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.

This is in a major policy shift aimed at making the tax system more responsive to the realities of small businesses.

The proposed reform will allow eligible businesses operating as individuals, sole proprietorships, partnerships or limited liability companies to benefit from a simplified tax regime, rather than being subjected to compliance requirements 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 his Technical Advisor and Chairperson of the MTS Committee, Elsie Appau-Klu, at an MTS 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.

Madam Appau-Klu said the proposed expansion was necessary because many young people and women were being encouraged to formally register their businesses as limited liability companies, even when their operations remained very small.

Under the current application of the Income Tax Act, the MTS has largely been applied to individuals and sole proprietors. Consequently, small businesses that adopt a corporate structure may be subject to the standard corporate tax regime, including more stringent accounting and compliance requirements.

According to the GRA, this situation could discourage formalisation and place an unnecessary burden on businesses with relatively low turnover.

“The MTS should not be limited to individuals and sole proprietors,” the Technical Advisor said, announcing the Authority’s policy position that qualifying small businesses with annual turnover not exceeding GH¢750,000 should ultimately be eligible for the simplified regime.

GRA collaborating with Finance Ministry for amendments

She said the Authority’s Legal and Policy teams had been instructed by the Commissioner General to work with the Ministry of Finance towards the necessary legislative amendments to make the inclusion of qualifying small companies explicit.

The proposed GH¢750,000 threshold is also intended to align the MTS with the registration threshold for goods under the Value Added Tax Act, 2025 (Act 1151), creating greater consistency across the tax framework.

The GRA said excluding small businesses solely because of their legal status could undermine efforts by institutions such as YEA, MASLOC, the Ghana Enterprises Agency and other enterprise-support organisations to promote formalisation.

Ms Appau-Klu said the policy would mean that businesses such as salons, laundries, bakeries, carpentry shops and provision stores that operate as limited liability companies could eventually access the simplified tax framework if their annual turnover remains below the proposed threshold.

The Authority’s roadmap envisages stakeholder engagement and administrative guidance in the immediate term, followed by proposals for legislative amendments by December 2026.

In the longer term, the GRA also plans to digitise the MTS through mobile applications, USSD platforms and other digital channels to simplify registration, filing and tax payments, including the potential use of local-language interfaces.

Madam Appau-Klu emphasised that the overarching objective was to ensure businesses were not penalised for formalising their operations.

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

She further called for stronger collaboration among business associations, enterprise-support agencies and the GRA to help small businesses grow while gradually adapting their tax obligations as their operations expand.

The proposed reform is expected to strengthen the link between business formalisation and tax compliance by ensuring that entrepreneurs can choose corporate structures without automatically losing access to simplified taxation.