The Ministry of Finance has ushered in the new year with a sweeping overhaul of the Value Added Tax (VAT) regime, a move it says will return nearly GH¢6 billion to the pockets of Ghanaian households and businesses in 2026 alone. The reforms, which took effect yesterday, are branded under the government’s agenda of “Resetting for Growth, Jobs and Economic Transformation.”
The most significant changes include the complete abolition of the COVID-19 Levy, a reduction in the standard VAT rate, and a major increase in the turnover threshold for mandatory VAT registration. According to the Ministry, the abolition of the COVID-19 Levy alone will leave an estimated GH¢3.7 billion with individuals and businesses this year.
“This is tax relief in action,” a statement from the Ministry declared, outlining the key pillars of the new policy.
Core Reforms at a Glance:
· VAT Rate Reduction: The standard VAT rate has been lowered from its previous level to 20 percent, aimed at directly easing the tax burden on consumers and businesses.
· Abolition of COVID-19 Levy: The temporary levy, introduced to shore up government revenue during the pandemic, has been scrapped entirely.
· GETFund & NHIL Overhaul: The levies for the Ghana Education Trust Fund (GETFund) and the National Health Insurance Levy (NHIL) are now fully input-output deductible. This technical change is projected to reduce the cost of doing business by approximately 5 percent, as businesses can now claim these as credits against their VAT liabilities.
· Higher Registration Threshold: Small and medium-sized enterprises (SMEs) dealing in goods will benefit from a substantially higher VAT registration threshold. Businesses will now only need to register for VAT when their annual turnover exceeds GH¢750,000, a significant increase from the previous threshold of GH¢200,000. This is expected to reduce administrative burdens and compliance costs for thousands of smaller businesses.
· Simplified VAT Structure: The controversial VAT Flat Rate Scheme (VFRS) has been abolished. It has been replaced with what the Ministry describes as a “unified and more transparent VAT structure,” aiming to streamline compliance and reduce complexities in the system.
The Finance Ministry projects that the combined effect of these measures will stimulate economic activity by increasing disposable income for consumers and improving cash flow and competitiveness for businesses. The increased registration threshold, in particular, is seen as a major boost for SME growth and formalisation.
The implementation of these reforms, represent one of the most substantial tax policy shifts in recent years. The success of the measures will likely be judged by their impact on inflation, business expansion, and overall economic growth throughout 2026.
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