Salaries, savings, deposits, not affected by new VAT Act
The Ministry of Finance and Economic Planning says a number of banking transactions, including salaries, savings, deposits and loans will not be affected by a new VAT Act, Act 870, to be implemented in May.
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There have been agitations particularly in the media over the scope of banking transactions to be affected by the new regime, with some, including banks, saying the 17.5 per cent VAT will affect all transactions.
But the Finance Ministry’s statement, signed by Deputy Minister of Finance, Cassiel Ato Baah Forson, said that is far from the truth.
A Deputy Minister of Information, Felix Kwakye Ofosu, on Asempa FM, said the Act targets non-core financial services, admitting that the communication from the banks may have created some unintended panic among the banking public. He therefore urged the banks to seek explanations on directives when the need arose.
See the Finance Ministry’s statement
The Ministry of Finance and the Ghana Revenue Authority have noted with concern publications in the media on banks charging VAT on services including salaries and savings.
2. We wish to state categorically that salaries, savings, deposits, loans and payment with cheques are all exempted from VAT. The new VAT Act, Act 870 only affects fees that are charged on non-core financial services such as data processing, legal, accounting, actuarial, notary and consulting services.
3. We also wish to state that this is not a new law, it has been in place since 1998. Banks were charging fees on services they were rendering. Banks are also already paying the VAT on inputs used to render these services.
4. Act 870 requires the Banks to register for VAT and they can offset the VAT against the VAT they charge. Therefore, the impact of the VAT is not the full 17.5 per cent as being speculated. VAT registered businesses/persons can also offset the VAT (input VAT) they pay to the banks against their VAT (output VAT).
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5. The general public is also informed that this enforcement of the tax obligation should have started from January 2nd 2014, but the banks were allowed till May to enable them to fully prepare to implement the new policy.