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Ghana

An individual’s liability to income tax in Ghana is determined by his/her residency status Income tax is levied at progressive rates on an individual’s taxable income for the year.

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Key Message

Resident individuals are taxed on their global income, irrespective of source. Non-resident individuals are taxed on incomes that have sources in Ghana.

Income tax

Liability for income tax

An individual’s assessable income that is subject to tax will be dependent on the residency status;

  • In the case of a resident person, the full amount of the person's income from the business, employment, or investment for the year, whether or not the income is brought into or received in Ghana. There is credit for taxes paid in other jurisdictions on the non-Ghanaian sourced income. The foreign tax credit allowable however, shall not exceed the average rate of Ghanaian tax payable on that income.
  • In the case of a non-resident person, the full amount of the person's income from the business, employment, or investment, the extent to which the income has a source in Ghana. However, where the non-resident has a Ghanaian Permanent Establishment (PE), all incomes of the PE are taxed irrespective of the source.

Residency Status

An individual is deemed resident for a year of assessment if that individual is;
 
  • a citizen of Ghana (other than one with a permanent residence outside Ghana for the whole year of assessment);
  • Present in Ghana for a period, or periods amounting in total to 183 days or more in any 12-month period that commences or ends during the year of assessment
  • An employee or official of the Ghana government posted abroad during the year
  • A citizen who is temporarily absent from Ghana for not more than 365 continuous days (where the citizen has a permanent home in Ghana).

Tax trigger points

According to the Income Tax Act 2015 (Act 896) there is no threshold/minimum number of days that exempts the employee from the requirements to file tax returns and pay tax in Ghana.

Types of taxable income

All earnings, whether in cash or in the form of a benefit-in-kind, made by an employer to an employee are taxable unless specifically exempted in accordance with the Ghana tax laws.

Tax Rates

For Residential Employees

Chargeable Income Rate Applicable
First GH¢2,592
Free
Next GH¢1,296 
5%
Next GH¢1,812
10%
Next GH¢33,180 17.5%
Exceeding GH¢38,880 25% 

Tax rates for Non-resident Employees

Non-residents are subject to tax on their employment income at a flat rate of 20%.

Social security

Liability for social security

Every employer under the National Pensions Act 2008, (Act 766), is required to pay 18.5 percent of the basic salary of every employee to the Social Security and National Insurance Trust (SSNIT)on or before the 14th day of the month following the month in which the deductions are made. The 18.5 percent is made up of 13 percent from the employer and 5.5 percent of the basic salary of the employee. These contributions are further divided into SSNIT and “Tier 2”. 13.5% of the contributions is remitted to SSNIT , which ultimately takes 11% and remits 2.5% to the National Health Insurance Authority; the 5% is paid into Tier 2

Additionally, the law makes provision for a further voluntary contribution by either the employer or the employee alone or both up to a maximum of 16.5% of basic salary of a “Tier 3” scheme. The total of all these contributions (35% of the employees’ base pay) is allowed for tax deduction purposes in the hands of both the employees and employers.

Failure to comply will expose the Company to a penalty of 3 percent of the contribution unpaid together with the contribution, for each month of default
With respect to expatriates however, The current position of the National Pensions Regulatory Authority (NPRA) is for employers to pay the whole 18.5% for expatriates into the Tier 2 Scheme.

The NPRA’s position is based on the premise that once all contributions are made to the Tier 2 Scheme, the expatriates can easily access the fund upon repatriation.

The Social Security and National Insurance Trust (SSNIT) came out recently with a Public Notice directing that all expatriates begin to contribute to the Social Security Fund. The modalities, are however, yet to be published.

Compliance obligations

Employer compliance obligations

An employer shall, not later than the 30th of April following the end of every year of assessment, furnish a return on the total assessable income derived by each employee from the employment.

Where amounts withheld during the year are insufficient to meet the employee’s tax liability, the employer is required to withhold and pay within fifteen days after the year of assessment, that is, by 15th January of each year, the correct taxes arising from the employment of a person.

Employer reporting and withholding requirements

Employment income is subject to tax and social security withholding under the PAYE system. If an individual is taxable on employment income, the obligation to withhold rests with either the employer or, if the employer is not operating withholding, it rests with the “host” employer.

Other Issues

Double taxation treaties

N. Double Tax Treaties
Country Dividends Interests Royalties Management Fees and Tech. Fees
United Kingdom 7.5^ / 15^^ 12.5 12.5 10
France 5* / 7.5** / 15^^ 10* / 12.5** 10* / 12.5** 10
Netherland 5^ / 10^^ 8 8 8
Germany 5^ / 15^^ 10 8 8
Italy 5^ / 15^^ 10 10 10
South AFrica 5^ / 15^^ 5# / 10^^ 10 10
Belgium 5^ / 10^^ 10 10 10
Swiss Confederation 5^ / 15^^ 10 8 8
Denmark 5^/5∞/5∞15^^ 8 8 8

*     If the company paying the Dividend, Interest or Royalty is a resident of France
**     If the company paying the Dividend, Interest or Royalty is a resident of Ghana
^     If the beneficial owner is a company which holds directly at least 10% of the capital of the company paying the dividend
^^     In all other cases
#     If the Interest is derived by a Bank which is a resident of the other contracting state
∞     If the beneficial owner is the other contracting state or the central bank of the other state or any national agency or any agency (including a financial institution owned or controlled by the government of that other state.
α      If the beneficial owner is a pension fund or other similar institution providing pension or other similar institutions where it is established and recognised for tax purposes in accordance with the law of that other state

By virtue of Act 896 and the Non-discrimination clause under the Double Taxation Treaties, where the tax rates above exceed the general tax rate under “Payments to Non-Residents” the general tax rate applies.

Permanent establishment implications

A foreign permanent establishment means a fixed place of business of a resident person situated in a foreign country where the business is conducted continuously for at least six months, but excludes any place at which only activities of a preparatory or auxiliary nature are conducted;

A Ghanaian permanent establishment includes

  1. a place in the country where a non-resident person carries on business or that is at the disposal of the person for that purpose;
  2. a place in the country where a person has, is using or is installing substantial equipment or substantial machinery;
  3. a place in the country where a person is engaged in a construction, assembly or installation project for ninety days or more, including a place where a person is conducting supervisory activities in relation to that project;
  4. the provision of services in the country;
  5. A place in the country where an agent performs any function on behalf of the business of a non-resident person
  • Including, in the case of an insurance business, the collection of premiums or the insurance of risks situated in the country
  • Excluding the case involving a general agent of independent status with its own legal personality acting in the ordinary course of business and “owner” means a person who owns a permanent establishment.

Indirect taxes

The provision of goods and services in Ghana, is liable to the Value Added Tax (VAT)/National Health Insurance Levy (NHIL) of 17.5% %; however, there are situations where the tax is waived for certain taxpayers. In those situations, the tax payer who has been granted such waiver would be issued with VAT Relief Purchase Order (VPROs). This constitutes a waiver of the VAT/NHIL.

Exemption from imported Value Added Tax (VAT)/ National Health Insurance Levy (NHIL): This tax works hand in hand with the VAT/NHIL tax on local transactions, and as mentioned earlier, a waiver can be obtained from the Government of Ghana in this regard.

Transfer pricing

In Ghana, transfer pricing implications could arise when an employee is being paid by an entity in one jurisdiction but performing services for the benefit of an entity in another jurisdiction; in other words, a cross-border benefit is being provided. This will also be dependent on the nature and complexity of the services performed.

Transfer pricing is used to shift tax liabilities among associated persons to obtain the best overall tax outcome. It empowers the Commissioner to distribute, apportion, or allocate any income, deductions, or credits between associated persons so as to reflect the chargeable income the persons would have realised in an arm’s length transaction.

Work permit/visa requirements

The following are the requirements for work permit as per the Ghanaian laws:

  • Formal Application letters addressed to the relevant bodies.
  • Letter of Support from Ministry, Department, Agency (if any).
  • Employer’s Certificate of Registration, Certificate of Incorporation, Certificate to Commence Business, Regulation.
  • Employer’s Current Tax Clearance Certificate.
  • Passport of applicant employee.
  • Copy of applicant employee’s Non-Citizen Identity Card.
  • Scanned passport page bearing applicant’s picture and bio data.
  • Offer / Appointment Letter / Contract of Employment of applicant employee
  • Curriculum vitae of applicant employee.
  • Applicant Employee’s Professional and Educational certificates.
  • Medical report of applicant employee from any recognised hospital in Ghana.
  • Professional/educational certificates of applicant employee.
  • Police report from applicant employee’s home country.

Immigration Compliance
Work permits must be renewed yearly.

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