The Ghana Revenue Authority (GRA) proposes extending its Modified Taxation Scheme (MTS) to small limited liability companies. This expansion targets businesses with an annual turnover of up to GHS 750,000. The policy aims to simplify tax compliance for these smaller entities.
This major policy shift seeks to make Ghana's tax system more responsive to the realities of small businesses. Currently, many small companies structured as limited liability entities face complex compliance requirements meant for larger corporations. The proposed reform will allow eligible businesses, regardless of their legal structure, to benefit from a simplified tax regime.
This initiative fits into Ghana's broader economic strategy to boost formalisation and support small and medium-sized enterprises (SMEs). Institutions like the Youth Employment Agency (YEA) and the Microfinance and Small Loans Centre (MASLOC) encourage business registration. The current tax system, however, can inadvertently penalise small businesses for formalising by subjecting them to stringent corporate tax rules. Aligning the MTS with the GHS 750,000 Value Added Tax (VAT) registration threshold will also create greater consistency across the tax framework.
Anthony Kwasi Sarpong, the GRA Commissioner-General, announced this policy direction. His Technical Advisor and Chairperson of the MTS Committee, Elsie Appau-Klu, delivered the speech. She stated that the proposed expansion is necessary because many young people and women are encouraged to register businesses as limited liability companies, even if their operations remain small. The GRA believes excluding small businesses based on their legal status undermines formalisation efforts.
The GRA's Legal and Policy teams have received instructions to collaborate with the Ministry of Finance. This collaboration aims to secure the necessary legislative amendments to explicitly include qualifying small companies in the MTS. The Authority plans stakeholder engagement and administrative guidance immediately. Legislative proposals are expected by December 2026. In the longer term, the GRA also plans to digitise the MTS through mobile applications and USSD platforms, simplifying registration and payments.
This reform will likely strengthen the link between business formalisation and tax compliance. Entrepreneurs can choose corporate structures without losing access to simplified taxation. This could encourage more businesses to register formally, expanding the tax base. Decision-makers will monitor the legislative process and its impact on small business growth and tax revenue. The overarching objective is to ensure businesses are not penalised for formalising their operations.