The Ghana Revenue Authority (GRA) is proposing a major expansion of the Modified Taxation Scheme (MTS) to cover qualifying small limited liability companies with annual turnover of up to GH¢750,000, in a policy shift aimed at reducing the compliance burden on small businesses that choose to formalise their operations.
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 .
A Shift from Individual-Focused Taxation
Under the current application of the Income Tax Act, the MTS has largely been applied to individuals and sole proprietors operating in the informal sector. Consequently, small businesses that adopt a corporate structure—such as registering as limited liability companies—are subject to the standard corporate tax regime, including more stringent accounting and compliance requirements .
Madam Appau-Klu said the proposed expansion had become 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. She noted that excluding small businesses solely because of their legal status could undermine formalisation efforts by institutions such as YEA, MASLOC, the Ghana Enterprises Agency and other enterprise-support organisations .
“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 .
Alignment with VAT Threshold
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), which took effect on January 1, 2026. Act 1151 raised the VAT registration threshold for businesses dealing in goods from GH¢200,000 to GH¢750,000 in annual sales, effectively excluding micro and small enterprises from VAT obligations .
GRA said the alignment would create greater consistency across the tax framework. Under the proposal, 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 .
What the Modified Taxation Scheme Offers
The MTS is a simplified, flexible and easy way of taxing business income for resident individuals working in the informal sector. It is not a new tax, but a redesigned approach tailored for people working in the informal sector to encourage voluntary tax compliance, expand the tax base and ensure fairness .
The scheme currently operates under three categories:
· Presumptive Tax Based on Instalment (PTI): Fixed tax amounts paid based on income levels and business activity, for businesses with average annual sales not exceeding GH¢20,000 over three consecutive years .
· Presumptive Tax Based on Turnover (PTT): A flat rate of 3% on annual sales for businesses with turnover of more than GH¢20,000 but not exceeding GH¢500,000 .
· Modified Cash Basis (MCB): Tax paid on earnings after deducting allowable business expenses, for taxpayers who do not qualify for the presumptive taxes or who choose this method .
The scheme is currently accessible to resident individuals earning income only from their business and from sources within Ghana, and who are not registered for VAT. Registration can be completed through the MTS Taxpayer App, at GRA offices, through field officers, or via trade associations. Payments are made through USSD code *880# or via mobile money in the app .
Legislative Roadmap
The GRA’s Legal and Policy teams have 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 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 .
