Our commercial lives have witnessed transformational developments with the rise of technology and digitisation in the past few years. With the world of technology eliminating distances between buyers and sellers, electronic commerce (e-commerce) – which has been defined as the production, distribution, marketing, sale or delivery of goods and services by electronic means[1]– now serves as a global platform for doing business and conducting international trade across various sectors of the economy.
The first e-commerce website in Ghana, eshopafrica.com, was launched in 2001. Since then, online purchases in Ghana have experienced tremendous growth – especially following the COVID-19 pandemic and being facilitated by several factors, such as the nationwide provision and accessibility of Internet and payment services. As of January 2022, Ghana registered approximately 17 million Internet users[2] and revenue of the e-commerce industry in Ghana is forecast to continuously increase by approximately US$875million within the next few years[3].
With such unprecedented growth in Ghana’s e-commerce market, it comes as no surprise that international e-commerce giants such as Amazon, eBay, Etsy, AliExpress, Uber and Bolt are no longer strange names in the Ghanaian household. As more international e-commerce service providers expand their reach into Ghana, the country stands to gain considerably from sustainable e-commerce tax initiatives and policies.
We have witnessed the development and implementation of some tax laws to ensure that international online businesses operating in Ghana contribute their fair share of revenues to public coffers. As part of its initiatives to boost Ghana’s tax revenue and tax to GDP ratio, the GRA announced plans to commence taxing e-commerce businesses, including non-resident ones, from 1 April 2022[4]; and accordingly, the Value Added Tax (Amendment) Act, 2022 (Act 1082) was passed.
Scope of e-Commerce in Ghana under Tax Laws
For tax purposes, Ghana’s Value Added Tax Act, 2013 (as amended) (VAT Act) defines e-commerce to include a business transaction, including a digital service[5], that takes places through the electronic transmission of data over a communication network such as the Internet[6]. The following activities constitute supply of e-commerce in Ghana: website supply; web-hosting; distance maintenance of programmes and equipment; making images, text, information and databases available; music and games, games of chance and gambling games; political, cultural, artistic, sporting, scientific and entertainment broadcasts and events; and distance teaching.
Registration
Non-resident persons[7] who supply any of the above-mentioned services to persons for use or enjoyment in Ghana, other than through a VAT-registered agent, are mandated to register with the Ghana Revenue Authority (GRA) and pay value added tax.
The application for registration must be done online through the Non-Resident Taxpayer Registration Portal (NRTR Portal) via www.gra.gov.gh. For registration purposes, a non-resident entity is required to provide a notarised copies of its business registration documents and official national identification of the person authorising the registration application form. All documents must be in English. Where the non-resident person has an agent in Ghana who is a representative or any other person representing their interest in Ghana, that agent is required to register for the tax if the non-resident person on whose behalf he or she is acting fails to register.
Failure to comply will incur liabilities for penalties and/or a restriction of access in the country until the company or person fulfils the obligations required under the VAT Act. The GRA has indicated that the Commissioner-General may rely on regulatory bodies including the Bank of Ghana, National Communication Authority and National Information Technology Agency to facilitate compliance by monitoring financial data on transactions of non-resident entities operating within the digital space through payment platforms and for compliance support regarding communication spectrum regulations and data traffic for non-resident entities.
Registration Threshold
Registration for VAT is compulsory for resident persons who make or expect to make a taxable supply of goods or services that exceed GH¢200,000 (approximately US$17,000) over a 12-month period or GH¢50,000 (US$4,200) over a 3-month period, and there are reasonable grounds to believe the aggregate supplies for those 3 months and the consecutive 9 months will exceed GH¢200,000.
This registration threshold is however not applicable to non-resident persons who provide e-commerce services. Non-resident persons become registrable upon commencement of taxable e-commerce activities in Ghana[8].
Place of Supply
For the supply of e-commerce other than digital services, the place of supply is the place where the effective use or enjoyment occurs[9]. In the case of a digital service, the place of supply is the place where the service is supplied, used or enjoyed in the country if any two of the following circumstances exist: the recipient of the service is a resident person; the payment, including mobile money, credit card, debit card or bank account for the supply of a digital service originates from a payment platform in the country or a registered authorised financial institution[10]; the recipient of the digital service supplied has either a business, residential or postal address, Internet proxy address or phone number in the country; and the service is received on a terminal located in the country including a computer, tablet, mobile phone or similar device[11].
Applicable Taxes and Levies
The VAT Act provides for a standard rate of 15% for VAT[12] (effective 1st January 2023, previously 12.5%), 2.5% for National Health Insurance Levy (NHIL)[13], 2.5% for Ghana Education Trust Fund Levy (GETFL)[14] and 1% for COVID-19 Health Recovery Levy (CHRL)[15]. These rates apply to all supplies of goods and services that do not qualify for an exemption, zero-rating or the VAT Flat Rate Scheme. VAT, NHIL, GETFL and CHRL (together loosely called VAT) are charged on the supply of all goods and services in Ghana by a taxable person, and also on the imports of goods and services into the country – except where specifically exempt.
A registered non-resident person who makes a supply of e-commerce is required to charge these taxes and levies and account for same by filing the returns and making payments through the NRTR Portal. It is worth noting that where the non-resident company provides an e-commerce service to a resident VAT withholding agent appointed by the Commissioner General, the VAT payable will be subject to a withholding VAT of 7% and the resident VAT withholding agent must issue a Withholding VAT Credit Certificate to the non-resident company as evidence of the VAT withheld. This withholding tax must be taken into account when filing VAT returns.
E-Invoicing
Upon registration, the non-resident e-commerce company must apply to the Commissioner-General indicating the business’ invoicing system, and the Commissioner-General will provide the company with an API that contains the certification for integration into their invoicing system. Certified invoicing systems approved by the Commissioner-General currently include e-invoicing software (certified ERPs and POS) and free invoicing software (mobile solution, online solution and desktop solution).
Non-resident e-commerce companies are required to utilise the electronic invoicing system certified by the Commissioner-General to issue tax invoices to their customers on supply of e-commerce services[16]. The tax invoice must include certain pertinent details including the name, address and tax identification number of the taxable person; date and time of supply, description of the services; the rate of the tax and levies charged; rate of any discount, total tax charged; QR code and invoice signature[17].
Filing of Taxes
Registered non-resident companies providing e-commerce services in Ghana are required to file monthly VAT, NHIL, GETFL and CHRL returns no later than last day of the month immediately following the month to which the return relates, whether or not tax is payable for the period. The returns may be filed online or via the GRA-dedicated email address ([email protected]), and on any day including weekends and public holidays on or before midnight of the last day. The payable taxes must be remitted to the Commissioner-General on the same day the returns are due via SWIFT transfer or through other suitable payment options provided on the GRA website.
Conclusion
Tax systems around the world, Ghana not excluded, may struggle to keep pace with globalisation and market liberation. The priority has to be identifying practical and reasonable ways of applying internationally accepted taxation norms to e-commerce, and where necessary clarifying those norms – and the GRA has done an exceptional job in that regard. Nevertheless, the issue of taxing electronic commerce on the Internet is complicated by several factors including the dynamic nature of the Internet and transactions that take place online; the question of double taxation; and the emergence of alternative payment media including digital assets and cryptocurrencies. These are some matters for the GRA to consider in ensuring that e-commerce is taxed fairly and efficiently.
[1] World Trade Organisation, 1998
[2] Statista (November 2022) https://www.statista.com/statistics/1171416/number-of-internet-users-ghana/
[3] Statista (1 June 2023) https://www.statista.com/forecasts/1343449/ecommerce-market-revenue-ghana
[4] Citi Newsroom, 17 February 2022
[5] “Digital service” includes social networking, online gaming, cloud services, video or audio streaming, digital marketplace operations and online advertisement services
[6] Section 16 of the VAT Amendment Act, 2022
[7] A foreign national who is in Ghana for less than 183 days in any 12-month period that falls in the tax year is non-resident for tax purposes.
[8] GRA Practice Note on Taxation of E-Commerce, December 2022 (Practice Note Number DT/2022/001)
[9] VAT Amendment Act, 2022
[10] As provided for under the Banks and Specialised Deposit-Taking Institutions, Act, 2016 (Act 930)
[11] VAT Amendment Act, 2022
[12] Value Added Tax Act, 2013 (Act 870) (as amended)
[13] National Health Insurance Act, 2012 (Act 852)
[14] Ghana Education Trust Fund Act, 2000 (Act 581)
[15] COVID-19 Health Recovery Levy Act, 2021 (Act 1068)
[16] Section 41(1) of the VAT Act (as amended) and the Operational Directives on Certified Invoicing System
[17] GRA Practice Note on Taxation of E-Commerce, December 2022 (Practice Note Number DT/2022/001)
