GRA announces major policy proposal under Modified Taxation Scheme initiative

The Ghana Revenue Authority (GRA) plans to broaden the Modified Taxation Scheme (MTS) to encompass qualifying small limited liability companies with annual revenues not surpassing GH¢750,000. This policy adjustment aims to render the tax system more appropriate for small enterprises. The proposed modification will enable eligible businesses, operating as individuals, sole proprietorships, partnerships, or limited liability companies, to avail themselves of a streamlined tax framework, eschewing the compliance demands typically intended for larger corporations.

Anthony Kwasi Sarpong, the GRA’s Commissioner-General, outlined this policy direction during a September 9 MTS stakeholder workshop in Accra, presided over by his Technical Advisor and Chairperson of the MTS Committee, Elsie Appau-Klu. Appau-Klu explained that the proposed extension is crucial, given the trend of young people and women registering their businesses as limited liability companies, even when their operations are modest.

Under the existing Income Tax Act application, MTS primarily targets individuals and sole proprietors. As a result, small businesses adopting a corporate structure may face the standard corporate tax regime, accompanied by more rigorous accounting and compliance obligations. The GRA contends that this scenario could dissuade formalization and impose an unwarranted burden on enterprises with comparatively low revenues.

"The MTS should not be confined to individuals and sole proprietors," declared the Technical Advisor, unveiling the Authority's stance that qualifying small businesses with annual revenues falling within the GH¢750,000 limit should ultimately qualify for the simplified regime. The Legal and Policy teams of the GRA have been directed by the Commissioner General to collaborate with the Ministry of Finance to effect the requisite legislative revisions to incorporate this inclusion explicitly.

The proposed GH¢750,000 threshold also seeks to synchronize the MTS with the registration threshold for goods under the Value Added Tax Act, 2025 (Act 1151), fostering increased harmony within the tax framework. The GRA posits that excluding small businesses solely based on their legal status may undermine the endeavors of entities like YEA, MASLOC, the Ghana Enterprises Agency, and other enterprise-support organizations, aimed at promoting formalization.

Appau-Klu emphasized that the policy would permit small businesses like salons, laundries, bakeries, carpentry shops, and provision stores, operating as limited liability companies with annual revenues below the proposed threshold, to eventually access the simplified tax framework. The Authority's short-term roadmap involves engaging stakeholders and providing administrative guidance, followed by legislative amendment proposals by December 2026.

In the long term, the GRA also intends to digitize the MTS through mobile applications, USSD platforms, and other digital channels to simplify registration, filing, and tax payments, potentially incorporating local-language interfaces. Appau-Klu stressed that the overarching objective is to ensure that businesses are not penalized for formalizing their operations.

"We aspire for a Ghana where a small business is not penalized for becoming formal," she asserted. She further advocated for enhanced collaboration among business associations, enterprise-support agencies, and the GRA to facilitate small businesses' growth while gradually adjusting their tax obligations as their operations expand.

The proposed reform is anticipated to enhance the correlation between business formalization and tax compliance by ensuring that entrepreneurs can opt for corporate structures without forfeiting access to simplified taxation.