All business travellers are likely to be taxed on their employment income relating to work done in Ghana. The taxable income could be derived from, brought into or received in Ghana.
An individual’s assessable income that is subject to tax will be dependent on the residency status;
According to the Internal Revenue Act, 2000 (Act 592), there is no threshold/minimum number of days that exempts the employee from the requirements to file tax returns and pay tax in the Ghana.
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.
For Residential Employees
|Chargeable Income||Rate Applicable|
Tax rates for Non-resident Employee
Non-residents are subject to tax on their employment income at a flat rate of 20%.
Every employer under the National Pensions Act 2008, (Act 766), is required to pay 18.5 percent of the income of every employee to the SSNIT on or before the 14th day of the month following the month in which the deductions are made. The said amount is made up of 13 percent from the employer and 5.5 percent from the income of the employee. These contributions are further divided into SSNIT and “Tier 2”. SSNIT takes 13.5% and “Tier 2” takes 5%.
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% “Tier 3” scheme. The total of all these contributions (35% of the employees’ base pay) are 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, there are still on-going negotiations between the National Pensions Regulatory Authority (NPRA) and the Ghana Employers’ Associations on the payment of social security by expatriates. However, the current position of the 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 assess the fund upon repatriation. Therefore, until such negotiations are concluded and the final decision taken, the status quo still holds which is, expatriates do not contribute to the social security scheme, even though this is contrary to the law.
An employer shall, not later than the 31st of March following the end of every year of assessment, furnish a return on the total assessable income derived by each employee from the employment.
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.
|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|
* 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
By virtue of Act 592 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.
A permanent establishment is defined as;
(a) a place where a person carries on business through an agent, other than a general agent of independent status acting in the ordinary course of business as such;
(b) a place where a person has, is using, or installing substantial equipment or machinery; or
(c) a place 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 such project.
The provision of goods and services in Ghana, are liable to the Value Added Tax (VAT)/National Health Insurance Levy (NHIL) of 17.5%, however, there are situations where certain tax payers are waived from paying this tax. In that situation, the tax payer who has been granted such waiver would be issued with VAT Relief Purchase Order (VPROs), which 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, this can be applied from the Government of Ghana, for a waiver from this tax.
In Ghana, transfer pricing implication could arise to the extent that the 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 would 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.
The following are the requirements for work permit as per the Ghanaian laws:
As businesses become increasingly global, we have witnessed a dramatic rise in the number of business travelers now working in foreign jurisdictions.
© 2016 KPMG a partnerships established under Ghanaian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.