The Ghana Revenue Authority (GRA) has reiterated that the Withholding VAT (WVAT) is not a ‘new tax’.
Instead, it said it is a mechanism to account for and pay Value Added Tax (VAT) on the supply of goods and services by the person making the payment.
It recognised that there were many suppliers who were engaged in taxable activities but were not paying tax to the government.
“So the government has thought it wise that there should be a mechanism, whereby it can collect a portion of that amount. If the person is already a registered taxpayer, an opportunity will be offered him to deduct the withholding VAT that has been taken when he is filing the returns at the end of the month,” Mr Benjamin Nsia of the Legon Medium Taxpayer Office (MTO) in Accra, said at a sensitisation workshop for taxpayers, traders and importers at the weekend.
The VAT Act, 2013 (Act 870) was recently amended (VAT Amendment-No.2 Act 2017 (Act 954) to provide for the introduction of a VAT withholding scheme as a compliance tool and not a new tax.
The Amendment empowers the Commissioner-General to appoint a person as an agent to withhold VAT on payments made to suppliers who are VAT registered.
By law, an appointed VAT withholding agent must withhold seven per cent of the taxable value of all local taxable supplies made by a standard rated taxable person / supplier at the time of payment, and the difference of 10.5 per cent of the taxable value, along with the taxable value is paid to the taxable person/supplier.
When the appointed agent makes payment to suppliers, they deduct seven per cent VAT on the taxable value and remit directly to the GRA.
Mr Nsia said the WVAT helped to reduce future uncollectible debt by collecting the tax upfront from some of the major consumers and increase voluntary registration.
“Withholding VAT is part of your money that we have deducted seven per cent from, so at the end of the month you are supposed to show all your output, we deduct your input and the difference we deduct the seven per cent also from it.”
Filing of returns
In an interview, Mrs Selina Zefo Kere, a Principal Revenue Officer at the Legon MTO said penalties were charged as often as people failed to file their tax returns.
She said failure to file on due dates attracted a penalty of GH¢500 plus GH¢10 for each day in default.
“Every tax payer is supposed to file returns but the number of returns to be filed depends on the tax type and the activities of the tax payer. Exemptions are when a tax payer has no income for the year of assessment or the income is subject to a nil tax (fall below income tax bracket),” she said. —