Value Added Tax (VAT) is a consumption tax placed on goods on each stage of production including the consumption stage. A flat rate of 17.5 percent of VAT is charged on goods and products.
On the 1st of October, a new VAT was imposed on the sale of immovable property by estate developers. In other words, a 5 percent VAT was introduced to the real estate industry. The real estate tax has some advantages on the sector including increased revenue, enabling the government to provide more affordable housing for its citizens.
The introduction of the VAT brings with it a number of negative implications being voiced by real estate agents. These include – the reduction in sales of properties, as extra charges will be transferred to the end user. The tax will also increase the mortgage rates. This will discourage buyers from investing in the property market.
Q: VAT on real estate, does that include all properties?
VAT is charged on immovable properties or buildings. It is not charged on agricultural land and infrastructure, such as roads and bridges among others.
Q: Will the TAX affect those currently paying for mortgages they acquired before October?
A: According to Sammy Amegayibor, the General Secretary of the Ghana Real Estate Developers Association (GREDA), the Ghana Revenue Authority(GRA) claims that with an existing contract, anyone who has not finished paying for a property before the law was passed, whatever balance is outstanding, a VAT will be charged on it.
Q: What is GREDA’s view on the current real estate tax that has been passed?
A: GREDA is has a different opinion on the new charge, especially on the outstanding balance. “We have objected to it. There is an LI 1646, VAT regulation 1998, section 45 which mandates them to charge on existing contracts but we are of the view that the constitution 107 B also acts on retroactive regulation, meaning, new laws cannot affect existing laws, but we are taking it out and seeing what we can do about it,” Amegayibor concluded.
Source: Lamudi
