Question Tag: Withholding VAT

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  • 12 Marks

PT – Nov 2019 – L2 – Q2b – Value-Added Tax (VAT)

Calculates withholding VAT, output VAT, and VAT payable by Akorfa Vinyo for equipment hire services.

b) Akorfa Vinyo, an equipment hiring company, raises an invoice in the sum of GH¢500,000.00 in respect of hiring of equipment services to a withholding VAT agent (Sir James Enterprise). This supply excludes Value Added Tax (VAT of 12.5%), National Health Insurance Levy (NHIL of 2.5%), and Ghana Education Trust Fund Levy (GETFL of 2.5%).

Assume that this is the only supply of value-added activity done by Akorfa Vinyo in the period and payments are made in the same period.

Required:
i) Calculate the proportion of VAT that should be withheld by the agent in respect of payment of the invoice (the withholding VAT rate is 7%). (3 marks)
ii) Calculate the output VAT to be shown on the face of Akorfa’s monthly VAT Return. (3 marks)
iii) Calculate the VAT payable by Akorfa, if the total input VAT incurred for the period is GH¢25,000. (3 marks)
iv) Show the payment details by the Withholding Agent for the supply. (3 marks)

i) Proportion of VAT that should be withheld by the agent:

Proportion of VAT to be withheld (7% x 525,000) GH¢36,750
(3 marks)

ii) Calculation of output VAT:
Description Amount (GH¢)
12.5% x 525,000 65,625.00
Output VAT GH¢65,625
(3 marks)

  • 2 Marks

PT – May 2020 – L2 – Q2c – Value-Added Tax (VAT),

Explains the purpose of implementing Withholding VAT in Ghana.

The introduction of Withholding Value Added Tax was widely celebrated by tax administrators and tax practitioners as it is believed the benefits to be raked by the Ghana Revenue Authority would be enormous.

Required:
What purpose does Withholding Value Added Tax seek to achieve?
(2 marks)

Withholding VAT is not a new tax but a compliance measure aimed at ensuring that all VAT due to the government is paid. It involves the declaration of VAT by both the supplier and the withholding agent. The primary purpose is to curb the abuse by non-filers of VAT who charge VAT without accounting for it to the authorities.
(2 marks)

  • 4 Marks

PT – Nov 2021 – L2 – Q2b – Withholding Tax Administration

Explain the objectives of the Withholding VAT Scheme introduced by the Ghana Revenue Authority.

One of the innovations by the Ghana Revenue Authority is the introduction of the Withholding VAT Scheme. The scheme is aimed at promoting tax compliance.

Required:
Explain FOUR (4) objectives of the scheme.

The objectives of the Withholding VAT Scheme are:

  1. Reduces Nil and Non-Filers: Reduces the number of nil and non-filers, as surveillance and monitoring ensure that deception in filing is minimized.
  2. Reduces Future Uncollectible Debts: The scheme collects VAT upfront from major consumers, thus reducing future uncollectible debts.
  3. Increases Voluntary Registration: Taxpayers, knowing they are being monitored, voluntarily comply with the obligations under the law.
  4. Improves Revenue Flows: The government can raise revenue through this medium, promoting compliance and ensuring efficient collection.
  5. Enhances Compliance: The scheme has generally improved compliance among taxpayers.
  6. Promotes Fair Application of Tax Laws: Ensures that the tax laws are fairly applied to all taxpayers.

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