Ghana plans for ‘vigorous’ taxation of e-commerce in 2021

The head of Ghana’s tax authority has revealed plans to tax supplies by foreign digital businesses to local consumers in the West African country. 

The plan was described as ‘vigorous’ by Ammishaddai Owusu-Amoah, the Commissioner-General of the Ghana Revenue Authority (GRA), when speaking to local media in early 2021. Quoted in this online article, Mr. Owusu-Amoah stated: “There will be vigorous efforts to tax players in the e-commerce market. This sector has been a challenge over the years for the authority; but this year, we are providing staff with the requisite training to enable them to identify players in the sector for tax purposes.”

Ghana’s standard VAT rate of 12.5% is currently planned to apply. It is understood that an annual sales threshold of 200,000 Ghanaian Cedi (GHS) may be part of the new tax rules, this equates (at the time of writing) to USD34,700. 

Ghana VAT Act: some specifics

In section 16 (2) of Ghana’s VAT Act the relevant definitions of affected services are already provided. ‘Telecommunications services’ are defined as “services that relate to the transmission, emission or reception of signals, writing, images and sounds of information of any nature by wire, radio, optical or other electromagnetic systems, including the provision of access, transmission, emission or reception. Ghana’s VAT Act states that ‘electronic commerce’ covers “business transactions that take place through the electronic transmission of data over communications networks like the internet.”

In section 2(c) there is an extended (but not exhaustive) list of digital supplies that would be affected:

• Website supply
• Web hosting
• Distance maintenance of programmes and equipment
• Images, text and information and making databases available
• Music and games, games of chance and gambling games
• Political, cultural artistic, sporting, scientific and entertainment broadcasts and events
• Distance teaching

The VAT Act also states that, in the case of electronic commerce supplies described above, the place of the supply is “the place where the effective use and enjoyment occurs”.  

We understand that a local fiscal representative may be required while the planned rules may also extend to both B2C and B2B supplies provided by foreign digital businesses. It is also possible that the rules, when publicly available, may include additional invoicing requirements. 

Ghana’s administrative guidelines for e-commerce sales

A recent KPMG update confirmed these plans. In the update a description of Ghana’s administrative guidelines was provided: “As part of efforts to ensure that Ghana receives its due share of tax revenue from the digital economy, the Ghanian Government intends to review current legislation to strengthen relevant laws and provide additional regulations and administrative guidelines for the taxation of e-services.”

Ghana’s motivation reflects those of jurisdictions worldwide that have already introduced similar rules. It is to level the playing field between foreign and domestic digital businesses but also to raise much-needed revenue from such digital activities. The revenue-raising motivation is even more pronounced given the impact of the COVID-19 pandemic on government sources of income.

Ghana will follow in the footsteps of African jurisdictions such as South Africa, Kenya, and Angola (to name but a few) in taxing the sales of foreign digital businesses. South Africa was one of the pioneers of such rules introducing them back in June 2014.

No DST plans in Ghana

In relation to Digital Services Tax (DST), there are currently no plans in Ghana to introduce such a direct tax. However, given the speed of DST adoption elsewhere on the African continent it may not be long before Ghana also reveals its plans for a DST. We will, of course, keep you updated on developments in Ghana. 

Note: This article was published for the inclusion in a special Taxamo report on developments in Africa.

PLEASE REMEMBER THAT THIS INFORMATION HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT PRESENTED AS SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. VERTEX INC. ACCEPTS NO LIABILITY FOR ANY LOSS RESULTING FROM ANY PERSON ACTING OR REFRAINING FROM ACTION AS A RESULT OF THIS INFORMATION.