No double taxation under new digital tax collection system – GRA assures

The Ghana Revenue Authority (GRA) has assured consumers that the introduction of a new system requiring commercial banks to collect taxes on qualifying cross-border digital services will not result in double taxation.

The arrangement will require participating banks and payment service providers to collect and remit applicable taxes on qualifying digital transactions made using Ghana-issued bank cards.

In a statement, the GRA clarified that consumers who already pay the applicable taxes through subscription prices should not be charged twice on the same transaction when the new collection mechanism takes effect.

“The Authority wishes to clarify that the new system does not introduce a new tax or increase the existing VAT rate. Rather, it is intended to improve the collection and accounting of taxes already applicable to digital services supplied by non-resident companies to consumers in Ghana,” the statement said.

The Authority disclosed that approximately 92 non-resident digital service providers are currently registered and remitting Value Added Tax (VAT) to the GRA.

However, it has identified about 100 additional providers that are not currently charging and remitting the applicable taxes. These businesses will be progressively brought into compliance with Ghana’s tax laws.

As a result, consumers who use services from providers that have not previously charged the applicable taxes may begin to see the statutory amounts reflected in their payments.

The GRA said it recognises the importance of informing consumers about applicable taxes and preventing duplicate collection.

It added that it would continue engaging banks, payment service providers and digital service providers to establish appropriate safeguards against double taxation and ensure clear communication about charges.

The GRA explained that the effective tax rate remains at 20%, comprising three statutory components:

• 15% Value Added Tax (VAT)

• 2.5% National Health Insurance Levy (NHIL)

• 2.5% Ghana Education Trust Fund (GETFund) Levy

According to the Authority, the new collection arrangement is intended to improve compliance, collection and accounting without increasing the existing rates.

The system is expected to cover qualifying payments for a range of digital services supplied by non-resident companies to consumers in Ghana.

These include streaming and entertainment platforms such as Netflix, Spotify, Disney+, Showmax and beIN Sports.

Software and productivity services that may fall within the scope include Microsoft 365, Adobe, Zoom, Google Workspace and ChatGPT. Cloud computing platforms such as Amazon Web Services (AWS), Google Cloud and DigitalOcean may also be covered.

Other potentially affected transactions include online advertising payments to platforms such as Google, Meta, TikTok and LinkedIn, as well as qualifying digital learning services, cybersecurity products, virtual private network (VPN) services and online travel bookings.

The precise tax treatment will depend on whether a particular service and transaction fall within the applicable rules.

Some banks have already notified customers that applicable taxes will be reflected in payments for qualifying digital services made with their bank cards.

The banks have clarified that the amounts are statutory tax obligations rather than additional fees imposed by the financial institutions.

The GRA stressed that the distinction between introducing a new tax and improving the collection of an existing tax is important for consumers to understand.

“The GRA wishes to emphasise that the introduction of a new tax must not be confused with improvements in the collection of an existing tax,” the statement concluded.

The Authority said the objective is to strengthen compliance, promote fairness between resident and non-resident service providers, and ensure that taxes required by law are properly collected and accounted for.

Consumers are therefore encouraged to review payment notifications for qualifying digital services and seek clarification from their banks or service providers if they believe a tax has been charged more than once on the same transaction.