EXPLAINER: All you need to know about GRA's new VAT regime

Value Added Tax (VAT), popularly known as VAT, is a tax levied on the value added at each stage of a product’s production and distribution.

It is similar to a sales tax; however, unlike sales tax, every business along the value chain receives credit for the VAT already paid, while the end consumer does not. This makes VAT essentially a tax on final consumption.

Previously, Ghana’s VAT rate stood at 21 percent, applied to the value of taxable supplies in the country.

After a series of consultations and appeals from industry stakeholders calling for the scrapping or reduction of the tax, the government, in collaboration with the Ghana Revenue Authority (GRA), reduced the rate from 21 percent to 20 percent.

According to the GRA, the new VAT model is designed to make VAT payments easier and more seamless for businesses, while also boosting the government’s revenue mobilisation agenda. The new rate took effect on January 1, 2026.

Despite the reduction, some members of the business community, particularly the Abossey-Okai Spare Parts Dealers, have raised concerns, arguing that the rate still significantly affects the cost of doing business.

They have therefore called for a review of the tax under the Value Added Tax Act, 2025 (Act 1151).

EXPLAINER: What 27 years of VAT means for businesses and the economy

Ghana’s new VAT regime

Ghana’s new VAT system under the Value Added Tax Act, 2025 (Act 1151) took effect on January 1, 2026, implementing a unified 20% effective rate.

This model consolidates the former 15% VAT, 2.5% GETFund levy, and 2.5% NHIL levy, while abolishing the 1% COVID-19 levy and the VAT flat rate scheme.

Key details of the new VAT model

The government reduced the effective rate from 21.9% to 20%.

The 20% rate combines the standard VAT (15%), the National Health Insurance Levy (NHIL) at 2.5%, and the Ghana Education Trust Fund (GETFund) levy at 2.5%.

Although businesses collect VAT on behalf of the government, the final burden of the tax is borne by consumers.

Businesses are allowed to reclaim VAT paid on their inputs, meaning they are taxed only on the value they add at each stage of the supply chain.

Registration threshold

Under the new VAT model, the annual threshold for VAT registration has increased from GH¢200,000 to GH¢750,000.

Despite these changes, calls for a broader overhaul of Ghana’s tax system continue, with many advocating for a review of VAT. The government, however, maintains that the simplified VAT framework will create a fairer tax environment and support long-term economic stability.

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