NAVIGATING TAXATION 2020 GHANA TAX FACTS AND FIGURES - SEPTEMBER 2020 - PWC
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Introduction In this publication, all currency references are in Ghana Cedi (GH¢), which was approximately US$0.18 as at 31 August 2020. Although we have taken all reasonable This guide has been prepared for care in compiling this publication, quick reference, and action should we do not accept responsibility for any not be taken on the strength of the errors or inaccuracies that it information contained herein without may contain. obtaining professional advice. Office locations in Ghana Accra office Takoradi office Sierra Leone office PwC Tower No. 13, GK Ntow Street Number 117 Jomo Plot no. A4 Rangoon Lane, South Chapel Hill Kenyatta Road Cantonments City Takoradi – Ghana Telephone: PMB CT 42 Cantonments +232 (0) 78361701 Accra – Ghana Telephone: +233 (0) 312028416 Facsimile: Telephone: +233 (0) 312028410 +233 (0) 302761500 Facsimile: +233 (0) 312028410 Email: Facsimile: pwc.ghana@gh.pwc.com +233 (0) 302761544 Email: pwc.ghana@gh.pwc.com Website: Email: www.pwc.com/gh pwc.ghana@gh.pwc.com Website: www.pwc.com/gh Website: www.pwc.com/gh PwC
A brief profile of PwC About us – Global PwC Ghana overview We offer professional services to both PwC firms provide industry-focused the private and public sectors in the assurance, tax and advisory services following industries: to enhance value for our clients. We’re a network of firms in • Consumer and industrial products 157 countries with more than and services 276,000 people who are committed • Energy, utilities and resources to delivering quality in assurance, advisory and tax services. • Financial services • Government and public sector Our global values (including donor agencies and NGOs) We are driven by our global values of Act with integrity, Make a difference, PwC Ghana is a member firm of Care, Work together and Reimagine PricewaterhouseCoopers International the possible. We strive to deliver what Limited, each member firm of which we promise, work together as a team, is a separate legal entity. Ghana is an and become a more purpose-led and established market with high levels values-driven firm. of economic activity and very good growth prospects. PwC Ghana is In Africa, PwC is the largest provider located in Accra and Takoradi, with a of professional services, with close to branch office in Sierra Leone, and has 400 partners and over 9,000 people over 300 employees and 13 resident located in 34 countries. This enables partners/directors. us to provide clients with seamless and consistent service, wherever they are located on the continent. Navigating taxation – 2020 Ghana Tax Facts and Figures
Audit and Assurance Services Our risk assurance services consist of a portfolio of inter-related solutions Our audit approach is tailored developed around the themes of to suit the size and nature of your risk, controls and assurance, and organisation and draws upon our use skills and competencies that are extensive industry knowledge. fundamental to the delivery of a As leaders in the development of high-quality financial audit. non-financial performance reporting, we help our clients respond to the The risk assurance services we offer need for greater transparency, manage the following four areas of risk: improved corporate governance and business models based on • Financial/Commercial; the principle of sustainability. Every engagement is considered • Operational; unique and is executed to ensure • Organisational; and value creation. We assist shareholders and other stakeholders by providing an • Compliance/Regulatory. independent opinion and reports that add credibility to financial information. We assist audit committees in discharging their corporate governance and compliance responsibilities. We provide clearance to group auditors so that they are able to meet group reporting requirements. And we assist management by providing observation and advice on financial reporting and business issues. PwC
Tax and company secretarial Advisory services services We help organisations to work smarter PwC is the leading provider of tax and grow faster. We consult with our services worldwide. We understand clients to build effective organisations, your business and economic innovate and grow, reduce costs, environment and we combine this manage risk and regulation and with specialist tax knowledge to leverage talent. Our aim is to support help you navigate complexity. you in designing, managing and We provide services in the areas executing lasting beneficial change. of direct tax, indirect taxes, transfer We offer services in the following pricing, international tax and mergers areas: and acquisitions, tax reporting and strategy, people and organisation and • transaction; company secretarial and immigration • business recovery; services. • people and change; As regards to accounting, we assist • forensics and investigative; with • finance and accounting; and • preparing the monthly cash book; • strategy and operations. • recording monthly bank transactions; Sustainability and climate • keeping other subsidiary ledgers; change services and Organisations today operate in a • preparing the trial balance income complex environment with growing statement and balance sheet. pressures from many angles. These include the need for transparency from stakeholders; consumer pressure (licence to operate); growing and changing risks to business models and supply chains; and increased competition for efficiency and growth opportunities attained through access to new products and markets. Navigating taxation – 2020 Ghana Tax Facts and Figures
PwC Ghana Business Our sustainability experts help our School clients in defining their sustainability For PwC, developing people and strategy, advising on policy, sharing knowledge are central to how operational change, risk management, we do business. We believe it is pivotal reporting, monitoring and assuring to the achievement of growth in our their progress – all through a firm, our clients’ businesses, industries sustainability lens. We help our clients and the broader economy. integrate environmental, social and governance issues into their operations PwC’s Business School is not and embrace the challenges of today’s a traditional learning institution. business environment as opportunities Due to our deep experience in our for long-term and sustainable growth. industry and our knowledge of our clients and the industries in which they operate, we are subject matter experts in a variety of areas. PwC’s Business School is therefore focused on delivering relevant learning and development solutions based on this knowledge, as well as offering public courses on selected topics and a wide range of bespoke training solutions tailored to the needs and capacity of organisations. For more information on the Business School please visit our website: https://www.pwc.com/gh/en/about-us/ business-school.html PwC
Resident Partners/Directors Vish Ashiagbor Edward Gomado Country Senior Partner Assurance vish.ashiagbor@pwc.com edward.gomado@pwc.com Michael Asiedu-Antwi Ayesha Bedwei Assurance Leader Tax michael.asiedu-antwi@pwc.com ayesha.a.bedwei@pwc.com George O Kwatia Nelson Opoku Tax Leader Internal Firm Services george.kwatia@pwc.com nelson.b.opoku@pwc.com Eric Nipah Abeku Gyan-Quansah Advisory Leader Tax eric.nipah@pwc.com abeku.gyan-quansah@pwc.com Oseini Amui Hayfron Aboagye Assurance Assurance oseini.x.amui@pwc.com hayfron.aboagye@pwc.com Maxwell A Darkwa Kingsley Owusu-Ewli Assurance Tax maxwell.a.darkwa@pwc.com kingsley.owusu-ewli@pwc.com George K Arhin Assurance and Business School george.arhin@pwc.com Navigating taxation – 2020 Ghana Tax Facts and Figures
Table of contents PwC
Introduction Life insurance business 11 Taxation of retirement funds 11 A brief profile of PwC Payments sourced from Ghana 11 Direct taxation 1 Income attributable to a permanent Income liable to tax 1 establishment 12 Resident persons 1 Branch profit tax 12 Income sources 1 Relief from double taxation 12 Taxation of individuals 2 Double tax treaties 12 Monthly tax rates 2 Treaty tax rates 13 Income from employment 2 Withholding tax under domestic tax laws 14 Personal relief 2 Exempt income 15 Contributions to retirement benefit Anti-avoidance schemes – schemes 2 Income splitting 15 Interest incurred by an individual on Transfer pricing 15 residential premises 3 Thin capitalisation 16 Non-cash benefits 3 Administrative procedures – Furnishing Taxation of loan benefits 4 of returns of income 16 Non-taxable benefits/income 4 Cases where a return is not required 16 Taxation of overtime and bonus 4 Statement of estimated tax payable 16 Payment to temporary and casual Payment of tax 16 workers 4 Offences and penalties 17 Pay-as-you-earn 5 Indirect taxation 18 Employer returns 5 Value Added Tax, National Health Modified taxation 5 Insurance Levy & Ghana Education Year of assessment (individuals and Trust Fund Levy 18 partnerships) 5 Scope 18 Corporate tax 6 Standard (invoice credit) scheme 19 Rates of tax 6 Group registration 19 Year of assessment (companies) 6 Tax representative 19 Basis period 6 Exempt supplies 19 Deductions allowed 6 VAT, NHIL and GETFL incurred 20 Deductions not allowed 6 VAT flat rate scheme 20 Capital allowances 6 Withholding of VAT 21 Carry-over of tax losses 7 Returns 21 Mineral royalties 7 Refunds 21 Ring-fencing of financial institutions, Penalties 21 petroleum and mineral operations 8 Fiscal Electronic Devices 22 Dividends 8 Communication service tax 22 National Fiscal Stabilisation Levy 8 Special petroleum tax 23 Free-zone developers/enterprises 8 Customs and excise taxes 23 Young entrepreneurs 8 Import duties 24 Private universities 8 Special import levy 24 Manufacturers and assemblers of African Union import levy 24 automobiles 9 ECOWAS levy 24 Taxation of gifts 9 Export and Import levy 24 Realisation of assets and liabilities 9 Import duty exemptions 24 Telecommunications and transportation Administrative charges 24 business 9 Advance Eco levy 25 Change in control 10 Export duties 25 Taxation of banking business 10 Excise duties 25 Taxation of insurance companies – Excise tax stamp 25 General business 10 Environmental tax 25 Withholding tax on premium payments 10 Airport tax 25 Navigating taxation – 2020 Ghana Tax Facts and Figures
Direct taxation Income liable to tax A partnership is resident for a year if any of the partners resided in Ghana In Ghana, income tax is levied in at any time during that year. each year on the income of both resident and non-resident persons. A company is resident if it is incorporated under the Companies Resident persons are taxed on Act, 2019 (Act 992), or management their worldwide income while and control of the company is non-resident persons are taxed exercised in Ghana at any time on income which has a source in during the year. Ghana. Generally, income has a source in Ghana if it accrues in A Ghanaian permanent or is derived from Ghana. establishment is treated as a resident company for the purposes Resident persons of income taxation. An individual is resident for tax Persons not meeting the above purposes if that individual is: criteria are non-resident persons. • present in Ghana for an aggregate period of 183 days or Income sources more in any 12-month period that The chargeable income of a person commences or ends during the for any year is the total of that year; person’s income for the year from • a citizen who is temporarily each business, employment, and absent from Ghana for a period investment less the total amount of of not more than 365 continuous deduction allowed to that person. days where that citizen has a permanent home in Ghana; or • an employee of the Government of Ghana who has been posted abroad. PwC | 1
Taxation of individuals Monthly tax rates The table below indicates the new monthly income tax bands and rates generally applicable to the chargeable income of resident individuals: Year Chargeable Rate Tax Cumulative Cumulative 2020 income % payable income tax GH¢ GH¢ GH¢ GH¢ First 319.00 0 0 319.00 0 Next 100.00 5 5.00 419.00 5.00 Next 120.00 10 12.00 539.00 17.00 Next 3 000.00 17.5 525.00 3 539.00 542.00 Next 16 461.00 25 4 115.25 20 000.00 4 657.25 Exceeding 20 000.00 30 The chargeable income of non-resident individuals is generally taxed at a flat rate of 25%. Income from employment Contributions to retirement An individual’s income from benefit schemes employment for a calendar year Statutory contributions towards is the gains and profits of that retirement are categorised under individual from the employment for a three-tier scheme, as follows: that year or a part of the year. • First tier – A mandatory basic Personal relief social security scheme; Personal relief ranging from • Second tier – A mandatory fully GH¢600 to GH¢2,000 (per category) funded and privately managed is available to individuals who meet occupational pension scheme; the qualifying criteria. Individuals and with disabilities are also entitled to 25% of their non-investment • Third tier – A voluntary fully assessable income as personal funded and privately managed relief. provident fund and personal pension scheme. 2 | Navigating taxation – 2020 Ghana Tax Facts and Figures
The general mandatory monthly Interest incurred by an pension contribution rates are as individual on residential follows: premises • For employers: 13% of the Mortgage interest incurred by an employee’s salary; and individual on a loan employed in the construction or acquisition of one • For employees: 5.5% of the residential premises may be claimed employee’s salary. as a deduction against the income of that individual. The employer is responsible for remitting the total mandatory Non-cash benefits contributions within 14 days from the end of the month in which the Except where specifically exempt deduction is expected to have or otherwise stated, non-cash been made. The contributions are benefits received from employment remitted to the Social Security and are recognised at market value and National Insurance Trust (SSNIT) taxed. and an approved trustee, as appropriate. Accommodation facilities and vehicle-related benefits are Exemption from tax is available specifically provided for and valued for contributions made to the as follows: mandatory and voluntary pension schemes. Facility provided 2020 Provision of accommodation Value (% of TCE) Accommodation with furnishing 10% Accommodation only 7.5% Furnishing only 2.5% Shared accommodation 2.5% Provision of means of transport Value (% of TCE) Fuelled vehicle with driver 12.5% up to GH¢600 per month Vehicle with fuel 10% up to GH¢500 per month Vehicle only 5% up to GH¢250 per month Fuel only 5% up to GH¢250 per month PwC | 3
Taxation of loan benefits • Redundancy pay; Interest on concessionary loans • Pension; granted by an employer to an • Capital sum paid to a person employee may be deemed as a as compensation or gratuity for taxable benefit. personal injury suffered by that person or because of the death Non-taxable benefits/income of another person; The following benefits and income • Interest paid to an individual by a are generally not taxable: resident financial institution or on bonds issued by the Government • A discharge or reimbursement of of Ghana; or proper business costs incurred on behalf of the employer; • Interest and dividends paid or credited to a member of an • A discharge or reimbursement of approved unit trust or mutual the employee’s dental, medical, fund scheme. or health insurance expenses if the benefit is available to each Taxation of overtime and full-time employee on equal terms; bonus Reduced income tax rates apply on • Relocation costs for recruiting a the taxation of overtime and bonus non-resident individual to come payments subject to meeting certain and work in Ghana based on conditions. certain conditions; • On-site accommodation provided Payment to temporary and by an employer engaged timber, casual workers mining, building, construction, farming business or petroleum Payment to a temporary worker is operations to employees; generally taxed using the applicable income tax rates and bands for • Payment made to employees individuals. Payment to a casual on a non-discriminatory basis worker is subject to 5% final which by reason of the size, type withholding tax. and frequency of the payment is unreasonable or administratively impracticable for the employer to account for or allocate to an individual; 4 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Pay-as-you-earn Pay-as-you-earn (PAYE) is a system of withholding income tax from payments made by employers to employees. Under the PAYE system, the employer deducts tax from an employee’s taxable income at source and remits the tax to the Ghana Revenue Authority (GRA) by the 15th day of the month following the month in which the deduction was or should have been made. Employer returns An employer must file an Employer’s Annual Tax Deduction Schedule with the GRA, disclosing income paid to and tax withheld from each employee, within four months of the end of the calendar year. Modified taxation Individuals whose only source of income in the year is from one business may opt to be taxed under the presumptive tax scheme based on instalment or turnover, subject to certain conditions. Year of assessment (individuals and partnerships) The year of assessment and accounting period for both individuals and partnerships are the calendar year. PwC | 5
Corporate tax Rates of tax Deductions allowed Income tax rates applicable Expenses that are wholly, to companies differ according exclusively and necessarily incurred to industry, location and type in the production of income are of business. The general rates allowed as a deduction for tax applicable to entities which do not purposes. qualify for incentives include: Examples of allowable expenses are as follows: Entity/Activity 2020 Companies – general 25% • capital allowance for the year; Companies engaged 35% • bad debts (under certain in mining or upstream conditions); petroleum business • tax losses brought forward for a specified number of years; Year of assessment (companies) • repairs and improvements under certain conditions; The year of assessment is the calendar year. • losses incurred on the realisation of business or investment assets Basis period and liabilities; The basis period of a company or • incentives for hiring recent trust is the accounting year of the graduates; and company or trust. • financial costs under certain conditions. A company or a trust may choose a particular accounting year. Once Deductions not allowed chosen, an accounting year cannot be changed unless approval In general, expenses that are of in writing is obtained from the a capital nature or not wholly, Commissioner-General of the GRA. exclusively and necessarily incurred in the production of income are not deductible. Examples of expenses that are not deductible include domestic and excluded expenditure. Capital allowances 6 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Capital allowances Capital allowances are granted to persons who own depreciable assets and use those assets to produce income from business. Capital allowances granted to a person are to be taken in the year granted and cannot be deferred. Depreciable assets are grouped in the following classes for the purpose of capital allowances: Class Assets included Rate (%) Basis 1 Computers and data-handling equipment 40 Reducing with peripheral devices balance 2 Automobiles, trailers, construction and 30 Reducing earth-moving equipment, plant and balance machinery used in manufacturing Plantation capital expenditure 3 Locomotives, water transportation 20 Reducing equipment, aircraft, office furniture and balance fixtures Equipment not included in another class 4 Buildings, structures and works of a 10 Straight- permanent nature line 5 Intangible assets Over useful life An importer or manufacturer of excisable goods shall be granted 50% capital allowance on machinery and equipment imported for the purpose of affixing excise tax stamps. Carry-over of tax losses Tax losses can be carried forward for three or five years depending on the industry/sector of operation. Mineral royalties Subject to any fiscal stability agreement, the mineral royalty rate is 5% of the total revenue earned from minerals (excluding petroleum and water) obtained from mining operations by a holder of a mining lease, restricted mining lease or small-scale mining licence. PwC | 7
Ring-fencing of financial • Breweries; institutions, petroleum and • Inspection and valuation mineral operations companies; The chargeable income of financial • Companies providing mining institutions, petroleum or mineral support services; operations is calculated separately for each financial service, petroleum • Shipping lines; and right or mineral operation. • Maritime and airport terminal operators. Dividends Generally, unless exempt or subject Free-zone developers/ to a double tax treaty, dividends enterprises paid by a resident company are Companies registered to operate as subject to a final withholding tax free-zone developers/enterprises of 8%. enjoy a ten-year income tax holiday. Once the ten-year tax holiday has National Fiscal Stabilisation expired, the tax rate on the export Levy of goods and services is 15%. Any other income is taxed at 25%. The National Fiscal Stabilisation Levy (NFSL) is a quarterly levy chargeable on the accounting Young entrepreneurs profit before tax of some specified Business income of young companies and institutions. The rate entrepreneurs operating in certain of this levy is 5% and it is applicable industries is exempt from tax for five from 2013 to 2024 calendar years. years. Depending on the location of the business, the corporate income The affected companies and tax rate is increased to up to 15% institutions are: for the next five years and then up to 25% thereafter. Such businesses • Banks (excluding community and can also carry forward tax losses for rural banks); five years. • Non-banking financial institutions; Private universities • Insurance companies; Private universities are exempted • Telecommunications companies; from taxes if 100% of profit after tax is ploughed back into the business. 8 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Manufacturers and Telecommunications and assemblers of automobiles transportation business Business income of registered Payments received by a person who manufacturers and assemblers carries on a business of transmitting of knocked-down automobiles or receiving messages by cable, under the Ghana Automotive radio, optical fibre or satellite or Manufacturing Development electronic communication from Programme are exempted from tax an apparatus located in Ghana, for a period ranging between three whether or not the messages to ten years subject to meeting originate, terminate or are used in certain conditions. Ghana, are liable to a withholding tax rate of 15%. Taxation of gifts Similarly, payments received by A gift received by an entity a person who conducts a business in respect of business or an of carrying passengers, cargo, investment is included in the mail or other movable assets that assessable income of the entity and are embarked in Ghana (other than taxed at the applicable corporate transhipment), including the rental tax rate. of containers and related equipment that are incidental or supplementary Realisation of assets and to the transportation business, are liabilities liable to a withholding tax rate The gains or losses from the of 15%. realisation of business or investment assets and liabilities are included For a non-resident, the withholding in the assessable income of the tax is treated as a final tax. entity and taxed at the applicable corporate tax rate. PwC |PwC 9 | 9
Change in control Taxation of insurance Any change in the underlying companies – General ownership of an entity that exceeds business 50% and takes place at any time The business of a general insurance within a three-year period triggers company is taxed on premiums and a number of consequences for the proceeds derived and any reserve entity, such as: for unexpired risk deducted in the previous period, less: • deemed disposal of the assets and liabilities of the entity at • Proceeds incurred; market value and reacquisition at the same value; and • Premium incurred under a contract of reinsurance; and • non-deductibility of financial costs, losses and bad debts • Reserve for unexpired risk as at incurred before the change. the end of the accounting year. Taxation of banking business The corporate income tax rate is applied to the result. A person engaged in banking business is required to determine Any other business activity of income or loss from the banking a person engaged in general business separately from any other insurance business is required to be business activity and keep separate tracked and taxed separately. books of account for each business. Specific provision for a debt claim Withholding tax on premium is deductible if the Commissioner- payments General is satisfied that it is indeed a bad debt. Premiums paid to a resident insurance company under an insurance contract are exempted from withholding tax. Premiums paid to a non-resident person for insurance with a source in Ghana attract a 5% withholding tax. 10 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Life insurance business A person engaged in a life insurance • Interest paid by a resident person business is required to determine (including a Ghanaian permanent income from the life insurance establishment) or paid in relation business separately from any other to a debt obligation secured by business activity. real property located in Ghana; • Payments made in respect of The business of a life insurance natural resources located in company is taxed as follows: Ghana; • Step 1: Exclude from income • Rent paid for the use of, right to premiums and proceeds derived. use, or forbearance from using an asset situated in Ghana; • Step 2: Do not deduct from income and do not include in • Royalties paid for the use of, right the cost of an asset or liability to use, or forbearance from using premiums and proceeds incurred. an asset in Ghana; • Premiums and proceeds for The corporate income tax rate is general insurance paid to cover applied to the result. risk in Ghana; Taxation of retirement funds • Payment in respect of acquiring a domestic asset or incurring a Retirement contributions received domestic liability or the realisation by a retirement fund are exempt of that asset or liability; from tax. Retirement payments made by the retirement fund are not • Payment made in respect of an deductible. activity conducted or forbearance from conducting an activity in Payments sourced from Ghana; Ghana • Payments for employment or The following are some of the services rendered in Ghana, payments considered as having regardless of the place of been sourced from Ghana: payment; or paid by the Government, regardless of the • Dividends paid by a tax resident place of performance; and company; • Any other payments brought into or received in Ghana by a resident person. PwC | 11
Income attributable to a Double tax treaties permanent establishment Double tax treaties (DTTs) provide The income and liability of a relief from the double taxation of permanent establishment are income that accrues to residents calculated as if the permanent of contracting states within either establishment is separate from its of the jurisdictions covered by the owner and arrangements between treaty. Ghana has DTTs with France, the two are recognised. Germany, the United Kingdom, South Africa, Italy, Belgium, the The income of a Ghanaian Netherlands, Switzerland, Denmark, permanent establishment is subject Singapore, Mauritius, the Czech to tax in the same manner as a Republic*, Ireland*, Morocco* and resident company. Malta*. The foreign income of a foreign permanent establishment is exempt from tax in Ghana. Branch profit tax The net profit of a branch is deemed as repatriated profits and attracts a final withholding tax of 8%. Relief from double taxation A resident person (excluding a partnership) can claim foreign tax credit for any income tax they pay to a foreign country in respect of a foreign-sourced income to the extent that the foreign-sourced income is included in the assessable income of that person. 12 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Treaty tax rates Tax rates applicable under the terms of these treaties are as follows: Country/ Dividend1 Dividend2 Royalty Technical or Interest Type of Management income Service fee % % % % % France 7.5 15.0 12.5 10.0 12.5 United 7.5 15.0 12.5 10.0 12.5 Kingdom Germany 5.0 15.0 8.0 8.0 10.0 South Africa 5.0 15.0 10.0 10.0 10.0 (5.0% for non- resident banks) Belgium 5.0 15.0 10.0 10.0 10.0 Italy 5.0 15.0 10.0 10.0 10.0 The 5.0 10.0 8.0 8.0 8.0 Netherlands Switzerland 5.0 15.0 8.0 8.0 10.0 Denmark 5.0 15.0 8.0 8.0 8.0 Singapore 7.0 7.0 7.0 10.0 7.0 Mauritius 7.0 7.0 8.0 10.0 7.0 Czech 6.0 6.0 8.0 8.0 10.0 Republic* Morocco* 5.0 10.0 10.0 10.0 10.0 Ireland* 7.0 7.0 8.0 10.0 7.0 Malta* 6.0 6.0 8.0 12.0 7.0 * Not yet in force 1 Dividends, where the recipient holds at least 10% or 25% of shares. 2 Dividends, in any other case. PwC | 13
Withholding tax under domestic tax laws Income Rate % Resident persons Interest (excluding individuals and resident financial institutions) 8 Dividends 8 Rent on residential properties 8 Rent on non-residential properties 15 Fees to resident individuals as invigilators, examiners and part-time teachers 10 or lecturers, and endorsement fees to individuals Fees or allowances to directors, managers, board members and trustees 20 who are resident individuals Commission to insurance, sales, canvassing and lotto agents who are 10 individuals Supply of goods exceeding GH¢2,000 per annum 3 Supply of works exceeding GH¢2,000 per annum 5 Supply of services by an entity exceeding GH¢2,000 per annum 7.5 Supply of general services by an individual 7.5 Payments to petroleum subcontractors 7.5 Payments for unprocessed precious minerals 3 Royalty, natural resource payments 15 Non-resident persons Dividends 8 Royalties, natural resources payments and rents 15 Management and technical service fees 20 Goods, works or any services 20 Repatriated branch after tax profits 8 Interest income (excluding individuals) 8 General insurance premiums 5 Income from telecommunication and transportation business 15 Payments to petroleum subcontractors 15 14 | Navigating taxation – 2020 Ghana Tax Facts and Figures
A withholding agent is required to • Income of an approved unit trust prepare and provide the withholdee or mutual fund; and with a withholding tax certificate • Income of an approved Real within 30 days of the month of Estate Investment Trust. deduction. Anti-avoidance schemes – Exempt income Income splitting The following types of income are exempt from taxes: Income splitting includes transfers of income or assets (including • Gain from life insurance when the money) to an associate that result in proceeds are paid by a resident the transferee receiving or enjoying insurer; the income from that property in order to reduce the combined • The income of a non-resident tax liability of the transferor and person from a business that transferee. Income splitting is not operates ships or aircraft, if permitted under the laws of Ghana. the Commissioner-General is satisfied that an equivalent Transfer pricing exemption is granted by that person’s country of residence to Ghana’s Transfer Pricing persons resident in Ghana; Regulations (TPRs) require that transactions conducted between • A dividend paid to a resident persons who are in a controlled company by another resident relationship (e.g. parent-subsidiary, company when the company associates, relatives, etc.) be done receiving the dividend controls at at arm’s length. The TPRs also cover least 25% of the voting power in transactions between an employer the company paying the dividend. and employee. This exemption does not apply to certain special industries; A transaction is conducted at arm’s • Interest or dividend on an length if the terms of the transaction investment paid or credited to a do not differ from the terms of a holder or member of an approved comparable transaction between unit trust scheme or mutual fund; independent persons. • Interest and gains realised by a The acceptable methods under the non-resident person on bonds TPRs are similar to those contained issued by the government of in the guidance of the Organisation Ghana; for Economic Co-operation and • Gains from the realisation of Development (OECD) on transfer GSE-listed securities; pricing. PwC | 15
At the end of the year, taxpayers Cases where a return is not who conducted business with required other persons with whom they have controlled relationships are required Unless the Commissioner-General to: requests so in writing, a return shall not be filed by: • Complete and file annual transfer pricing returns; and • a non-resident person who has no tax payable for the year; or • Should have supporting documentation or information • a resident individual who has on transactions with connected no tax payable on his or her persons. chargeable income for the year. Thin capitalisation Statement of estimated tax payable A company is deemed as being thinly capitalised if the ratio of its A person who is required to directly debt to equity is greater than 3:1. pay tax in instalment is required to Thin capitalisation does not apply to file an estimate of tax payable for financial institutions. the year with the Commissioner- General by the date for payment of Administrative procedures the first tax instalment. – Furnishing of returns of income Payment of tax Tax instalment payments are A return of income should be filed generally due by the last day of with the GRA within four months of the third, sixth, ninth and twelfth the end of each accounting period. months of the basis period where Subject to approval by the the accounting period is a 12-month Commissioner-General, multiple period. extensions may be granted to file a Withholding tax is due 15 days after return at a later date other than the the end of each calendar month that compliance due date. Extensions a tax is withheld. granted shall not exceed 60 days from the date the return was In any other case, tax is due on originally due to be filed. the date stated in a notice of assessment. 16 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Offences and penalties Penalties and interests apply for non-compliance and, in some cases, criminal sanctions exist for the income tax offences. PwC | 17
Indirect taxation Value Added Tax, National Health Insurance Levy & Ghana Education Trust Fund Levy Scope In Ghana, Value Added Tax (VAT), The liability for VAT, NHIL and National Health Insurance Levy GETFL is in the case of: (NHIL) and Ghana Education Trust Fund Levy (GETFL) are charged on • a taxable supply, by the taxable any supply of goods and services person making the supply; that is a taxable supply and is made • imported goods, by the importer; by a taxable person in the course of its taxable activity. • an imported service, by the receiver of the service under A taxable activity means an activity, certain conditions; and whether or not for a pecuniary profit, • the supply of telecommunication carried on by a person in Ghana services or electronic commerce or partly in Ghana that involves for use in Ghana, by the non- the supply of goods or services to resident person making the another person for consideration. supply or its agent. Except for exempt goods and Except for supplies considered to services, VAT, NHIL and GETFL are be zero-rated or subject to a flat rate generally charged on the following: of 3% (for wholesalers and retailers of goods), the standard rate of VAT • the supply of goods and services is 12.5%, the NHIL is 2.5% and the made in Ghana; and GETFL is 2.5%. • imports of goods and services. 18 | Navigating taxation – 2020 Ghana Tax Facts and Figures
NHIL and GETFL are calculated on Group registration the value of the taxable supply of Group registration is possible but the goods, services or imports, with subject to approval of a written VAT charged on the value of the application by members of the taxable supply inclusive of NHIL and proposed group of businesses. GETFL. A taxable person is a person Tax representative who is registrable for VAT and/or A taxpayer may appoint a person who has been registered by the as his representative in dealings Commissioner-General and issued with the GRA subject to conditions with a certificate of registration. The approved by the Commissioner- effective date of registration as a General. taxable person is the date specified on the certificate of registration Exempt supplies or, in the case of persons who are registrable but not yet registered for Some supplies that are specifically VAT, from the beginning of the tax exempt are listed below: period immediately following the tax period in which the obligation to • Agricultural inputs; register arose. • Water, excluding bottled or packaged water; Standard (invoice credit) • Electricity within specified limits; scheme • Textbooks, approved The general mandatory registration supplementary readers, turnover threshold for taxable newspapers, atlases, charts, supplies over a 12-month period is maps and music; GH¢200,000. • Education services, and laboratory and library equipment for use in rendering such services; PwC | 19
• Medical services and medical VAT, NHIL and GETFL supplies; incurred • Certain pharmaceuticals, active A VAT registered business, which ingredients and selected inputs; principally makes taxable supplies, • Domestic transportation; may recover up to 100% of the VAT incurred on goods or services • Machinery and parts of purchased for the business, subject machinery designed for use in to meeting certain conditions. certain specified activities; The 2.5% NHIL and the 2.5% GETFL • Crude oil and hydrocarbon are however not recoverable as an products; input tax deduction against output tax. • Accommodation in a dwelling, or land for agricultural use and civil There is a time limit of six (6) months engineering public works; within which to claim VAT incurred • Goods specifically designed for on goods and services procured. the disabled; VAT flat rate scheme • Financial services; There is a flat rate scheme • Imported plant and machinery (3% VAT) applicable to taxable designed specifically for use in supplies made by wholesalers the automobile industry and kits and retailers in the course of their by an automobile manufacturer taxable activity. The scheme does or assembler subject to meeting not cover manufacturers and service certain conditions; and providers and does not cover the • Management fees charged supply of any form of power, heat, by a local fund manager for refrigeration or ventilation. All other management of a licensed private VAT provisions apply to the flat equity fund, venture capital fund rate scheme, except for the right or a mutual fund. to deduct input tax. The provisions of the NHIL and the GETFL do not, The full list and detailed descriptions however, apply to the scheme. of exempt items are provided in the relevant VAT legislation. 20 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Withholding of VAT VAT, NHIL and GETFL on imported goods are paid when the associated The Commissioner-General has duties are paid. The return and appointed some persons as payment of VAT, NHIL and GETFL VAT withholding agents. These on imported services are due within agents are required to withhold 21 days of the month following the from payments for standard rated month in which the services were supplies 7% of the taxable output imported. value for VAT purposes, i.e. the taxable value inclusive of NHIL and VAT withholding returns are filed by GETFL, and issue a Withholding the 15th day of the following month VAT Credit Certificate at the time of to which the returns relate and tax payment. withheld is paid by the due date. Returns Refunds Registered businesses are generally Businesses can apply for VAT required to submit monthly returns refunds in accordance with the showing: provisions of the relevant VAT legislation. Refund claims must • VAT charged on supplies; satisfy relevant conditions. • the taxable value of supplies sold that were exempt or relieved from Penalties VAT; There is a comprehensive system of • VAT incurred on the purchase of penalties and interest payable for: goods and services; • the incorrect declaration of VAT, • the net VAT payable or credit; and NHIL and GETFL; • NHIL and GETFL charged on • the late submission of returns; supplies. • late payments; and VAT, NHIL and GETFL returns and • infringements of the provisions of payment (if any) are ordinarily due the VAT laws. by the last working day of the month after the month to which the returns relate. PwC | 21
Some monetary penalties resulting from non-compliance are given in the table below: Offence Sanctions Failure to register Up to twice the amount of tax on taxable supplies until the application is filed Failure to issue (proper) tax invoices Up to GH¢1,200, plus the higher of GH¢500 and triple the amount of tax Late filing of VAT return GH¢500 plus an additional GH¢10 per day Making a claim for a refund which you are Twice the original refund request, plus not entitled to interest Late payment of tax 125% of the Bank of Ghana monetary policy rate, compounded monthly, and applied to the amount outstanding General penalty Up to three times the amount of tax involved Fiscal Electronic Devices Communications service tax With the passage of the Taxation (use Communication service tax (CST) of Fiscal Electronic Device) Act, 2018 is payable by users of electronic (Act 966), there are plans to implement communication services (ECS) a Fiscal Electronic Device (FED) provided by a person permitted system to replace the current manual or authorised under the Electronic invoicing system for VAT. The GRA is Communications Act, 2008 (Act 775) expected to fully implement the rollout and its Regulations. of the FED system over a two-year period. Users of ECS include individuals and corporate entities, as well as the ECS providers themselves. 22 | Navigating taxation – 2020 Ghana Tax Facts and Figures
The rate of CST is 5% and this is Special petroleum tax chargeable on ECS and recharges Persons licensed to operate as oil made by ECS providers. Charges marketing companies are required for ECS include those made for to charge a Special Petroleum monetary and non-monetary Tax at specific rates per litre consideration (e.g. promotions and or kilogramme on the following bonuses). CST is also applicable to petroleum products: interconnection services. • Petrol; ECS providers in Ghana are ordinarily required to collect tax and • Diesel; account to the GRA on a monthly • Liquefied petroleum gas; basis. • Natural petroleum gas; and The due date for filing this monthly • Kerosene. return is the last working day of the month following the month to which The tax is administered by the GRA the tax return and payment relate, and should be remitted by the last unless the Commissioner-General working day of the month following directs otherwise. the month of transaction. If a CST return is not filed by the due date without justification, a Customs and excise taxes penalty of GH¢2,000 applies, with Ghana enacted the Common an additional penalty of GH¢500 for External Tariff (CET) classification each day the return is not submitted. system as the binding customs duty regime in 2016. If an extension approval has not been granted by the Commissioner- The CET sets out the various General of the GRA, interest duties and administrative charges at 125% of the statutory rate is applicable to imports and exports imposed on CST that is not remitted and also outlines the rates of excise to the GRA by the due date. duties applicable to excisable goods manufactured or imported into the country. PwC | 23
Import duties ECOWAS levy Typically, import duties range An Economic Community of West between 0% and 35%, depending African States (ECOWAS) levy of on the nature (description) of the 0.5% is imposed on imports of item imported as specified in the goods from non-ECOWAS Member CET. States into ECOWAS member states. Funding raised through Import duties are generally levied on the ECOWAS levy is primarily the cost, insurance and freight (CIF) used in financing the activities of value of the item imported. the ECOWAS Commission and Community institutions. NHIL of 2.5% and GETFL of 2.5% are also applied to the CIF (used Export and Import levy for customs purposes) and import duty amounts, whilst VAT of 12.5% A 0.75% Export and Import (EXIM) is applied on the CIF, import duty, levy applies on all imports of goods NHIL and GETFL inclusive amount. into Ghana. Proceeds from the EXIM levy are subsequently allocated to the Ghana EXIM Bank and the Special import levy Ghana Export Promotion Agency. A special import levy of 2% applies on the importation of certain goods. Import duty exemptions The levy applies in addition to the import duties and mandatory There are special import duty statutory or administrative charges. exemptions for some privileged persons, organisations and This levy is expected to expire by institutions (e.g. diplomatic December 2024. missions) as well as for persons belonging to certain specific industries (such as mining, oil and African Union import levy gas, and free-zone entities). An African Union (AU) import levy of 0.2% applies on eligible imports Administrative charges of goods from Non-AU Member States into AU member states for There are statutory administrative consumption within the member charges ranging between 0.4% state. The AU levy is mainly to and 3.45% of the value of goods provide a reliable and predictable imported. These charges may source of funding for the AU and apply regardless of any import duty some of its specialised agencies. exemptions. 24 | Navigating taxation – 2020 Ghana Tax Facts and Figures
Advance Eco levy Excise tax stamp An Advance Eco levy is required Excise tax stamps are to be affixed to be paid by all exporters of used to specific excisable goods which electrical and electronic equipment are manufactured in or imported and tyres imported into Ghana. into the country. Specific rates of levy are applicable for each item in accordance with the They apply to tobacco products, HS Code classification. alcoholic and non-alcoholic carbonated beverages, bottled Export duties water and other goods specified by the minister responsible for finance, Exports usually attract 0% duty, before sale or before entry into the except in some cases for specific market. classes of goods. Environmental tax Excise duties An environmental excise tax of Excise duties generally range 10% applies to specified locally between 0% and 175% of the ex- manufactured and imported plastic factory price and apply to products and plastic products. such as beer, spirits, tobacco products, etc. Airport tax Airport tax is levied on local and foreign travels. The tax is GH¢5 for local travel and US$60–US$200 for foreign travel. PwC | 25
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