• 4 Marks

PT – May 2021 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain how VAT will be accounted for in the case of imported services in Ghana.

MMX Bank, a resident financial institution in Ghana, contracted Crown UK, a specialist in software maintenance. Per the contract, Crown UK is required to come to Ghana to provide the services every two years. The specialist will provide services to the bank’s clients in the normal banking operation.

Required:
How will VAT, if any, be accounted for?

VAT is charged on consumption. Since the services will be provided in Ghana, VAT will be charged. This is a case of imported services. According to Section 65 of the VAT Act 870 (2013) as amended, if the services are going to be used in a taxable activity, no VAT will be charged. If used for exempt activities, VAT will be charged. This situation relates to a reverse charge, meaning the recipient (MMX Bank) accounts for VAT, not Crown UK.

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