Ghana GRA: Expands Modified Taxation Scheme to Small LLCs

• The Ghana Revenue Authority (GRA) is proposing to extend its Modified Taxation Scheme (MTS) to small limited liability companies.
• Eligible LLCs must have an annual turnover of up to GH¢750,000 to qualify for the simplified tax regime.
• This reform aims to reduce compliance burdens for small businesses and encourage formalization, as current rules subject small LLCs to standard corporate tax.
• The GRA plans legislative amendments by December 2026, collaborating with the Ministry of Finance, and will digitize the MTS in the long term.
• The GH¢750,000 threshold will align with the VAT Act, 2025, promoting consistency across Ghana's tax framework.

The proposed GRA legislative amendments tax Ghana represent a significant step towards creating a more equitable and efficient tax environment for small businesses.

The Ghana Revenue Authority (GRA) is advancing a significant policy proposal aimed at extending its Modified Taxation Scheme (MTS) to encompass qualifying small limited liability companies. This strategic move targets businesses with an annual turnover not exceeding GH¢750,000, signaling a fundamental shift in how the nation's tax system addresses the unique operational realities of smaller enterprises. The initiative seeks to integrate these entities into a more streamlined tax framework, diverging from the more complex compliance obligations typically imposed on larger corporate structures.

This pivotal policy direction was unveiled by Elsie Appau-Klu, who serves as the Technical Advisor to the Commissioner-General of the GRA and chairs the MTS Committee. Speaking on behalf of Commissioner-General Anthony Kwasi Sarpong, Ms. Appau-Klu made the announcement at an MTS stakeholder workshop held in Accra on September 9. The event brought together key organizations including Eban Capital, the Association of Small Scale Industries (ASSI), the Microfinance and Small Loans Centre (MASLOC), the Youth Employment Agency (YEA), and the GRA itself, underscoring the collaborative effort behind this GRA tax reform small businesses Ghana.

Currently, the Ghana Income Tax Act primarily applies the Modified Taxation Scheme to individuals and sole proprietorships. This existing framework inadvertently subjects small businesses that opt for a corporate structure, such as limited liability companies, to the standard corporate tax regime. Such a regime often entails more rigorous accounting and compliance requirements, which can prove burdensome for entities with relatively modest turnovers. The GRA acknowledges that this situation can hinder formalization efforts and impose undue pressure on businesses with relatively low turnover.

The necessity for this expansion is further highlighted by the increasing trend of young entrepreneurs and women formally registering their businesses as limited liability companies, even when their operations remain small in scale. By excluding these small LLCs from the simplified regime solely based on their legal status, the current system inadvertently undermines the objectives of various enterprise-support organizations like YEA, MASLOC, and the Ghana Enterprises Agency, which actively promote business formalization. The GRA's policy position explicitly states that the MTS should not be confined to individuals and sole proprietors, advocating for the inclusion of all qualifying small businesses with annual turnovers up to GH¢750,000.

To facilitate the inclusion of qualifying small companies, the Commissioner-General has directed the GRA's Legal and Policy teams to collaborate with the Ministry of Finance. Their joint mandate is to develop the necessary legislative amendments to explicitly extend the Ghana GRA Modified Taxation Scheme small LLCs. A key aspect of this proposed reform is the establishment of a GH¢750,000 tax threshold Ghana, which is designed to harmonize the MTS with the registration threshold for goods under the Value Added Tax Act, 2025 (Act 1151), thereby fostering greater consistency across the national tax framework.

The Authority has outlined a clear roadmap for implementing these changes. In the immediate future, the focus will be on stakeholder engagement and issuing administrative guidance. Looking ahead, proposals for these legislative amendments are anticipated by December 2026. Beyond the legislative phase, the GRA plans a longer-term initiative to digitize the MTS. This will involve developing mobile applications, USSD platforms, and other digital channels to simplify processes such as registration, filing, and tax payments, potentially incorporating local-language interfaces to enhance accessibility for a broader range of small businesses. This comprehensive approach aims to establish a truly Ghana simplified corporate tax regime.

The proposed GRA legislative amendments tax Ghana represent a significant step towards creating a more equitable and efficient tax environment for small businesses. By allowing entities like salons, laundries, bakeries, carpentry shops, and provision stores operating as limited liability companies to access a simplified tax framework, provided their annual turnover remains below the proposed threshold, the initiative directly addresses a critical barrier to growth and formalization. This reform is expected to reduce compliance burdens, encourage more businesses to operate formally, and ultimately contribute to a more robust and transparent economy.

This expansion of the Ghana Income Tax Act MTS expansion is not merely a technical adjustment but a strategic policy intervention designed to support the backbone of the Ghanaian economy. It acknowledges the evolving landscape of small business formation and aims to align tax policies with national development goals, particularly those focused on youth and women entrepreneurship. The move underscores the GRA's commitment to fostering an environment where small businesses can thrive without being encumbered by disproportionate tax complexities, thereby promoting sustainable economic growth and job creation.

Lawyers and compliance officers advising small limited liability companies in Ghana should actively monitor the Ghana Revenue Authority's proposed legislative amendments to extend the Modified Taxation Scheme. This reform could significantly simplify tax compliance and reduce burdens for eligible small LLCs with annual turnover up to GH¢750,000, presenting new opportunities for tax planning and formalization strategies for their clients.

Source: Original reporting via Carbonatix