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Business News of Saturday, 24 December 2016

Source: Graphic.com.gh

Anxious developers await scrapping of VAT on real estate

Real estate developers say they are eagerly awaiting the scrapping of the five per cent Value Added Tax (VAT) that was imposed on real estate sales by the outgoing administration.

After making the issue one of its campaign promises, the General Secretary of the Ghana Real Estate Developers Association (GREDA), Mr Samuel Amegayibor, said it was time for the New Patriotic Party (NPP) to ‘walk the talk’ now that it has won power.

“Since the NPP and its Vice Presidential Candidate, Dr Mahamudu Bawumia, stated clearly in their manifesto that they will have this VAT scrapped, we expect this to be done as soon as possible,” Mr Amegayibor told the GRAPHIC BUSINESS on December 15.

The NPP, in its 2016 manifesto, promised to scrap the five per cent VAT that the outgoing administration imposed on real estate business should it win the December 7 general election.

As the umbrella body of real estate developers and related service providers in the industry, Mr Amegayibor said GREDA had been discussing the issue with the outgoing administration but to no avail.

He said the five per cent VAT should not have been introduced in the first place since it hindered the growth of the industry.

Background

The Value Added Tax (amendment) Act, 2015 (Act 890) obliged real estate developers to charge and account for VAT on taxable supplies of immovable property at a flat rate of five per cent on the value of each taxable supply. Under the Act, estate developers engaged in the sale or supplies of immovable properties are required to charge and account for VAT from October 1, 2015.

The government, in January 2015, slapped the industry with a 17.5 percent which did not go down well with the sector

However, after deliberations between GREDA and the government, the 17.5 percent was replaced with a flat rate of five per cent.

Although the five percent is relatively low as compared to the 17.5 percent, GREDA is still not happy about it as it further pushed for its scrapping.

Housing deficit

Given the present housing deficit, which is estimated to be more than 1.8 million units and growing, GREDA believes the imposition of five per cent VAT on the sale of houses will further disable workers in the lower income bracket from owning their own homes.

The association explained that some of the many troubles the VAT would bring was the rise in the retail prices of houses, thereby disqualifying many people from accessing mortgages.

Some individual developers also raised concerns, warning that it could affect prospective homeowners.

Favourable environment

Mr Amegayibor also noted that the sector was looking forward to a very favourable business environment under the incoming administration, where interest rates, inflation and taxes will all be reduced.

He said the high interest rates had made it difficult for the sector to secure funding from banks in spite of the fact that the real estate business required long-term financing.

Going forward, the GREDA Executive Secretary said the association would study the new administration in the first quarter of next year, after which it would know which policies and legislation to push for.