The Ghana Revenue Authority (GRA) is working to ensure that small businesses do not face a heavier tax and compliance burden simply because they register as limited liability companies.
The Authority is proposing to extend the Modified Taxation Scheme (MTS) to qualifying small limited liability companies with annual turnover of up to GH¢750,000.
The proposed reform is intended to close a gap in the current tax framework, under which small businesses that change from sole proprietorships or partnerships to limited liability companies may lose access to the simplified taxation regime.
Anthony Kwasi Sarpong, Commissioner-General of the GRA, announced the policy in a speech delivered on his behalf by Elsie Appau-Klu, Technical Advisor to the Commissioner-General and Chairperson of the MTS Committee, at a stakeholder workshop in Accra.
Ms 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.
She said many of those businesses, despite adopting a corporate structure, remained small in terms of turnover and capacity.
Under the current application of the Income Tax Act, the MTS has largely been available to individuals and sole proprietors, meaning some small companies are required to comply with the more demanding corporate tax regime.
The GRA believes that such an arrangement could discourage entrepreneurs from formalising their businesses because incorporation may result in additional tax and accounting obligations that are disproportionate to the size of their operations.
“The MTS should not be limited to individuals and sole proprietors,” Ms Appau-Klu said, explaining that the Authority’s policy position was for qualifying businesses with annual turnover not exceeding GH¢750,000 to eventually access the simplified regime.
She said the GRA’s Legal and Policy teams had been directed to work with the Ministry of Finance to prepare the necessary legislative amendments to make the inclusion of qualifying small companies explicit.
The proposed GH¢750,000 threshold is also expected to align the MTS with the registration threshold for goods under the Value Added Tax Act, 2025 (Act 1151), creating greater consistency within the tax system.
Ms Appau-Klu said excluding small businesses based solely on their legal status could undermine government and institutional efforts to promote formalisation among entrepreneurs.
She cited initiatives by the Youth Employment Agency, the Microfinance and Small Loans Centre, the Ghana Enterprises Agency and other enterprise-support institutions, which encourage young people and small business owners to formally register their businesses.
Under the proposed arrangement, businesses such as salons, laundries, bakeries, carpentry shops and provision stores that are registered as limited liability companies could qualify for the simplified tax regime if their annual turnover remains below the proposed threshold.
The GRA’s roadmap envisages continued stakeholder engagement and the issuance of administrative guidance in the immediate term, followed by proposals for legislative amendments by December 2026.
The Authority also plans to digitise the MTS over the longer term through mobile applications, USSD platforms and other digital channels.
The digital system is expected to simplify business registration, tax filing and payments, with the possible introduction of local-language interfaces to make the system more accessible to small businesses.
Ms Appau-Klu said the broader objective was to ensure that entrepreneurs were not discouraged from formalising their businesses because of taxation.
“We want a Ghana where a small business is not punished for becoming formal,” she said.
She called for stronger collaboration between the GRA, business associations and enterprise-support agencies to help small businesses grow while allowing their tax obligations to increase gradually as their operations expanded.
The proposed reform could therefore create a closer link between business formalisation and tax compliance by allowing entrepreneurs to adopt corporate structures without automatically losing access to simplified taxation.
The stakeholder workshop was organised by Eban Capital, the Association of Small Scale Industries, MASLOC, YEA and the GRA.
