2019 Ghana Tax Facts And Figures: Navigating Taxation

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Navigatingtaxation2019 Ghana Tax Facts and FiguresAugust 2019www.pwc.com/gh

IntroductionIn this publication, all currencyreferences are in Ghana Cedi (GH ),which was approximately USD 0.19 as at20 August 2019.Although we have taken all reasonablecare in compiling this publication, we donot accept responsibility for any errorsor inaccuracies that it may contain.This guide has been prepared for quickreference, and action should not betaken on the strength of the informationcontained herein without obtainingprofessional advice.Office locations in GhanaAccra officeNo. 12 Airport CityUna Home, 3rd FloorPMB CT 42 CantonmentsAccra – GhanaTelephone: 233 (0) 302761500Facsimile: 233 (0) .com/ghTakoradi officeNo. 13, GK Ntow Street South Chapel HillTakoradi – GhanaTelephone: 233 (0) 312028416Facsimile: 233 (0) .com/ghSierra Leone officeNo. 2, MIK Drive,Off Barrack Road, Murray TownFreetown – Sierra LeoneTelephone: 232 (0) 79 998 321Facsimile: 233 (0) .com/ghPwC

A brief profile of PwCAbout us – GlobaloverviewPwC firms provide industry-focusedassurance, tax and advisory servicesto enhance value for our clients. Weare a network of firms in 158 countrieswith more than 250,000 people whoare committed to delivering quality inassurance, advisory and tax services.Tell us what matters to you and findout more by visiting us atwww.pwc.com/ghOur global valuesAs professional advisers, we helpour clients solve complex businessproblems and aim to enhance theirability to build value, manage risk andimprove performance. We take pride inthe fact that our services add value byhelping to improve transparency, trustand consistency in business processes.In order to succeed, we must grow anddevelop, both as individuals and as abusiness.Our global values of Act with integrity,Make a difference, Care, Work togetherand Reimagine the possible help us toNavigating taxationachieve this growth. We strive to deliverwhat we promise, work together as ateam, and become a more purpose-ledand values-driven firm.In Africa, PwC is the largest providerof professional services, with close to400 partners and over 9,000 peoplelocated in 34 countries. This enablesus to provide clients with seamless andconsistent service, wherever they arelocated on the continent.PwC GhanaPwC Ghana is a member firm ofPricewaterhouseCoopers InternationalLimited, each member firm of which isa separate legal entity. PwC’s globalnetwork provides us with a broadresource base of in-depth knowledge,methodologies and experience that weuse to provide value for our clients. Asan established market, Ghana has highlevels of economic activity and verygood growth prospects. As such theprofessional services offered can addsignificant value to clients’ businesses.

PwC Ghana, which is located in Accraand Takoradi with a branch office inSierra Leone, has over 300 employeesand 13 resident partners/directors. Weoffer professional services to both theprivate and public sectors in Ghana inthe following industries:George O KwatiaTax [email protected] Consumer and industrial productsand services (CIPS): Fast-movingconsumer goods, telecommunication,manufacturing, construction,transport, media and service-orientedcompanies;Oseini [email protected] Energy utilities and resources:Mining and exploration, oil and gas aswell as renewable energy and utilitycompanies; Financial services: Banking,insurance, pensions and non-bankingfinancial institutions; and Government and public sector:Government, multi- and bi-lateralagencies (donor agencies, NGOs).Resident Partners/DirectorsVish AshiagborCountry Senior [email protected] Asiedu-AntwiAssurance [email protected] NipahAdvisory [email protected] A [email protected] K ArhinAssurance and Business [email protected] [email protected] OpokuInternal Firm [email protected] [email protected] [email protected] [email protected]

Table of contentsNavigating taxation

Direct taxationIncome liable to taxResident personsIncome sourcesTaxation of individualsMonthly tax ratesIncome from employmentPersonal reliefContributions to retirement benefitschemesInterest incurred by an individual onresidential premisesNon-cash benefitsTaxation of loan benefitsNon-taxable benefits/incomeTaxation of overtime and bonusPayment to temporary and casualworkersPay-as-you-earnEmployer returnsModified taxationYear of assessment (individuals andpartnerships)Corporate taxRates of taxYear of assessment (companies)Basis periodDeductions allowedDeductions not allowedCapital allowancesCarry-over of tax lossesMineral royaltiesRing-fencing of financial institutions,petroleum and mineral operationsDividendsNational Fiscal Stabilisation LevyFree-zone developers/enterprisesYoung entrepreneursPrivate universitiesTaxation of giftsRealisation of assets and liabilitiesTelecommunications and transportationbusinessChange in controlTaxation of banking businessTaxation of insurance companies –General businessWithholding tax on premium paymentsLife insurance businessTaxation of retirement fundsPayments sourced from 1111111111Income attributable to a permanentestablishmentBranch profit taxRelief from double taxationDouble tax treatiesTreaty tax ratesWithholding tax under domestic tax lawsExempt incomeAnti-avoidance schemes – IncomesplittingTransfer pricingThin capitalisationAdministrative procedures –Furnishing of returns of incomeCases where a return is not requiredStatement of estimated tax payablePayment of taxOffences and penaltiesIndirect taxationValue Added Tax, National HealthInsurance Levy and Ghana EducationTrust Fund LevyScopeStandard (invoice credit) schemeGroup registrationTax representativeExempt suppliesVAT, NHIL and GETFL incurredVAT flat rate schemeWithholding of VATReturnsRefundsPenaltiesFiscal Electronic DevicesCommunication service taxSpecial petroleum taxCustoms and excise taxesImport dutiesSpecial import levyAfrican Union import levyECOWAS levyExport and Import Levy (EXIM)Import duty exemptionsAdministrative chargesAdvance Eco levyExport dutiesExcise dutiesExcise tax stampEnvironmental taxAirport 0202020212121222323232323242424242424242424PwC

Direct taxationIncome liable to taxIn Ghana, income tax is levied each yearon the income of both resident and nonresident persons.A partnership is resident for a year if anyof the partners resided in Ghana at anytime during that year.Resident persons are taxed on theirworldwide income, while non-residentpersons are taxed on income which hasa source in Ghana. Generally, incomehas a source in Ghana if it accrues in oris derived from Ghana.A company is resident if it isincorporated under the Companies Act,1963 (Act 179), or management andcontrol of the company is exercised inGhana at any time during the year.Resident personsAn individual is resident for tax purposesif that individual is: present in Ghana for an aggregateperiod of 183 days or more in any12-month period that commences orends during the year; a citizen who is temporarily absentfrom Ghana for a period of not morethan 365 continuous days wherethat citizen has a permanent home inGhana; or an employee of the Government ofGhana who has been posted abroad.2 Navigating taxationA Ghanaian permanent establishmentis treated as a resident company for thepurposes of income taxation.Persons not meeting the above criteriaare considered to be non-residentpersons.Income sourcesThe chargeable income of a person forany calendar year is the total of thatperson’s income for the year from eachbusiness, employment, and investmentless the total amount of deductionallowed to that person.

Taxation of individualsMonthly tax ratesThe table below indicates the newmonthly income tax bands and ratesgenerally applicable to the chargeableincome of resident individuals:Year2019ChargeableincomeGH Rate%TaxpayableGH CumulativeincomeGH CumulativetaxGH ding20,00030The chargeable income of non-residentindividuals is generally taxed at a flatrate of 25%.Income from employmentAn individual’s income from employmentfor a calendar year is the gains andprofits of that individual from theemployment for that year or a part of theyear.Personal reliefPersonal reliefs ranging from GH 100to GH 600 (per category) are availableto individuals who meet the qualifyingcriteria. Individuals with disabilitiesare also entitled to 25% of their noninvestment assessable income aspersonal relief.Contributions to retirementbenefit schemesStatutory contributions towardsretirement are categorised under athree-tiered scheme, as follows: First tier – A mandatory basic socialsecurity scheme; Second tier – A mandatory fullyfunded and privately managedoccupational scheme; and Third tier – A voluntary fully fundedand privately managed provident fundand personal pension scheme.PwC 3

The general mandatory monthlycontribution rates are as follows: For employers: 13% of the employee’ssalary; and For employees: 5.5% of theemployee’s salary.The employer is responsible for remittingthe total mandatory contributions within14 days from the end of the month inwhich the deduction is expected tohave been made. The contributionsare remitted to the Social Security andNational Insurance Trust (SSNIT) and anapproved trustee, as appropriate.Exemption from tax is available forcontributions made to the mandatoryand voluntary schemes.Interest incurred by anindividual on residentialpremisesMortgage interest incurred by anindividual on a loan employed in theconstruction or acquisition of oneresidential premises may be claimed asa deduction against the income of thatindividual.Non-cash benefitsExcept where specifically exempt orotherwise stated, non-cash benefitsreceived from employment arerecognised at market value and taxed.Accommodation facilities and vehiclerelated benefits are specifically providedfor and valued as follows:Facility provided2019Provision of accommodationValue (% of TCE)Accommodation with furnishings10%Accommodation only7.5%Furnishings only2.5%Shared accommodation2.5%Provision of means of transportValue (% of TCE)Fuelled vehicle with driver12.5% up to GH 600 per monthVehicle with fuel10% up to GH 500 per monthVehicle only5% up to GH 250 per monthFuel only5% up to GH 250 per month4 Navigating taxation

Taxation of loan benefitsInterest on concessionary loans grantedby an employer to an employee may bedeemed as taxable benefit.Non-taxable benefits/incomeThe following benefits and income aregenerally not taxable: A discharge or reimbursement ofproper business costs incurred onbehalf of the employer; A discharge or reimbursement of theemployee’s dental, medical, or healthinsurance expenses if the benefit isavailable to each full-time employeeon equal terms; Relocation costs for recruiting a nonresident individual to come and workin Ghana based on certain conditions; On-site accommodation providedby an employer engaged in timber,mining, building, construction,farming business or petroleumoperations to employees; Payment made to employees on anon-discriminatory basis which byreason of the size, type and frequencyof the payment is unreasonable oradministratively impracticable for theemployer to account for or allocate toan individual; Redundancy pay; Pension; Capital sum paid to a person ascompensation or gratuity for personalinjury suffered by that person orbecause of the death of anotherperson; Interest paid to an individual by aresident financial institution or onbonds issued by the Government ofGhana; or Interest and dividends paid orcredited to a member of a unit trust ormutual fund scheme.Taxation of overtime and bonusReduced income tax rates apply onthe taxation of overtime and bonuspayments subject to certain conditionsbeing met.Payment to temporary andcasual workersA payment to a temporary worker is istaxed as if that worker was a permanentworker. A payment to a casual worker issubject to 5% final withholding tax.PwC 5

Pay-as-you-earnPay-as-you-earn (PAYE) is a system ofwithholding income tax from paymentsmade by employers to employees.Under the PAYE system, the employerdeducts tax from an employee’s taxableincome at source and then remits the taxto the Ghana Revenue Authority (GRA)by the 15th day of the month followingthe month in which the deduction was orshould have been made.Employer returnsAn employer must file an Employer’sAnnual Tax Deduction Schedule withthe GRA, disclosing income paid to andtax withheld from each employee, withinfour months of the end of the calendaryear.Modified taxationIndividuals whose only source of incomein the year is from one business may optto be taxed under the presumptive taxscheme based on instalment or turnover,subject to certain conditions.Year of assessment(individuals and partnerships)The year of assessment and accountingperiod for both individuals andpartnerships is the calendar year.6 Navigating taxation

Corporate taxRates of taxDeductions allowedIncome tax rates applicable tocompanies differ according to industry,location and type of business. Thegeneral rates applicable to entities whichdo not qualify for incentives include:Expenses that are wholly, exclusivelyand necessarily incurred in theproduction of income are allowed as adeduction for tax purposes.Examples of allowable expenses are asfollows:Entity/Activity2019Companies – general25% capital allowance for the year;Companies engagedin mining or upstreampetroleum business35% bad debts (under certain conditions); tax losses brought forward for aspecified number of years;Year of assessment(companies) repairs and improvements undercertain conditions;The year of assessment is thecalendar year. losses incurred on the realisation ofbusiness or investment assets andliabilities;Basis period incentives for hiring recent graduates;andThe accounting period of a companyor trust is the accounting year of thecompany or trust.A company or a trust may choosea particular accounting year. Oncechosen, an accounting year cannotbe changed unless approval in writingis obtained from the CommissionerGeneral of the GRA. financial costs under certainconditions.Deductions not allowedIn general, expenses that are of a capitalnature or not wholly, exclusively andnecessarily incurred in the production ofincome are not deductible. Examples ofexpenses that are not deductible includedomestic and excluded expenditure.PwC 7

Capital allowancesCapital allowances are granted to persons who own depreciable assets and usethose assets to produce income from business.Capital allowances granted to a person are to be taken in the year granted andcannot be deferred. Depreciable assets are grouped in the following classes for thepurpose of capital allowances:ClassAssets includedRate (%)Basis1Computers and data-handlingequipment with peripheral devices40Reducing balance2Automobiles, trailers, construction andearth-moving equipment, plant andmachinery used in manufacturing30Reducing balance20Reducing balance10Straight-linePlantation capital expenditure3Locomotives, water transportationequipment, aircraft, office furniture andfixturesEquipment not included in another class4Buildings, structures and works of apermanent nature5Intangible assetsOver usefullifeAn importer or manufacturer of excisable goods shall be granted 50% capitalallowance on machinery and equipment imported for the purpose of affixing excisetax stamps.Carry-over of tax lossesTax losses can be carried forward for three or five years depending on the industry/sector of operation.8 Navigating taxation

Mineral royaltiesSubject to any fiscal stability agreement,the mineral royalty rate is 5% of the totalrevenue earned from minerals (excludingpetroleum and water) obtained frommining operations by a holder of amining lease, restricted mining lease orsmall-scale mining licence.Ring-fencing of financialinstitutions, petroleum andmineral operationsThe chargeable income of financialinstitutions, petroleum or mineraloperations is calculated separately foreach financial service, petroleum right ormineral operation.DividendsGenerally, unless exempt or subject toa double tax treaty, dividends paid by aresident company are subject to a finalwithholding tax of 8%.National Fiscal StabilisationLevyThe National Fiscal Stabilisation Levy(‘NFSL’) is a quarterly levy chargeable onthe accounting profit before tax of somespecified companies and institutions.The rate of this levy is 5% and it isapplicable from 2013 to 2019 calendaryears.The affected companies and institutionsare: Banks (excluding community andrural banks); Non-banking financial institutions; Insurance companies; Telecommunications companies; Breweries; Inspection and valuation companies; Companies providing mining supportservices; Shipping lines; and Maritime and airport terminaloperators.Free-zone developers/enterprisesCompanies registered to operate asfree-zone developers/enterprises enjoya ten-year income tax holiday. Once theten-year tax holiday has expired, the taxrate on the export of goods and servicesis 15%. Any other income is taxedat 25%.Young entrepreneursThe business income of youngentrepreneurs operating in certainindustries is exempt from tax for fiveyears. Depending on the location of thebusiness, the tax rate is increased to upto 15% for the next five years and thenup to 25% thereafter. Such businessescould also carry forward tax losses forfive years.PwC 9

Private universitiesPrivate universities are exempted fromtaxes if 100% of profit after tax isploughed back into the business.Taxation of giftsA gift received by an entity in respect ofbusiness or an investment is included inthe assessable income of the entity andtaxed at the applicable tax rate.Realisation of assets andliabilitiesThe gains or losses from the realisationof business or investment assets andliabilities are included in the assessableincome of the entity and taxed at theapplicable tax rate.Telecommunications andtransportation businessPayments received by a person whocarries on a business of transmittingor receiving messages by cable, radio,optical fibre or satellite or electroniccommunication from an apparatuslocated in Ghana, whether or notthe messages originate, terminateor are used in Ghana, are liable to awithholding tax rate of 15%.10 Navigating taxationSimilarly, payments received by aperson who conducts a business ofcarrying passengers, cargo, mail orother movable assets that are embarkedin Ghana (other than transhipment),including the rental of containers andrelated equipment that are incidentalor supplementary to the transportationbusiness, are liable to a withholding taxrate of 15%.For a non-resident, the withholding taxis treated as a final tax.Change in controlAny change in the underlying ownershipof an entity that exceeds 50% andtakes place at any time within a threeyear period triggers a number ofconsequences for the entity, such as: deemed disposal of the assets andliabilities of the entity at market valueand reacquisition at the same value;and non-deductibility of financial costs,losses and bad debts incurred beforethe change.Taxation of banking businessA person engaged in banking businessis required to determine income or lossfrom the banking business separatelyfrom any other business activity andkeep separate books of account for eachbusiness. Specific provision for a debtclaim is deductible if the CommissionerGeneral is satisfied that it is indeed abad debt.

Taxation of insurancecompanies – Gener

Taxation of individuals 3 Monthly tax rates 3 Income from employment 3 Personal relief 3 Contributions to retirement benefit schemes 3 Interest incurred by an individual on residential premises 4 Non-cash benefits 4 Taxation of loan benefits 5 Non-taxable benefits/income 5 Taxation of overtime and bonus 5 Payment to temporary and casual