22 May 2023
by Joram Abrokwah
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Businesses must adhere to several domestic and business taxesincluding corporate income tax, value-added taxes, withholdingtaxes, and capital gains taxes. Businesses must understandGhana's tax system and abide by tax laws to prevent legal andfinancial problems. This article will present a general overview ofGhana's corporate tax structure, outlining the various domestictaxes, tax rates, and compliance requirements.
Do you have to pay taxes as a start-up or a new business?
YES, startups and new businesses must pay taxesin Ghana as long as the nature of business is a taxable activity.However, some sectors or business activities may enjoy taxincentives and tax holidays. The taxes to be paid coverPay-As-You-Earn (PAYE), Withholding Tax, Income Tax (Individual andCorporate), and Value Added Taxes among others.
After registering your business at the Registrar-General'sDepartment, it is required to also register with the Ghana Revenue Authority(GRA) before undertaking any taxable activity.
The amount of taxes a business pays depends on the type ofbusiness, the nature of the business activity, and the volume oftransactions carried out within the tax assessment period. Let mealso quickly add that the nationality of the owners of a businessdoes not affect the amount of corporate income taxes they pay,however, the sales revenue and profitability of the business affectthe corporate income taxes that are paid.
Types of business taxes
Business taxes are classified under 2 broad categories;
Direct taxes aretaxes levied on persons and organizationswith the tax burden borne by the person or business.Examples include.
- Income taxes -Individual and Corporate
- Pay As You Earn
- Gift Tax
- Capital Gains Tax
Indirect taxes are taxes levied on goods andservices with the tax burden borne by the final consumerof the goods and services. Examples include;
- Value-Added Tax
- Ghana Education Trust Fund Levy
- Electronic Levy
- National Health Insurance Levy
- Communication Service Tax
To give further understanding of the above taxes, we havecategorized the taxes into which ones apply to businessesand individuals;
|P-A-Y-E||Value added tax|
|Tax stamp||Communication service tax|
|Gift tax||Mineral royalties' tax|
|Vehicle income tax||Withholding tax|
|Personal income tax||Rent tax|
|Vehicle income tax||Corporate income tax|
|Capital gains tax||Capital gains tax|
Table 1: Individual and Business taxes
Read Also:Taxation In Ghana: All You Need ToKnow
CORPORATE INCOME TAX
Corporate Income Taxes (CIT) are taxes levied on the income andgains from business and investments of companies for a year ofassessment or financial year.
The corporate income tax rate is generally 25%. This rate maychange per industry.
|CORPORATE INCOME TAX RATES PER INDUSTRY INGHANA|
|Income of a Trust||25%|
|Companies principally engaged in the hotelindustry||22%|
|Companies engaged in the export of non-traditionalexports||8%|
|Financial institutions from loans granted to farmingenterprises||20%|
|Financial institutions from loans granted to a leasingcompany||20%|
|Manufacturing companies located in regional capitals(except Accra and Tema)||18.5%|
|Manufacturing companies located outside Accra, Tema, andthe regional capitals||12.5%|
|Free Zone Enterprises after 10 years tax holiday (ondomestic sales)||25%|
|Free Zone Enterprises after 10 years tax holiday (on theexport of goods and services)||15%|
|Petroleum income tax||35%|
|Mineral income tax||35%|
Table 2: Corporate tax rates per Industry in Ghana
Certain businesses enjoy tax holidays which means thesebusinesses do not pay the actual tax rate during this period.
|Sector/ Business||Period of Tax Holiday|
|Agro-processing business conducted wholly in thecountry||First Five (5) years|
|Cocoa-by-product business wholly in the country||First Five (5) years|
|Tree crop farming||First Ten (10) years|
|Cash crops or livestock (excluding cattle)||First Five (5) years|
|Cattle farming||First Ten (10) years|
|Waste processing business||First Seven (7) years|
|Rural Banks||First Ten (10) years|
|Real Estate (certified low-cost housing)||First Five (5) years|
Table 3: Sectors and Tax Holiday Periods
CIT COMPLIANCE AND PENALTY
Companies are required by the Ghana Revenue Authority to file CorporateIncome Tax returns by the fourth month after thejust-ended year of assessment or financial year.
Companies unable to meet this deadline may apply for anextension to file their Corporate Income Tax (CIT) returns, andthis extension should not exceed the sixth month of theyear (not more than two months after the filing due date).
In other words, CIT returns for the 2022 year ofassessment are to belodged/filed by 30th April 2023. Companieswho may apply for an extension have up to 30th June 2023.
CIT returns are paid quarterly every year of assessment with thefinal payment due by the fourth month of the ensuing assessmentyear.
A person is liable to pay interest for failing to pay due taxwhich is calculated at 125% of the statutory rate, compoundedmonthly, and applied to the outstanding amount at the start of theperiod.
When individuals receive income from employment (whether in cashor kind), taxes are levied on that income which is withheld by theemployer and paid on behalf of the employee. This tax is known asPay-As-You-Earn (PAYE).
In calculating the PAYE of resident individuals, it is essentialto understand that allowances and benefits are added to the salaryof the individual whiles deductions such as Social Securityand National Insurance Trust (SSNIT) and donations for a goodcause, are taken from the individual's basic salary beforearriving at the chargeable income (Final amount on which PAYE iscalculated). The chargeable income of non-residents is charged at25% flat.
Pay-As-You-Earn is calculated using the graduated tax rate
Table 4: Current Pay-As-You-Earn Graduated rates
PAYE COMPLIANCE AND PENALTY
Pay-As-You-Earn (PAYE) returns must be filed by the 15th of themonth following the month to which the return relates (January PAYEshould be filed by the 15th of February).
Failure to comply attracts a penalty of 500 currency points anda further penalty of 10 currency points for each day that thefailure continues.
VALUE ADDED TAX
Every business that provides a service or sells a Vatableproduct must register with the GRA before they can charge VAT.
To register for VAT in Ghana, one must fill out a VATapplication form which can be obtained at any Domestic Tax RevenueDivision Office of GRA and attach copies of their businessregistration documents.
After a successful application, a VATcertificate (which should be displayed at the businesspremises), and a VAT invoice book will be issued.In cases where a business would like toissue its own VAT invoices, they need to write tothe Commissioner General for approval.
Can you run a business without being VAT registered?
Unless otherwise exempted, businesses engaged in the supply ofgoods and services, importation of goods, and supply of importedservices are required to charge Value Added Tax.
Value Added Tax is charged on the value added to goods andservices.
The tax shall be paid;
- In the case of a taxable supply by the taxable personmaking the supply.
- In the case of imported goods, by the importer;
- In the case of imported services, by the receiver of theservice.
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The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
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