The Government intends to introduce a fiscal receipt system to replace the manual VAT invoices that VAT registered persons currently issue for the supply of goods and services. This fiscal receipt will be issued using a Fiscal Electronic Device (FED). The introduction of the FED is expected to maximise revenue collection by ensuring that the Ghana Revenue Authority (GRA) is able to monitor and verify sales transactions. This new measure is contained in the Taxation (Use of Fiscal Electronic Device) Act, 2018 (Act 966) which became law on 4 May 2018.
Among other things, the FED is a device that will work as a point-of-sale device and all VAT registered persons are required to issue fiscal receipts generated by the FED. The actual start date for the use of the FED will be communicated by the Government in the Gazette and two national newspapers.
Every taxable person will be required to use an approved FED and also keep a back-up FED at their premises for when the primary device malfunctions.
Although the fiscal receipt becomes the primary VAT document, the manual VAT invoices will still be used when both devices fail. When the problem with the FED has been fixed, the taxable person is required to transfer the transactions for which manual invoices were issued, to the FED.
Persons to whom fiscal receipts are issued can use these receipts to claim input tax deductions. These persons simply need to ensure their Tax Identification Numbers are captured on the fiscal receipts to claim input tax deduction using the fiscal receipt. A purchaser is required to ensure the value stated on the fiscal receipt is exactly the payment made.
There are several sanctions associated with contravening the law. For instance, a taxable person who fails to use the device may be fined an amount ranging between GHS6,000 – GHS24,000, as well as prison sentence.
The GRA is empowered to provide Administrative Directives covering issues such as how to correct errors on fiscal receipts.
In order to monitor effectively, the GRA will enter into contracts with licensed Communication Service Providers to provide electronic communications services. These services include communication between the FED and the backend system housed by GRA. GRA will therefore be able to determine actual sales by persons who use the FED. FEDs will only be supplied by persons who are licensed by GRA.
With the introduction of the FED, Ghana joins other African countries such as Kenya, Tanzania and Malawi that track VAT charged electronically. The use of an FED is expected to enhance the VAT audit process significantly. GRA auditors can simply compare sales numbers recorded on their servers with total VAT output disclosed on the VAT returns. Also, the output per the FED can be compared with the Annual Financial Statements of the taxable person.
This system of verification is likely to lead to reconciliation challenges. Businesses will need to ensure that sales numbers in the Annual Financial Statements and VAT returns are reconciled with output from the FED.
The law does not touch on how adjustments such as credit notes will be addressed. It provides that when goods are returned, the supplier should issue a refund receipt based on the instructions of the Commissioner-General, which is likely to be contained in the Administrative Directives. Since the refund receipt will not be issued by the FED, it is likely to create reconciliation differences. We expect the Administrative Directives to provide clarity on how all other adjustments including those connected to the supply of services can be made.
In addition, taxpayers need to consider the effect of FEDs on their current reporting systems, if any.
The use of FEDs gets closer to implementation with each passing day. Taxpayers need to start getting ready.