Snapshot of taxation in Ghana
Introduction
Ghana’s tax regime is regulated by several tax legislation including the Income Tax Act 2015 (Act 896) which came into effect on January 1, 2016. Ghana has moved from the source system of taxation of residence to a worldwide system of taxation where by a resident person is liable to tax irrespective of where the income is made and whether the source has ceased. A non-resident person who is present in Ghana in a year for an aggregate period of 183 days or more is deemed a resident person and liable to tax in the same manner as a resident person. Below is a quick look at Ghana’s current tax rates under the various tax laws as at June 2017.
Taxation of Individuals
Resident employees and self-employed persons are required to pay income tax at graduated rates in four equal installments. Non-resident individuals are liable to tax on income earned in Ghana. The current personal income tax rates are:
- Resident individuals 5%-20%
- Non-resident individual 20%
- Realization of investment asset such as
Shares by an individual 15%
- Gift other than gifts received in respect
of business or employment 15%
Taxation of Entities
The general corporate tax rate in Ghana is 25%. Other industries however, enjoy reduced corporate taxes as follows:
- Hotel industry 22%
- Export of non-traditional goods 8%
- Financial Institutions-
Income from Loan to Farming
Enterprises/Lease Company 20%
- Manufacturing industries located in:
All other regional capitals except
Accra and Tema 18.75%
Located outside regional capitals 12.50%
Companies engaged in petroleum and mining operations pay tax at the rate of 35%
Exempt Income
The following business incomes are exempt from tax:
- Income from cocoa of a cocoa farmer;
- Income of an approved charitable organisation;
- Income of a club, trade association or similar institution;
- Income of a statutory building society or a registered building society, or a statutory friendly society or a registered friendly society;
- Income of a non-resident person from a business of operating ships or aircrafts, where an equivalent exemption is granted by the country of residence of that person to persons resident in this country; and
Gains
Tax Concessions
Certain businesses conducted wholly in Ghana are granted tax concessions. These entities enjoy a reduced corporate tax rate of 1% during the stipulated tax concession. Entities entitled to tax concessions include:
- Tree crop farming 10 years
- Cash crop or livestock farming 5 years
- Cattle rearing 10 years
- Agro processing business 5 years
- Cocoa by product business 5 years
- Rural banking business 10 years
- Waste processing business 7 years
- Letting or sale of low cost affordable residential premises 5 years
- Approved unit trust scheme and mutual fund 10 years
- Venture capital financing company 10 years
- Withholding Taxes for Resident Persons
A resident person who makes payment of any of the items listed below to another resident person is required to withhold tax at the prescribed rate and pay same to the Ghana Revenue Authority (GRA) as follows:
- Interest (excluding individuals and resident financial institutions) 8%
- Dividends 8%
- Rent of residential property paid to an entity 8%
- Rent of non-residential property 15%
- Fees, allowance to resident director / manager,
board member, trustee 20%
- Fees to lecturers, invigilators, examiners,
part time teachers, non-executive directors / board members 10%
- Supply of goods exceeding GHȻ2,000 3%
- Supply of works exceeding GHȻ2,000 5%
- Supply of services exceeding GHȻ2,000 5%
Lottery winnings 5%-15%
Withholding Taxes for Resident Persons
Non-resident persons are subject to tax to be withheld at the prescribed rates on incomes earned from activities in Ghana. These include:
- Income from employment 20%
- Dividend 8%
- Royalties, natural resources payments and rents 15%
- Management, consulting and technical service
fee and endorsement 20%
- Repatriated Branch after tax profits 8%
- Interest 8%
- Short term insurance premium 5%
- Endorsement fees 20%
- Payment of services 20%
- Supply of goods, works and services 20%
- Petroleum sub-contractor 15%
- Transport business including
renting containers and related equipment other than transshipment: 15%
- Communication business by an apparatus located in the country, whether or not the messages originate, terminate or are used in the country 15%
Other Taxes
- VAT 15%
- VAT flat rate for traders operating In the retail sector 3%
- National Health Insurance Levy 5%
- Import Duty 0%-35%
- Excise Duty 0%-170.65%
- Special Petroleum Tax 15%
- Special Import Levy 2%
- National Electrification Scheme Levy 3%
- Public Lightening Levy 2%
- Stamp duty 5 – 0.5%
-
- Mineral royalties 5 %
- Capital Gains Tax/ Gains obtained from the realisation of capital or investment assets must be included in the assessable income of the tax payer 25%
GHANA’S DOUBLE TAXATION AGREEMENTS AND RATES
| No. | DTA | Date of signature | Rates of tax under DTA |
| 1. | Ghana and United Kingdom | Signed –
January 20, 1993 Ratified- August 10, 1994 |
a. Dividends (where recipient holds at least 10% shares) 7.5%
b. Dividends (in any other case) 15% c. Royalties 12.5% d. Technical/ Management Services fees 10% e. interest 12.5% |
| 2. | Ghana and South Africa | Signed -November 2, 2004
Ratified –May 18, 2007 |
a. Dividends (where recipient holds at least 10% shares)
5% b. Dividends (in any other case) 15% c. Royalties 10% d. Technical/ Management services fees 10% e. interest 10% (5% for banks) |
| 3. | Ghana and Switzerland | Signed: June 23, 2008
Effective: December 30, 2009 |
a. Dividends (where recipient holds at least 10% shares) 5%
b. Dividends (in any other case) 15% c. Royalties 8% d. Technical/ Management services fees 8% e. interest 10% |
| 4. | Ghana and Italy | Sinned:
February 19, 2004 Effective: January 1, 2007 |
a. Dividends (where recipient holds at least 10% shares) 5%
b. Dividends (in any other case) 15% c. Royalties10% d. Technical/ Management services fees 10% e. interest 10% |
| 5. | Ghana and Netherlands | Signed: March 10, 2008 | a. Dividends (where recipient holds at least 10% shares) 5%
b. Dividends (in any other case) 10% c. Royalties 8% d. Technical/ Management services fees 8% e. interest 8% |
| 6. | Ghana and France | Signed: April 5, 1993
In Force: April 1, 1997 Effective: January 1, 1998 |
a. Dividends (where recipient holds at least 10% shares) 7.5%
b. Dividends (in any other case) 15% c. Royalties 10% d. Technical/ Management services fees 10% e. interest 10% |
| 7. | Ghana and Germany | Signed: August 12, 2004
In Force: December 14, 2007 Effective: January 1, 2008. |
a. Dividends (where recipient holds at least 10% shares) 5%
b. Dividends (in any other case) 15% c. Royalties 8% d. Technical/ Management services fees 8% e. interest 10% |
| 8. | Ghana and Belgium | Signed: June 22, 2005
In Force: October 17, 2008 Effective: January 1, 2009 |
a. Dividends (where recipient holds at least 10% shares) 5%
b. Dividends (in any other case) 15% c. Royalties 10% d. Technical/ Management services fees 10% e. interest 10% |