How the VAT flat rate (3%) scheme works in Ghana

There are two types of VAT systems in Ghana: the Standard scheme and the Flat rate. While the former comes with a composite percentage of 17.5%, the latter is 3%. The objective of this short article is to equip readers with knowledge on how to compute the 3%  VAT Flat rate scheme (VFRS).

Before we start to look at how it is computed, let us take note of the following:

1. VAT inclusive/Invoice amount: This is the amount served by a seller to a buyer for payment for the supply of a good or service. It is an invoice amount that has the VAT in it. In percentage terms, this is 103%.
2. VAT exclusive amount: This refers to an invoice amount that does not have the VAT in it. In percentage terms, this is 100%. What makes this different from the first is the VAT of 3%.
3. 3% Vat flat rate scheme in ghana applies to only retailers and wholesalers. All others that fall outside this group should apply the standard scheme to their operations.

Computations under 3% Flat rate VAT

Step 1: Decide on the amount that you will charge a customer or buyer for a good or service. This is what is called the VAT exclusive amount, say GHS200.

Step 2: Calculate 3% on the VAT-exclusive amount. Using the GHS200 in step one, we get GHS6 (GHS200*3%)

Step 3: Add the two results or amounts in Steps 1 and 2 to get the amount to charge the customer. Thus, the customer pays GHS206 for the product. This is how computations take place under  3% vat flat rate scheme in Ghana.

Summary

• The amount in Step 1 or the VAT exclusive amount is the total amount that becomes the revenue of the seller (thus, the GHS200).
• The GHS60 (VAT payable) in Step 2 is an amount that must be paid to GRA.
• Finally, when the seller receives the GHS260 from the customer, he will retain GHS200 as his revenue and remit the GHS60 to GRA as VAT.