GRA implements upfront VAT payment on imports

Upfront VAT payment system and rate

Act 1082 requires a person importing taxable goods, who is registrable but not registered for VAT, to make an upfront payment of 12.5% of the customs value of the import, i.e., the cost, insurance, and freight (CIF) value of the goods, in addition to the standard import duties, levies, and other taxes payable.In addition, failure to register for VAT when required attracts a penalty of twice the amount of VAT payable on the taxable supplies made, from the time the person is required to apply for registration until the application is filed. The upfront payment of VAT is not a new tax but a compliance tool to ensure persons required to register for VAT do so and account for VAT accordingly.

Scope

Persons that are not registered for VAT are liable to make an upfront VAT payment on the customs value of goods when they:

• Import taxable goods into the country for home consumption;
• Forfeit and auction taxable goods on which duties have not been paid;or
• Transfer taxable goods out of bonded facilites. 

Exclusions

The following are excluded from the upfront VAT payment system:

• Imported taxable goods with a CIF value below GHS 200,000;
• Relief imports or goods categorized as exempt under the VAT Act (Act 870) or the Exemptions Act (Act 1083);Imports for personal use;
• Imports not for consumption in Ghana (including temporary imports);and
• Imports by privileged or exempt persons and organizations.

Importers who satisfy any of these conditions must apply for an exclusion through the Integrated Customs Management System (ICUMS) portal at the time of processing the import. Excluded persons who pay the upfront VAT may also claim a refund via an application to the commissioner-general.

Recovery of VAT paid

Importers who are required to pay VAT upfront on imports may recover the VAT amount if they satisfy the following conditions:

• Provide evidence of the payment;Register for VAT (where applicable);
• File all outstanding VAT returns;Pay all taxes, penalties, and interest; and
• Satisfy any other condition determined by the commissioner-general.

A refund application should be submitted through the taxpayers’ portal within six months of the payment.   

Deloitte Ghana comments

The government has introduced the upfront VAT payment regime as a compliance tool to encourage registrable persons to register and account for VAT. Generally, a person becomes registrable for VAT when the person makes taxable supplies exceeding GHS 200,000 over a 12-month period. An application for registration should be made within 30 days after the end of the period in which the VAT registration threshold is met. 

The upfront VAT payment may result in potential cashflow challenges for affected importers; therefore, these taxpayers may wish to take the necessary steps to register for VAT with the GRA at their respective tax offices. VAT registered taxpayers wrongly assessed for upfront VAT should escalate the error promptly for resolution.

To accomplish the main objective of encouraging VAT registration, Deloitte Ghana recommends that a special amnesty window is provided where the penalty for failure to register and interest on the accrued VAT liability may be waived. This would motivate unregistered taxpayers to register voluntarily and regularize their VAT affairs with the GRA. A smooth and seamless administrative process for the recovery of upfront VAT payments also would promote taxpayer confidence in the system.