Vehicle assemblers must meet local content threshold to enjoy VAT exemption – Mahama

President John Dramani Mahama has announced that vehicle assemblers in Ghana will be required to meet a specified local assembly threshold to qualify for VAT exemptions under new incentives being developed for the automotive sector.

He said the move is aimed at ensuring that companies benefiting from tax incentives make meaningful contributions to local manufacturing rather than importing almost-complete vehicles and carrying out only minor assembly work in Ghana.

President Mahama made the announcement at the commissioning of Phase Three of the Zonda Tech Ghana Limited Vehicle Assembly Plant at Tema Golf City.

According to him, the Ministries of Finance and Trade and Industry are finalising discussions on the new incentive framework for semi-knockdown vehicle assembly.

He explained that the government intends to introduce a minimum percentage of local assembly that manufacturers must achieve before they can access the VAT exemption.

The President said the policy would prevent companies from taking advantage of the incentives without contributing sufficiently to Ghana’s industrial development.

“We don’t want manufacturers who bring the whole car, they just remove the steering and the tyres, and they bring it here, put the tyres and put the steering, and say we’ve assembled this vehicle in Ghana,” he said.

Mahama said the new requirement is expected to promote greater value addition within Ghana’s automotive industry.

He noted that simply bringing vehicles into the country in an almost-complete state does not provide the same economic benefits as undertaking substantial manufacturing and assembly activities locally.

The President said government wants the automotive sector to create stronger linkages with Ghanaian businesses and increase opportunities for local suppliers.

He has consequently urged vehicle assemblers to deepen localisation by investing in the production of automotive components in Ghana.

Among the components identified are batteries, tyres, wiring harnesses, seats, glass, plastics and metal parts.

Mahama said developing local component manufacturing would strengthen domestic supply chains, create additional employment opportunities and ensure that more value generated by the automotive industry remains in Ghana.

He said details of the new incentive regime will be captured in the national budget, which the Ministry of Finance is expected to present to Parliament.

He said the country has already attracted several global vehicle manufacturers through its automotive development policy, but stressed that vehicle assembly should not be the final destination.

“The goal is to develop an integrated automotive industry in which locally produced materials and components feed directly into vehicle manufacturing,” he said.

President Mahama said Ghana’s automotive industry must ultimately be capable of producing vehicles and components for both the domestic market and export to other African countries.

He noted that with the African Continental Free Trade Area headquartered in Ghana, the country is strategically positioned to serve a continental market of more than 1.4 billion people.

He said government would continue to provide an enabling environment for investors while expecting manufacturers to increase local content, transfer technology and develop Ghanaian suppliers.

The President said the policy is intended to ensure that incentives granted to the automotive sector translate into tangible benefits for Ghana through increased production, job creation, technology transfer and reduced dependence on imported vehicles.