5% rent tax? Here’s what we found

On December 11, 2023, some users on X (formerly Twitter) circulated an artwork suggesting that Ghanaians will pay a 5% VAT flat rate on rent beginning in 2024.

God bless us all. pic.twitter.com/TGbIdUoTR5

— KALYJAY (@gyaigyimii) December 11, 2023

 The artwork has been reposted by many users on the app (see here, here and here) with concerns that it will lead to an increase in rent fees.

In this article, Fact-Check Ghana presents the facts about the 5% rent tax.

Claim: “Beginning next year (2024), Ghanaians who seek to rent would be required to pay a 5% flat VAT rate.”

Verdict: Misleading

Explanation: On November 15 2023, the Minister of Finance, Ken Ofori Atta delivered the 2024 budget to parliament, which outlined some revenue measures for the 2024 fiscal year.

As part of the revenue measures, the budget stated that, “A VAT flat rate of 5 percent will  replace the 15 percent standard VAT rate on all commercial properties and will be introduced to simplify administration and enhance revenue mobilisation.”

What is the Value Added Tax (VAT)? 

According to the  Value Added Tax (Amendment) (N0.2) Act, 2022, there are two VAT tax rates. The VAT flat rate and VAT standard rate.

The VAT flat rate is a 3% levy on businesses making an annual complete sum of sales between GH¢200,000 and GH¢500,000.

The VAT standard rate, on the other hand, is calculated on the value of taxable goods, services or imports. It is a 15% levy on annual sum sales amounting to GH¢500,000 and above. This VAT standard rate is also charged on commercial properties and not residential properties.

Contrary to the claim circulating on social media, the proposed 5% VAT flat rate will replace the existing 15% standard VAT rate. In essence, while the 5% VAT is presented as a new rate, it signifies a reduction from the current 15% VAT, if the law is passed by Parliament.

Aside from the proposed 5% flat VAT, owners of commercial properties will still pay the existing 1% Covid-19 Recovery Levy, a 2.5% National Health Insurance Levy (NHIL) and a 2.5% Ghana Education Trust Fund (GETFund) Levy. These will make the total rates on commercial properties 11%.

From the above, it is clear that if the new proposed 5% flat VAT is passed, it will replace the current 15% VAT which would be a reduction.

It is also clear that if this tax law is passed, it will be paid by commercial property owners and not for rent or residential properties.