The Ghana Revenue Authority (GRA) has announced a major overhaul of the country’s Value Added Tax (VAT) regime, beginning with a reduction in the standard VAT rate from 21% to 20%, as part of a broader reform package aimed at easing the tax burden on households and businesses.
On the other hand, the VAT flat rate has been increased from 4 to 20%, a move Ghana Union of Traders Association (GUTA) said would collapse small businesses.
The changes, which take effect from January 1, 2026, follow the passage of the Value Added Tax Act, 2025 (Act 1151), and mark one of the most significant restructurings of the VAT system in recent years.
In an official notice issued to all VAT-registered taxpayers, the GRA said the reforms are designed to simplify the tax system, improve efficiency and encourage voluntary compliance.
According to the Authority, the reduction in the core VAT rate is intended to provide relief to consumers and producers at a time of persistent cost pressures.
“The VAT rate has been reduced to 20 percent to ease the tax burden on households and businesses,” the GRA stated.
Beyond the rate cut, the reforms introduce substantial relief for small and medium-sized enterprises.
The threshold for VAT registration for businesses dealing in goods has been significantly increased from GH¢200,000 to GH¢750,000 in annual turnover.
This adjustment is expected to remove thousands of small traders from the VAT net, reducing compliance costs and administrative pressure on informal and micro-scale operators.
The GRA also announced the abolition of several levies that had been added to the VAT structure in recent years.
Chief among them is the COVID-19 Health Recovery Levy, which has now been scrapped entirely.
The Authority said the removal of the levy reflects changing economic conditions and the need to streamline indirect taxes.
In another important shift, the GRA disclosed the re-coupling of the National Health Insurance Levy (NHIL) and the Ghana Education Trust Fund (GETFund) levy into the VAT input tax system.
Under the new arrangement, both NHIL and GETFund levies will be treated as allowable input tax deductions, enabling businesses to claim input tax credits and improving cash flow, particularly for manufacturers and formal sector enterprises.
The reforms also abolish the VAT Flat Rate Scheme (VFRS), which previously applied mainly to retailers. With its removal, the VAT system will operate under a single, unified structure.
The GRA said this change is intended to improve transparency, reduce distortions and ensure a more equitable application of VAT across sectors.
The Authority noted that all the measures will take effect simultaneously from January 1, 2026, allowing for a clean transition to the new VAT framework.
The notice was directed at the general public, particularly VAT-registered taxpayers, employers, accountants, auditors, importers, exporters, clearing agents and tax consultants.
According to the GRA, the reforms are aimed at simplifying the VAT system, promoting fairness, improving administrative efficiency and boosting voluntary tax compliance.
The notice was issued under the authority of the Commissioner-General, who urged taxpayers to familiarise themselves with the changes ahead of implementation.
For further clarification, the GRA has advised taxpayers and the public to contact their nearest Taxpayer Service Centre or use its toll-free lines, WhatsApp platforms and official email channels for guidance on the new VAT regime.
