Understanding Premium Tax Reforms in Ghana

Understanding Premium Tax Reforms in Ghana

A breakdown of proposed fiscal measures and their effect on premiums

By Research Team

What’s Changing: Key Tax / Fiscal Reforms

As part of its 2025 fiscal strategy, the Ghanaian government has introduced several tax reforms that directly affect how insurance premiums are taxed. The main ones are:

1. VAT on non-life insurance premiums
   Under the Value Added Tax (Amendment) Act, 2023 (Act 1107), as of 1 July 2025, a 15% VAT is being applied to premiums for non-life insurance policies. 
   Affected products include fire, property, marine, travel, personal accident, liability, burglary, and workmen’s compensation insurance among others. 
2.  
3. Levies (NHIL, GETFund, COVID-19 Levy, etc.)
   These levies already existed and are applied to insurance premiums. Under the new scheme, they are stacked with the VAT. For example: NHIL (2.5%), GETFund (2.5%), and a COVID-19 Levies (1%) apply on premiums. 
4.  
5. Exemptions and special treatments
   • Motor insurance is explicitly exempt from the new VAT on non-life insurance premiums. 
   • Life insurance also remains outside the scope of VAT under these reforms. 
   • The government has made clarifications that VAT effects do not apply to claims (i.e. payouts for losses) since they are considered compensation rather than taxable supplies. 
6. Budget proposals around abolitions / reversals
   In the 2025 Budget, there were proposals to abolish (repeal) VAT on motor-vehicle insurance premiums. 
   Some of these have been passed or are in process. For example, the government intends to exempt motor insurance from the VAT (again) via legislation. (Ernst & Young Tax News)

How These Measures Affect Premiums: Direct & Indirect Effects

These reforms affect insurance premiums in multiple ways — some immediate and visible, others more indirect. Here are the main effects:

Broader Implications & Risks

Beyond the direct effect of adding a VAT charge, there are secondary impacts and risks to consider:

• Insurance penetration could decline: Ghana already struggles with low insurance uptake. A ~20% increase in premiums for non-life cover may push some potential customers to drop coverage or settle for minimal protection. This is especially true for small businesses and individuals in lower-income brackets.
• Regressive burden for lower-income users: Because levies and VAT are proportional, people who buy lower-value insurance still pay high percentages. Cost increases affect them more in absolute terms relative to income, even if the percent is same.
• Insurers’ administrative burden: Companies must upgrade billing systems, issue invoices showing VAT components, train staff, re-register for VAT if required, etc. These costs may also be passed to policyholders.
• Possible policy redesigns: Insurers may offer fewer add-ons or reduce coverage to keep gross premiums affordable. They might also seek cost-saving in claims or marketing.
• Fiscal trade-offs: While the government expects increased revenue through VAT and levies, reduced demand or increased evasion might limit gains. Also, increased premium taxes may lead to more uninsured exposures, possibly increasing costs for the public sector in disaster relief or liability exposure.

What to Watch & What Insurers / Consumers Can Do

For stakeholders in the insurance sector (insurers, brokers, consumers, regulators), attention to the following is crucial:

1. Transparency in pricing
   Insurers should clearly show in policy documents how much tax & levies are embedded in premiums. This helps maintain trust, especially when premiums rise sharply.
2. Product innovation
   To cushion the cost increase, insurers may need to design low-coverage/non-add-on products, or bundle services in ways that produce value even with higher premium. Microinsurance or parametric options may become more attractive.
   
    
3. Consumer education
   Many policyholders will be unaware of the reasons behind premium increases. Explaining the VAT/Reform changes helps reduce backlash.
    
4. Regulatory oversight
   The National Insurance Commission (NIC) and Ghana Revenue Authority (GRA) need to collaborate to ensure that exemptions (like for motor & life) are enforced properly and that companies comply fairly.
5.  
6. Monitoring market impact
   Keeping track of uptake rates and claims experience post‐implementation will help understand how demand shifts, whether some lines shrink or some become uneconomical under the new tax burden.

Conclusion

Ghana’s premium tax reforms mark a significant shift in how insurance is priced. The introduction of 15% VAT on non-life insurance premiums (stacked on existing levies) will raise the cost of many insurance products by roughly 20-25%, all else equal. Motor and life insurance have been spared this VAT burden, but non-life policyholders must be prepared for higher costs.

If managed well—with clear regulation, robust public education, and product innovation—these reforms can help Ghana mobilize domestic revenue without severely damaging insurance uptake. But there’s a balance to strike: too large a tax burden risks pushing insurance further out of reach for many, undermining the goals not only of revenue generation but economic resilience, risk protection, and financial inclusion.