Ghana: GRA proposes extending Modified Taxation Scheme to small companies

The Ghana Revenue Authority (GRA) is proposing to extend the Modified Taxation Scheme (MTS) to qualifying small limited liability companies with annual turnover of up to GH¢750,000, in a policy move aimed at making tax compliance more suitable for the realities of small businesses.

Under the proposed reform, eligible businesses operating as individuals, sole proprietorships, partnerships, or limited liability companies would be able to access a simplified tax regime rather than face compliance obligations primarily designed for larger corporate entities.

The Commissioner-General of the GRA, Anthony Kwasi Sarpong, announced the policy direction in a speech delivered on his behalf by Elsie Appau-Klu, his Technical Advisor and Chairperson of the MTS Committee, at a stakeholder workshop in Accra on September 9.

The workshop was organised by Eban Capital, the Association of Small Scale Industries (ASSI), the Microfinance and Small Loans Centre (MASLOC), the Youth Employment Agency (YEA), and the GRA.

GRA seeks to remove barriers to business formalisation

Appau-Klu said the proposed expansion had become necessary as more young people and women were being encouraged to formally register their businesses as limited liability companies, even when their operations remained relatively small.

Under the current application of the Income Tax Act, the MTS has largely been available to individuals and sole proprietors. As a result, small businesses that adopt a corporate legal structure may become subject to the standard corporate tax regime, which comes with more complex accounting and compliance requirements.

The GRA said this distinction could discourage formalisation and impose disproportionate obligations on businesses with modest turnover.

“The MTS should not be limited to individuals and sole proprietors,” Appau-Klu said, announcing the Authority’s position that qualifying small businesses with annual turnover not exceeding GH¢750,000 should eventually be allowed to participate in the simplified regime.

GRA working with Finance Ministry on legislative changes

Appau-Klu disclosed that the GRA’s Legal and Policy teams had been directed to work with the Ministry of Finance on the legislative amendments required to explicitly include qualifying small companies under the scheme.

The proposed GH¢750,000 threshold is intended to align the MTS with the registration threshold for goods under the Value Added Tax Act, 2025 (Act 1151), thereby promoting greater consistency within Ghana’s tax framework.

According to the Authority, excluding businesses solely because of their legal structure could undermine formalisation efforts led by institutions such as YEA, MASLOC, the Ghana Enterprises Agency, and other enterprise-support organisations.

The proposed changes could allow businesses such as salons, laundries, bakeries, carpentry workshops, and provision stores operating as limited liability companies to access the simplified tax regime, provided their annual turnover remains below the proposed threshold.

Digitisation planned for Modified Taxation Scheme

The GRA’s roadmap includes immediate stakeholder consultations and the development of administrative guidance, followed by proposals for legislative amendments by December 2026.

In the longer term, the Authority plans to digitise the MTS through mobile applications, USSD platforms, and other digital channels to simplify business registration, tax filing, and payments. Local-language interfaces may also be considered as part of the digitisation process.

Appau-Klu said the central objective was to ensure that businesses were not disadvantaged simply because they chose to formalise their operations.

“We want a Ghana where a small business is not punished for becoming formal,” she said.

She also called for deeper collaboration among business associations, enterprise-support institutions, and the GRA to help small businesses expand while allowing their tax obligations to increase gradually in line with business growth.

The proposed reform is expected to strengthen the relationship between formalisation and tax compliance by enabling entrepreneurs to adopt corporate structures without automatically losing access to simplified taxation.