Updated VAT registration requirement for nonresident suppliers of digital services

Background

Under Ghana’s Value Added Tax Act, 2013 (Act 870), nonresidents who provide telecommunication and e-commerce supplies for use or enjoyment in Ghana, other than through VAT registered agents, must register and account for VAT. The Ghana Revenue Authority launched an online registration and filing portal for these nonresident e-commerce suppliers to use with effect from 1 April 2022.

Scope of the changes

Definition of e-commerce amended to identify digital services

The Amendment Act has amended the definition of e-commerce to identify specific “digital services.” E-commerce is broadly defined as a “business transaction, including a digital service, that takes place through the electronic transmission of data over a communication network such as the internet.”

Under the Amendment Act, digital services include the following:

• Social networking;
• Online gaming;
• Cloud services;
• Video or audio streaming;
• Digital marketplace operations; and
• Online advertising services.
  

Due to the continued growth of the technology sector in Ghana, this sector’s expansion is expected to increase the tax base significantly.

Sanctions for failure to register

The amendment introduces new sanctions limiting the ability of a taxpayer to provide services in Ghana when noncompliant. A nonresident supplier who fails to register and account for VAT on e-commerce in Ghana when required may have restricted access to markets in Ghana until they comply with the registration and filing obligations under the VAT Act. This sanction is imposed in addition to penalties for failure to register for VAT, and noncompliance with filing and payment obligations.

Place of supply rules

The Amendment Act provides that the place of supply for e-commerce services, other than digital services, is the place where the supplies are effectively used or enjoyed.

In respect of digital services, the place where the service is supplied, used, or enjoyed is Ghana if any two of the following conditions are met:

The recipient of the service is resident in Ghana;

• The payment for the supply of a digital service, including by mobile money, credit card, debit card, or bank account, originates from a payment platform, or registered or authorized financial institution in Ghana;
• The recipient has a business, residential, or postal address; internet proxy address; or phone number in Ghana; or
• The service is received on a terminal located in Ghana, including a computer, tablet, mobile phone, or similar device.

As a result of these changes, a VAT registration obligation for the supplier may be triggered regardless of whether the end consumers are businesses or individuals.

Input tax deductibility

The Amendment Act restricts a nonresident supplier from claiming input tax incurred in providing digital services in Ghana; however, it does not explicitly extend this restriction to nonresident suppliers of telecommunication services and other e-commerce supplies.

The Commissioner-General is expected to outline procedures on how to deduct input VAT for Ghanaian resident recipients of digital services provided by a nonresident.

Deloitte Ghana comments

The amendment of the definition of e-commerce to specifically include digital services is intended to broaden the scope of VAT on e-commerce in Ghana as widely as possible. It also provides further clarity on exactly what supplies are included, while imposing obligations on a wide range of nonresident e-commerce suppliers. The Amendment Act also provides a framework to address questions on determining the place of supply of e-commerce supplies.

Affected nonresident suppliers who have not yet registered for VAT in Ghana may wish to take steps to complete their online VAT registration and start charging and accounting for Ghanaian VAT on qualifying supplies made into Ghana.