The Ghana Revenue Authority is introducing a new system to collect VAT from foreigners who engage in e-commerce. This system, called the Sentinal System, is expected to be fully rolled out on 22 July 2026.
Background
Ghana has always imposed taxes on non-resident persons who provide telecommunication services and electronic services to Ghanaians. In the past, the law required these non-resident persons to register in Ghana or appoint agents in Ghana to handle their tax compliance obligations. With the rise of the digital economy, especially after COVID, Ghana started enforcing the existing laws. It was not easy because the suppliers of these service providers were not in Ghana and chasing or tracing them was not as straightforward like walking down Oxford Street. So, in 2022, Ghana amended the VAT law to provide that any non-resident person who fails to comply with the VAT law risks being cutoff from Ghana. That is, Ghana is empowered to restrict access until the non-resident person regularises their VAT affairs. The GRA followed this by creating a portal for the non-resident persons to register online and discharge their VAT obligations online. This is the system we have in place now.
What’s changing?
Now, the GRA wants to shift the responsibility for collecting the VAT from these non-resident persons to persons who facilitate the payment. This is what the Sentinal System does. It requires banks, payment service providers, electronic money issuers and other entities in the Fintech space that facilitate cross-border transactions to collect the VAT. For instance, whereas previously, Netflix would charge and collect VAT on subscriptions paid by persons in Ghana, now, the platform that executes the payment of the subscription to Netflix would collect the VAT. For already compliant e-commerce entities, this new system does not change anything for their customers. All that happens is Ghanaian businesses will now be in charge of collecting the VAT. DOr non-compliant e-commerce business, their customers will now be forced to pay the VAT.
Banks, payment service providers, aggregators, electronic money issuers, third-party processors and other regulated payment processors are currently integrating with the Sentinal System or requires to do so. From 22 July, the GRA will have access to all these transactions. The transactions within the scope of the new system include
- streaming and digital media (Netflix, Spotify, Disney+, YouTube Premium, belN Sports, Showmax)
- Software as a Service (SaaS), cloud computing , and digital subscriptions (Microsoft, Adobe, Zoom, Salesforce, Google Workspace)
- Online gaming and digital goods (Steam, Blizzard, Roblox, DraftKings, Betway)
- Digital advertising and marketing services (Google Ads, Facebook/Meta Ads , TikTok for Business)
- Education and online learning platforms (Coursera, Udemy, Masterclass)
- Travel and hospitality booked online with non-resident merchants (Booking .com, Agoda, Uber, Bolt)
- Any other cross-border purchase of electronically supplied goods or services by a Ghana domiciled consumer
How it will work
The current design is that the non-resident merchant or supplier will present a transaction amount to the payment processor. This amount must be treated as exclusive of VAT. Customers are supposed to be notified that prices advertised are exclusive of taxes. The payment processor will then pass the transaction to the Sentinal System using an API. The Sentinal System will determine if VAT applies or not and instruct the payment processor to collect a calculated VAT amount if VAT applies. Where VAT applies, the payment processor will add the VAT to the merchant’s price and deduct the total from the customer. The payment processor then remits the amount advertised to the merchant and sends the VAT amount to the GRA. The GRA will expect the VAT amount by the end of the next day. The Sentinal System is configured to deal with chargebacks, refunds and reversals.
Legal basis
When the new VAT law came into force this year, it contained a new provision that the Commissioner-General is authorised to appoint a person to collect VAT and its levies on supplies made by another person. Essentially, the new law allows the GRA to appoint all businesses in Ghana facilitating cross-border payments for collection of VAT on e-commerce supplies made by non-resident persons. The Bank of Ghana is also supporting this new system. It has issued a directive to all regulated entities in this space to comply with the new system or face sanctions. See the Bank of Ghana’s notice below.
While the focus seems to be on electronic services, there is no reason why this new appraoch can’t apply goods ordered from abroad. Indeed, the Commissioner-General has hinted that this system will apply to both services and goods.
