The Ghana Revenue Authority (GRA) is the government agency empowered to collect and calculate taxes. He ensures compliance with the provisions of tax acts and acts as the first arbitrator between the parties in the event of a dispute. The Ministry of Finance and Economic Planning is accountable for superintending the GRA.
Taxation of individuals
Individuals who are residents of Ghana are currently taxed on a graduated scale (see Table of Annual Rates), while non-residents are taxed at a flat rate of 25%. Tax payable on income from employment must be withheld at source and paid to the GRA by the 15th of the month following the month for which income tax was withheld from work.
Individuals are required to report their income and expenses on a cash basis. Thus, when calculating their taxable income for each calendar year, individuals must both include income received and exclude paid expenses.
Individuals can claim tax deductions for statutory pension contributions, mortgage interest, and other personal benefits ranging from GHS 100 ($ 19.37) to GHS 600 ($ 116), or 25% of their taxable income, not investment-related, subject to eligibility criteria and approval. The tax cycle for individuals is the calendar year. Everyone must file a personal income tax return by the end of April of each year and must pay any unpaid taxes, especially concerning their gross income.
Taxation of legal entities
A typical Ghanaian company is first taxed on its taxable profits; In addition, shareholders are taxed on residual profits, which are distributed among them by the company. This is also true for branches in Ghana as long as the profits are not repatriated to the head office. The profits of the trust are taxed, but the amounts distributed among the beneficiaries are not. In a partnership, only partners are taxed, but a partnership as a legal entity is not.
Unlike individuals, companies and other legal entities are required to record income and expenses on an accrual basis for each reporting year, and not for a calendar year. Most companies in Ghana are taxed at a rate of 25%; workers in the extractive sector are taxed at a rate of 35%. However, different preferential tax rates are available for companies, depending on the nature of the business, the industry, and the location of each organization.
Companies pay taxes through self-assessment and withholding, with the companies themselves acting as tax agents for the government (see Table for Different Withholding Tax Rates). In the third month of the reporting year of each resident company, the company must submit a self-assessment form, which declares an estimate of the taxes payable for the reporting year. The estimated tax must then be paid to the GRA in quarterly installments, and the total amount paid must ultimately be at least 90% of the actual tax payable for the reporting year. Resident companies are also required to file a corporate income tax return no later than four months after the end of their reporting year. Thereafter, resident companies must pay any outstanding corporate income taxes after receiving a credit for the estimated taxes paid and withheld taxes for the year.
Tax incentives
Tax breaks offered in Ghana usually take the form of tax holidays, tax breaks, and reduced tax rates. Urgent tax holidays include:
• Five-year exemption from taxes on commercial income for real estate companies, livestock breeders, agricultural processing companies, and young entrepreneurs in specific industries; as well as
• 10-year tax exemption for developers and free zone businesses, rural banks, venture capital financiers, tree growers, and cattle farmers. Tax credits are also available for the following sources of income:
• Income paid to life insurance policyholders by a resident insurer;
• Income from approved real estate investment trusts, mutual funds, and mutual funds;
• Dividends paid by one resident company to another, in which the company receiving the dividend controls at least 25% of the voting rights in the company paying the dividend. This exemption does not apply to specific industries;
• Profit of a private university after-tax provided that 100% of the profits will be sent back to the business; as well as
• Interest paid to individuals by resident financial institutions or interest on government bonds. Finally, preferential tax rates on certain types of income are available for individuals and companies operating in particular industries:
• The income of manufacturing companies located outside of Accra or Tema is taxed at a rate of 18.75% if they are located in another capital of the region, and 12.5% if they are located outside the capitals of the region;
• Incomes of free zone developers and enterprises received from export are taxed at the rate of 15%;
• Overtime for qualified junior employees is taxed at 5% or 10%;
• Bonuses below 15% of the recipient’s annual base salary are taxed at 5%; as well as
• The income of young entrepreneurs working in certain fields of activity is taxed at a rate of 15% for five years after a five-year tax break.
