,000 to GH¢750,000 for suppliers of taxable goods.
· Mandatory VAT registration for all suppliers of services, irrespective of turnover.
· Extension of VAT zero-rating for locally manufactured textiles to 2028.
· Increase in upfront VAT payable by unregistered importers from 12.5% to 20%.
· Abolition of the VAT Flat Rate Scheme (VFRS) previously applicable to retailers and estate developers.
· Expansion of zero-rated supplies to include:
o Freight and insurance services directly attributable to exports;
o Stevedoring services for transit and transhipment;
o Port operation services related to transit and transhipment; and
o Shipping line charges related to transit and transhipment.
· Enhanced digital VAT administration through the use of the Commissioner-General Certified Invoicing System (E-VAT invoicing), and the operationalization of Fiscal Electronic Devices (FEDs).
· Increase in penalties for failure to register for VAT, now set at three times the VAT payable from the date registration was required.
· Application of standard-rated VAT to services supplied to Free Zones Enterprises or Developers.
· Removal of special VAT registration thresholds previously applicable to public authorities and promoters of public entertainment.
Critical Action Points:
What Businesses Must Do Now
The following actions are essential to mitigate risk and ensure compliance under the new VAT regime:
1. Reassess VAT Registration Obligations
· Determine whether the business supplies goods, services, or both.
· All service providers are required to register for VAT, irrespective of turnover.
· Suppliers of taxable goods are required to register only where annual taxable supplies is or expected to be GH¢750,000.
· Failure to register when required may result in VAT liabilities, interest, and significant penalties.
2. Review Pricing, Contracts, and Commercial Terms
· Revisit pricing models to reflect the deductibility of NHIL and GETFund levies, which were previously absorbed as part of cost build-ups.
· Failure to adjust pricing appropriately may erode profit margins or weaken market competitiveness.
3. Strengthen VAT Documentation and Record-Keeping
· Ensure that all purchases are supported by valid VAT invoices.
· Issue compliant VAT invoices and maintain accurate and complete VAT records.
· Weak documentation practices result in the loss of input VAT credits and higher effective tax costs.
4. Transition from the VAT Flat Rate Scheme
· Businesses previously operating under the VFRS must immediately cease charging flat-rate VAT.
· Businesses under the VFRS who do not meet the registration threshold may apply to the Commissioner-General to be deregistered.
· Full migration to the standard VAT system is required, including proper tracking, reporting, and reconciliation of input and output VAT.
5. Prepare for Full Digital VAT Compliance
· Onboard onto the Certified Invoicing System and prepare for the use of Fiscal Electronic Devices (FEDs).
· VAT compliance under Act 1151 is largely system-driven, with minimal tolerance for manual workarounds.
6. Actively Manage VAT Refunds and Cash Flow
· Identify accumulated VAT credits and submit refund claims in a timely manner.
· Incorporate expected VAT refund timelines into cash-flow planning and working capital management.
7. Enhance Compliance to Access Reliefs and Refunds
· Strong compliance behaviour improves eligibility for:
o Exemption from the 7% Withholding VAT; and
o Faster processing of VAT refund applications.
In Conclusion......
The VAT reforms introduced under Act 1151 clearly distinguish between prepared and unprepared businesses.
VAT compliance is no longer a purely accounting function; it is a core management responsibility. Immediate and deliberate action on registration, pricing, documentation, digital systems, and cash-flow planning is essential to minimise financial exposure and optimise outcomes under the new VAT regime from 2026 onwards.
