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COVID-19 - Tax Implications

Tax Implications

Many sovereign nations as a means of combating the spread of the Corona virus, have put in place precautionary measures such as quarantine, lock down and travel restrictions which Ghana is no exception. To this quest, the President of the Republic of Ghana on Sunday, 15 March 2020 issued measures to curtail its spread in Ghana.

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The Issue

The outbreak poses many challenges but for taxpayers in Ghana, the question is: what are the tax implications associated with this pandemic? Our tax alert intends to provide an overview of such implications.

Corporate Income Tax

As stated in our other update on the coronavirus outbreak, the outbreak is a non-adjusting event as at 31 December 2019 since little knowledge was known of the virus. Therefore, the outbreak posed minimal tax consequences as at 31 December 2019. The reason being that, adverse adjustments such as increase in provisions including bad debts and impairments (which are treated as non-allowable expenses under our current Income Tax Act, 2015 (Act 896)) that may arise as a result of the pandemic may not be required. 

Payment and Filing of Tax Returns

The Revenue Administration Act, 2016 (Act 915) provides for taxpayers to apply for extension of time to file and pay tax. The Commissioner-General may grant the approval if good cause is shown. It, therefore, suffices to say that, our tax laws have made provisions for taxpayers' inability to file on time in event of uncertainties.  As a result, where it can be envisaged by taxpayers that they will be unable to file their tax returns by the due dates, an opportunity for extension could be sought for a maximum period of two (2) months.

Should the outbreak persist at the end of the two (2) months extension period, what avenues may be available? 

By the current tax law, no further extension can be granted by the Commissioner-General for the submission of tax returns.  

Based on our current tax laws, failure to file a return on the due date will result in penal charges. With regards to payments of tax due, taxpayers are currently able to pay taxes via wire transfer. Therefore, a lock down will generally not impact the payment of any tax due but might affect filing of returns which still requires the physical presence at the Tax office.

Personal Income Tax

The Ghana tax system taxes individuals on residency basis. As such, a non-resident becomes resident for tax purposes if present in the country for an aggregate period of one hundred and eighty-three (183) days or more in any twelve-month period that commences or ends during the year of assessment. This law does not take into consideration a non-resident who has overstayed and thus attained residency status as a result of the pandemic.

Therefore, where there is no legislative instrument that amends this provision, instead of the individual being subject to tax in Ghana at the non-resident rate of 25%, that individual will be subject to tax at the graduated tax rate with 30% being the highest marginal rate on annual taxable income exceeding GHS240,000

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