Value Added Tax Act, 2025 (Act 1151) — Tax Alert: What changes from 1 January 2026

The Value Added Tax Act, 2025 (Act 1151) replaces the Value Added Tax Act, 2013 (Act 870) and all its subsequent amendments with effect from 1 January 2026. The headline changes are the abolition of the VAT flat-rate schemes, a sharp increase in registration thresholds, a 20% up-front payment at the port for unregistered importers, a tightened and enumerated list of zero-rated exported services, modernised invoicing and digital compliance rules, and refreshed Schedules for exemptions, zero-rating and reliefs. Taxpayers should plan now for pricing, contracting, systems and compliance changes ahead of the commencement date.

Commencement, repeal and transition

Act 1151 came into force on 1 January 2026. On commencement, Act 870 and all amending Acts through 2025 were repealed, with standard savings for instruments and proceedings not inconsistent with the new Act. Repealed enactments continue to apply to years of assessment commencing before 1 January 2026. The new law also codifies that any exemption or zero-rating conferred outside the VAT Act does not take effect for VAT purposes unless and until reflected by amendment within the Act. These transitional guardrails reinforce that, from 2026, the VAT position must be found in the text of the new Act and its Schedules.

Rate structure, valuation and the end of flat-rate schemes

The standard VAT rate remains 15%. However, Act 1151 does not carry forward the 3% VAT Flat Rate Scheme for retailers and wholesalers, nor the 5% flat-rate rules for supplies of immovable property by estate developers or for certain non-residential rentals. Their omission effects a policy reset to a single VAT system with input tax credit and output tax at 15 per cent for standard-rated supplies. Businesses that relied on flat-rate pricing will need to convert to full VAT accounting and re-map contract economics and systems to support input credit claims and output reporting.

The taxable value of a supply is broadened to include all duties and taxes except VAT itself, the Ghana Education Trust Fund Levy, the National Health Insurance Levy and the levy under section 23(b) of the Tourism Act, 2011. By excluding these levies from the VAT base, Act 1151 reduces VAT-on-levies cascading and aligns valuation with the re-integration policy signalled by Government. For imports, the VAT base follows the Customs Act rules, including customs value, other import duties and any excluded freight and insurance components.

Registration, thresholds and sanctions

Registration thresholds are substantially increased. For suppliers of goods, registration is required where taxable supplies exceed GHS750,000 in any period of twelve months or where there are reasonable grounds to expect that level in the next twelve months. There is also a rolling three-month threshold of GHS187,500, combined with a forward-looking test that the next nine months will take aggregate supplies above GHS750,000. Related-person aggregation applies where persons act in concert or are related, which discourages fragmentation to avoid registration.

Suppliers of services must register within thirty days of engaging in a taxable activity unless otherwise directed by the Commissioner-General, which replaces a pure threshold model with a hard timing rule for the services sector.

Sanctions for failure to apply for registration are stiffened. A person who fails to apply when obliged is liable to a penalty of not less than three times the VAT on taxable supplies from when the duty arose until the application is filed. In addition, an unregistered person who imports taxable goods must make a 20 per cent up-front payment based on the customs value. That up-front payment is creditable once the person registers and files returns, but the cash flow impact at the border is material and designed to compel timely registration.

Cross-border and digital economy measures

Non-resident suppliers of telecommunication services and electronic commerce to customers for use or enjoyment in Ghana must register for VAT if they make taxable supplies. Act 1151 retains the enforcement lever of restricting access for non-compliant non-residents until registration is effected. It also creates an express power for the Commissioner-General to appoint a person to collect VAT and a levy on supplies made by a taxable person for the purposes of administering the non-resident registration regime. These planks, taken together with the invoicing reforms described below, clarify the collection framework for digital supplies into Ghana.

The place-of-supply rules are restated and split for goods and services. For goods, the place is where they are delivered or made available, or, where transport is involved, where transport commences. For services, the default place is the supplier’s place of business from which the services are supplied, with exceptions for specific categories that are instead located where the recipient uses the service, including transfers and assignments of intellectual property and professional services such as legal, accounting and engineering.

Zero-rating and exemptions — what is in, and what has moved

Act 1151 keeps the structure of exempt and zero-rated supplies while refreshing content. Exports of goods remain zero-rated, including supplies to free zone developers and enterprises where Free Zone Act requirements are met. Locally manufactured textiles are zero-rated through 31 December 2028 and locally manufactured sanitary towels are now zero-rated.

For services, Act 1151 replaces broad consumption-based tests with an enumerated list of zero-rated exported services. Services directly connected with land outside Ghana or with tangible personal property situated abroad are zero-rated, as are services relating to the filing, granting, transfer, licensing or enforcement of intellectual property rights for use outside Ghana. Export freight and insurance qualify, as do stevedoring, port operation services and shipping line charges where they relate to transit and transshipment. The practical effect is that many outbound services will no longer qualify for zero-rating unless they fall within the listed categories and are supported by acceptable documentation.

The First Schedule preserves the main exempt classes familiar from Act 870, including domestic passenger transport, financial services excluding non-life insurance, certain hydrocarbons, supplies of immovable property and accommodation in a dwelling, and civil engineering public works. Act 1151 also expressly lists mosquito nets, paper for exercise books and textbooks, and mild carbon steel for machete manufacture as exempt, and continues the automotive plant/machinery and electric public transport reliefs. Estate developer sales remain outside the immovable property exemption, consistent with the general move away from real-estate flat rates.

Invoicing, withholding and compliance administration

Certified Invoicing System (CIS) rules are tightened and operationalised. Taxable persons must issue tax invoices or, where authorised, sales receipts in the prescribed form. If a taxpayer’s CIS goes offline or becomes inaccessible to the Ghana Revenue Authority, the taxpayer must notify the Commissioner-General within twenty-four hours and restore connectivity. Recipients who lose a tax invoice may obtain a copy from the Commissioner-General’s invoicing system, and invoice numbers may be used by recipients to enter a Ghana Revenue Authority reward scheme. These features strengthen audit trails and consumer participation in compliance.

Withholding VAT continues to apply. Appointed VAT Withholding Agents must withhold seven per cent of the taxable output value of supplies and issue a Withholding VAT Credit Certificate at payment. The scope includes entities that are themselves making zero-rated supplies, selected government entities and other registered entities. Failure to withhold and remit by the fifteenth day of the following month attracts a penalty equal to thirty per cent of the amount that should have been withheld. New in the law is an express power to exempt persons with satisfactory tax records from withholding VAT, which may improve cash flow for compliant taxpayers that would otherwise suffer withholding on their outputs.

Refunds, bad debts and cash flow mechanics

The core netting mechanism is unchanged: the VAT payable for a tax period equals output tax less deductible input tax. Where deductible input exceeds output, the excess is carried forward as a credit. A taxpayer may apply for a cash refund where the credit remains outstanding for a continuous period of three months or more, subject to audit triggers, and the Commissioner-General must pay approved refunds within thirty days of a compliant application. If payment is late, interest accrues at the prevailing Bank of Ghana discount rate plus a daily component equal to a quarter of that rate until the refund is paid. The provisions also codify adjustments for bad debts, allowing a deduction where consideration is not received for invoiced taxable supplies and conditions are met, together with claw-back rules where debts later become recoverable.

Key sector impacts and immediate planning points

Retailers and wholesalers will move off the 3% flat rate and into full VAT accounting. The shift will alter pricing, contract terms and systems, and will affect working capital once input tax recovery patterns are established. Estate developers and lessors of non-residential property will similarly leave the 5% output regimes and transition to the standard VAT system, with immediate implications for ongoing projects and customer contracts that reference the outgoing flat rates. Service exporters will need to test their offerings against the enumerated zero-rating categories and, where the fit is not available, plan to charge the standard rate from 2026. Small and micro businesses should reassess registration in light of the GHS750,000 threshold and the three-month test, while importers who are currently unregistered should evaluate the cash impact of the 20% up-front payment and accelerate registration where appropriate.

Non-resident digital suppliers should validate registration routes, invoicing capability and return/payment timing, including the last-day-of-the-month filing and payment rule that applies to persons registered under the non-resident provision. All taxpayers should ensure their CIS is compliant, that invoice retrieval and reconciliation processes are robust, and that withholding VAT arrangements reflect the Agent’s obligations, the possibility of exemption where records are satisfactory, and the timelines for remittance.

Snapshot of headline changes and practical implications

Notes: All references are to the Act 1151 and its Schedules. Sector-specific rules in other tax and regulatory laws, including the Customs Act and the Free Zone Act, continue to interact with VAT treatment and must be read together with Act 1151.

Conclusion

From 1 January 2026, Ghana’s VAT regime resets to a single-rate, input-creditable system, with the flat-rate regimes withdrawn, higher registration thresholds, stronger border and registration enforcement, and modernised rules for digital commerce, invoicing and withholding. Zero-rating for services is now an enumerated list, and exemptions and reliefs have been clarified and updated in targeted areas. Taxpayers should act now to review registration status, revise pricing and contracts that reference the outgoing flat rates, configure systems for CIS requirements and valuation changes, and test outbound services against the new zero-rating categories. Non-resident digital suppliers should confirm registration and collection arrangements in light of the appointment power and access restrictions. Transitional complexities will persist for pre-2026 periods under Act 870, but forward-looking compliance and commercial adjustments will be judged by the terms of the new Act and should be in place before commencement.