My business circumstances changes?
If your business circumstances changes you must write to your local VAT office immediately giving full details. You will find more about this in The VAT Guide (Public Notice No.3). 

The first step to registration is to complete the VAT Form 1 and Taxpayer Identification Form. The completed forms should be sent with the required information to the Local VAT Office nearest to the principal place of business. The VAT Form 1 and Taxpayer Identification Forms can be obtained from any VAT Office.

When the forms are processed, the taxable persons will be issued with a VAT Certificate. The VAT Certificate shows clearly the effective date of registration and the Taxpayer Identification Number (TIN). The TIN can be used in transactions with all other revenue institutions in the country.

The VAT Certificate must be displayed prominently at the principal place of business.

1. WHAT HAPPENS AFTER REGISTRATION?
A registered person is issued with VAT/NHIL returns (VAT Form 20). This form enables the registered person to declare his business activities for a given month. This form has sections where the registered person shall state his sales and purchases, and the payment or credit due to the VAT Service. Payment may accompany the form if necessary.

2. OBLIGATIONS OF A VAT/NHIL REGISTERED PERSON
The registered person is obliged to charge 12½% VAT and 2½% NHIL on all taxable sales. The registered person is also obliged to keep records of VAT/NHIL charged and paid. Record should also be kept of all material supporting sales made / or received and a distinction made between exempt and taxable sales.

The registered person is also obliged to submit monthly returns of sales and purchases made on the VAT form 20 (returns).

3. WHAT IF I DO NOT REGISTER?
According to section 56 of the VAT Law (Act 546) 1998, there are serious implications for refusing to register when a taxable person qualifies as such. The penalty for a deliberate or reckless refusal to register is a fine not exceeding ¢10million or imprisonment for a term not exceeding 5years or both. For any other reason, the penalty is a fine not exceeding ¢5million or imprisonment for a term not exceeding one year or to both. In addition, the business or individual will be liable to pay the amount of tax not collected on taxable sales made from the date registration should have taken place.

The Commissioner of the VAT Service may also compulsorily register any business that qualifies but refuses to apply for registration.

4. VOLUNTARY REGISTRATION
The VAT Law (Act 546) 1998 makes provision for a business with sales turnover below ¢100million a year to register. This type of registration is known as voluntary registration and makes it possible for businesses who do not qualify to register to enjoy the numerous benefits VAT/NHIL registration offers. To qualify for voluntary registration, a business must;

• a) Have a fixed place for conducting business
• b) Keep proper accounting records
• c) Be able to file regular and reliable tax returns

5. CANCELLATION OF REGISTRATION (DEREGISTRATION)
To initiate the process of removing a business’s name from the VAT register, the registered person has to complete an impending deregistration (VAT 16) Form. This process may be continued only when the Commissioner of the VAT Service is satisfied that the registered person has ceased to exist.

What is Input Tax?

Many of the things you buy are likely to be subject to VAT, but as a VAT registered business you can reclaim the VAT charged on business purchases and expenses. This is your input tax. It includes not only the VAT on your raw materials or on goods you buy for resale but also the VAT on things like:

• Office equipment for your business
• Your telephone bills (in so far as it has been used for your business)
• Payment for services relating to your business operations (e.g. accountants’ or solicitors’ fees).

It does not include VAT paid on goods or services for someone else’s business, neither does it apply to VAT on private purchases such as furnishings for your home. VAT charged in these circumstances is not part of your input tax.

I have issued a credit note for returned goods. How do I account for the VAT?
You must record the issue of the credit note in your records and deduct the VAT from your output tax for the period in which you issued the credit note.

I run a small hotel and ask for a deposit on advance bookings. Do I have to account for VAT on it?
Yes. This kind of deposit is an advance payment for services and you must account for VAT on it.

I own an electrical shop and ask a friend to carry out some repairs for me. He offers to do them for me free of charge if I give him a small radio from my shop. Do I have to account for VAT on it?
Yes. Remember that even gifts are taxable. However, this transaction is not a gift, it is payment in kind for your friend’s services. VAT is due on the full amount that you would normally charge for the radio.

I provide gifts to my best customers. Do I account for VAT on them?
Yes. Even if the gift is by way of doing business the output tax should be accounted for on the market value of the item.

A customer asks me to put a supply aside for him and gives me GH¢5 as deposit? Do I have to account for VAT on this and the balance when he collects the goods?
Yes the GH¢5 is an advance payment. VAT is due on both payments.

COMPLETING YOUR RETURN

BOX 3

Put in Box 3 the amount of output VAT due on sales and other outputs.

REMEMBER
Leave out any amounts notified to you as assessments by the VAT service.

The following categories of businesses must register to collect VAT/NHIL:

• Manufacturers
• Wholesalers
• Distributors
• Service Providers
• Retailers of goods who make taxable sales (turnover) of about ¢100million a year.

Those who deal in exempt goods and services are not liable to register. It must be noted that manufacturers, wholesales, distributors and service providers are not subject to the turnover limitation referred to as the VAT registration threshold.

Businesses that should register include sole proprietorships, limited liability companies, government institutions and non-profit making organizations (NGOs) who fall into the categories listed above. All business activities of registered persons such as subsidiaries, divisions and branches are covered by the registration.

All goods and services are taxable except those exempted by law. In principle, all individuals or businesses making taxable supplies must register for VAT. They are called Taxable Persons under the law (S4). However, the VAT law makes an exception for retailers of goods. Hence, the criteria for registration under the law can be summarized as follows:

a) All manufacturers and service providers, as well as wholesalers and distributors who make taxable supplies are obliged under the VAT Law to register for VAT.

b) All retailers of goods who make taxable sales or (turnover) above ¢100 million a year must apply to be registered (S. 5/1).

Strictly speaking, therefore, manufacturers, service providers and wholesale businesses are not subject to the turnover limitation, which is commonly referred to as the VAT Registration Threshold.

The definition of a taxable person includes a Sole Proprietor, Partnership (including husband and wife partnerships), limited liability company, government institutions and non-profit organizations. Each registration covers all the business activities of the registered person (S5 {2}). It may, therefore, include subsidiaries, divisions and branches of the same business.

A person registered for VAT is automatically registered to charge, collect and account for the NHIL. VAT and NHIL must be charged and accounted for simultaneously.

The law has other provisions regarding registration. First, a retailer of goods may apply to be voluntarily registered, if he so wishes, even when his annual taxable turnover falls below the registration threshold – S. 5(10). This is usually done to enable such persons to take advantage of the benefit of input tax credits. Secondly, the VAT Commissioner has been given powers to compulsorily register eligible firms that attempt to avoid or evade registration (5 [6]) even though their supplies exceed the turnover limit.