• Tax returns and compliance
• Tax rates
• Termination of residence
• Filing requirements
• Economic employer approach
• De minimus number of days
• Types of taxable compensation
• Tax-exempt income
• Personal relief 
• Employee’s share of social insurance
• End of services payments and pensions
• Collective benefits-in-kind
• Employee’s profit share
• Expatriate concessions
• Salary earned from working abroad
• Taxation of investment income and capital gains
• Double Taxation Consideration 
• Gains from stock option exercises
• Relief for foreign taxes
• Social security tax
• Sample tax calculation
  

All income tax information is summarized by KPMG, the Ghana member firm of KPMG international based on the Ghanaian Income Tax Act, 2015 (Act 896).

When are tax returns due? That is, what is the tax return due date?

It is the employer’s responsibility to file monthly tax returns on behalf of its employees. The employer is required to withhold the employees’ taxes and pay to the Ghana Revenue Authority (GRA). The tax withheld must be filed and payment made by the 15th of the month following the month in which the tax is withheld.

Additionally, the employer shall, not later than 30 April following the end of every year of assessment, furnish an Employer’s Annual Tax Deduction Schedule which shall specify tax withheld in respect of each employee employed by the employer who derives assessable income for the year from the employment. The return is required to outline salaries paid to each employee, exemptions, tax reliefs, chargeable income, tax due and tax paid.

What is the tax year-end?

31 December

What are the compliance requirements for tax returns in Ghana?

Generally, the employer is required to compute the income tax on any employment income accrued or derived in Ghana by the assignees. They are obliged to remit it to the GRA within the first 15 days of the ensuing month in which the payment was made.

At the year-end, the employer is required to prepare an annual reconciliation of the taxes withheld on monthly basis to determine whether there are any differences. Where there is a short fall, the employer is required to pay the difference within 15 days after the end of the year (that is on or before 15 January).

The employer shall also, not later than 30 April following the end of every year of assessment, furnish a return with respect to each person employed by the employer who derives assessable income for the year from the employment.
Failure of the employer to settle the balance due on the return by 15 January attracts the following interest:

• 125 percent of statutory rate compounded monthly and applied to the amount outstanding at start of period.

For the purposes of taxation, how is an individual defined as a resident of Ghana?

• 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 on posting abroad.
• A citizen who is temporarily absent from Ghana for not more than 365 continuous days (where the individual has a permanent home in Ghana).

What are the current income tax rates for residents and non-residents in Ghana?

Residents

Individuals who are tax resident are taxed at the graduated rates with 30 percent being the highest marginal bracket. The graduated tax rates and bands effective from 1 January 2019, are shown below:

Non-Residents

The tax rate applicable to non-resident individuals is a flat rate of 25 percent on their chargeable income.

Where the company provides the employee with accommodation, the employee is assessed to additional tax on the benefit-in-kind element as follows:

Similarly to the above, the assignee will be subject to additional benefit-in-kind where the Company provides the expatriate with a vehicle.  The additional in-kind element is derived as follows:

Loan Benefit

An employer may undertake the function of providing soft term loans to its employees compared to what a free market may offer as an incentive to its employees.
A taxable benefit is computed on the loan provided in return for services if the following conditions are not satisfied:

• the loan is from an employer to an employee
• the term of the loan does not exceed 12 months
• the aggregate amount of the loan and any similar loan outstanding at any time during the previous 12 months does not exceed the employee’s 3 months basic salary.
  

Where the above conditions are not met, interest benefit is computed for the year as a quarter of the interest imputed at the Bank of Ghana statutory rate minus interest paid by the employee during the year.

Are there any tax compliance requirements when leaving Ghana?

The assignees upon departure from Ghana must ensure the following tax obligations are met:

• The correct incomes have been reported and the appropriate taxes have been withheld and paid by the employer on their employment income.
• A form prescribed by the commissioner of the revenue authority for disengagement must be completed and filed with the authority in connection with cessation and subsequent repatriation of the assignee.
• The personal income tax return has been filed.
• A tax clearance certificate may be obtained as evidence of taxes paid.

In terms of immigration

• A letter of notification is sent to the Ghana Immigration Service (GIS) to notify them of the departure of the assignee.

The GIS provides a confirmation letter stating that the assignee has departed from Ghana

What if the assignee comes back for a trip after residency has terminated? 

The individual is required to meet Ghana immigration requirements. The individual will be taxable on any income which had a source in Ghana during the period spent in Ghana.

There are frequent communications between the Ghana Immigration Service (GIS) and the GRA on assignees in Ghana. Before an assignee is issued with or renews their work and residence permit with the GIS, a request is sent to the GRA for a tax clearance certificate to be obtained.

Do the immigration authorities in Ghana provide information to the local taxation authorities regarding when a person enters or leaves Ghana?

The GIS does not send such information to the GRA. The GRA, however, could request for such information from GIS when required.

Will an assignee has a filing requirement in the host country/territory after they leave the country/territory and repatriate?

The employer has up to 30 April after the year end to file the completed returns. The assignee upon departure has a filing obligation on the immediate period before departure. Also where some payments such as stock option, vest post assignment period, there will be tax filing requirement for declaration of the tax on the stock option attributable to the period the individual exercised employment in Ghana.

Do the taxation authorities in Ghana adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD treaty)? If no, are the taxation authorities in Ghana considering the adoption of this interpretation of economic employer in the future?

No. Ghana does not adopt the economic employer approach. Typically an employee is liable to Ghana income tax based on income earned in respect of duties performed in the country/territory.

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable.

What categories are subject to income tax in general situations?

• A person’s income from an employment is all of that person’s gains and profit from that employment unless it is specifically exempted by the Tax Laws.
• The gains or profits from an employment include any allowances or benefits paid in cash or given in kind to, or on behalf of, that person from that employment.
• In summary, whatever a person gets – either directly or indirectly – from being employed or from an employment is considered an employment income. That employment income is subject to tax unless specifically exempt by law. Taxable compensation will include the following:
  • income from wages and salaries
  • cost-of-living allowances
  • accommodation allowance
  • car allowance
  • unsubstantiated moving expenses
  • dependent expenses borne by the employer e.g. Child school fees
  • employer provided domestic assistance
  • grant of share 
  • etc.

Intra-group statutory directors

Will a non-resident of Ghana who, as part of their employment within a group company, is also appointed as a statutory director (i.e., member of the Board of Directors in a group company situated in Ghana) trigger a personal tax liability in Ghana, even though no separate director's fee/remuneration is paid for their duties as a board member?

Such a director will not be deemed as resident for tax purposes in Ghana. However, the tax laws require the local entity to file a Director’s return on their behalf annually. It must be noted that, if they come to Ghana to discharge any duty through which they have income attributable to Ghana for the period spent in Ghana, the 183-days residency rule will be applied in taxing the related income.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Ghana?

If the individual is not physically present and plays no oversight role in Ghana which earns their income attributable to Ghana, then there will not trigger tax in Ghana.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Ghana (i.e., as a general management fee where the duties rendered as a board member is included)?

Yes, as explained above

c) In the case that a tax liability is triggered, how will the taxable income be determined?

This will be based on the amount relating to cost borne by Ghana.

Are there any areas of income that are exempt from taxation in Ghana? If so, please provide a general definition of these areas.

The following amounts are exempt from income taxation in Ghana:

• A reimbursement or discharge of a person's dental, medical, or health insurance expenses where the benefit is available to all full-time employees on equal terms;
• a passage to or from Ghana in respect of that person's appointment or termination of employment where that person:
  • is recruited or engaged outside Ghana;
  • is in Ghana solely for the purpose of serving the employer; and
  • is not a resident of Ghana;
• Provision of accommodation by an employer carrying on a timber, mining, building, construction or farming business to that person at any place or site where the field operation of the business is carried on;
• A discharge or reimbursement by an employer of an expenditure incurred by that person on behalf of the employer that serves the proper business purposes of the employer;
• A payment made to employees on a non-discriminatory basis and which by reason of the size, type and frequency of the payments, are unreasonable or administratively impracticable for the employer to account for or to allocate to an individual;
• A final withholding payment;
• a redundancy pay (This must be in line with the provisions of the Labour Act; 2003 (Act 651))
• an exemption under Section 7 of Act 896 which include:
  • pension
  • gratuity paid in relation to personal injury suffered by a person or paid to another person for the death of that person(employee)
  •  income of individuals under diplomatic immunity

Below are the personal tax reliefs granted to individual tax payers in Ghana.

Employees contribute 5.5 percent of their basic salary towards social security. This contribution is fully deductible for tax purposes in Ghana.

In accordance with the Income Tax Act, 2015 (Act 896) a person’s income from an employment is all of that person’s gains and profit from that employment unless it is specifically exempted by the Tax Laws. End of service benefit therefore constitutes one’s gain from employment and as such is subject to tax in Ghana.

Pension payments are, however, exempt from taxes in Ghana.

Not Applicable

Employees profit share as a result of their employment in Ghana constitutes gains from employment which is taxable in accordance with the Income Tax Act, 2015 (Act 896).

Are there any concessions made for expatriates in Ghana?

There are no special tax concessions for expatriates in general. However, there are Investment Agreements between some companies in Ghana and the government of Ghana that exempt expatriates from taxes if they spend less than 30 continuous days or 60 cumulative days within a given year of assessment.

Companies can therefore, enter into agreement with the government of Ghana to benefit from similar concessions.

Is salary earned from working abroad taxed in Ghana? If so, how?

In Ghana, employment income is taxed based on the worldwide income in the case of resident individuals (citizen). Non-Ghanaian income of a citizens is taxable, even if this is not brought into or received in Ghana. There is, however credit for the 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.

Are investment income and capital gains taxed in Ghana? If so, how?

In accordance with the Income Tax Act, 2015 (Act 896), any investment income and capital gains with Ghanaian source are subject to tax in Ghana in the case of non-residents.

Residents who are citizens, however, are subject to tax on investment income and capital gains on their worldwide income. Interest paid to individuals by a resident financial institution, as well as interest earned on bonds issued by the Government of Ghana, are exempt from tax.

* 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 percent 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 recognized 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.

Although the exercise of an option is a taxable event, there are no guidelines on how the tax will be computed. In principle, the difference between the market value and the option price constitute income for the employee and as such is taxed by applying the individual income tax rates.

The gain from the sale of the shares will be the difference between the sales proceeds and the market value at the time of the exercise of the option. The “capital gain” will be taxed at the highest marginal rate. An individual may opt for a rate of 15 percent.

Is there any Relief for Foreign Taxes in Ghana? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on? 

For the purposes of ascertaining the income tax payable by a person for a basis period there shall be deducted any foreign tax credit allowed to the person for the year. A resident person is entitled to a credit for a year of assessment, referred to as a "foreign tax credit", for any foreign income tax paid by that person to the extent to which it is paid with respect to that person's assessable foreign income for the year.

Foreign tax credits are calculated separately for taxable foreign income from each business, employment, or investment and shall not exceed the average rate of Ghanaian income tax of that person for the year of assessment applied to that person's taxable foreign income for the year from each business, employment, or investment.

A person's assessable income in respect of which that person is entitled to a foreign tax credit in the above is increased by the amount of the foreign tax credit.

Are there social security/social insurance taxes in Ghana? If so, what are the rates for employers and employees? 

Mandatory First and Second Tier Contributions

By law, it is mandatory for all employers in Ghana to contribute to social security on behalf of all their employees.

The total contribution is 18.5 percent which is made up of 5.5 percent from the employee and 13 percent from the employer. Both contributions are based on the employee’s basic salary.

The payment to the social security scheme is then split into 13.5 percent which is remitted to the Social Security and National Insurance Trust (SSNIT) – Tier 1 scheme and the remaining 5 percent is remitted to the Tier 2 scheme which is privately managed.

A return is required to be submitted (together with payment) on or before the 14th of every month in respect of the previous month’s contributions.

The Act mandates contributions by and for all employees (including expatriates). The Regulators in publications and per the gazette of the National Pensions (Amendment) Act, 2014 (Act 883), have spelt out new modalities compelling expatriates to be enrolled on the scheme. Expatriates are guaranteed recovery of their contributions once they demonstrate that they are emigrating permanently from Ghana whether the minimum pension contribution of 15 years is met or not.

Exemption from participation/contributions is available to expatriates who are on a short-term contract (not more than 36 months) and has shown proof of contribution of similar scheme in another country/territory.

Voluntary Third Tier Contributions (Provident Fund)

This is a voluntary scheme that both the employer and employees can contribute into. However, such a scheme is required to be registered under the National Pensions Regulatory Authority approved scheme in order to gain tax deductibility. Where this requirement is met, both the employer and the employee may benefit from a tax deduction up to a maximum contribution of 16.5 percent by both the employer and/or the employee. The above tax benefit can fully be utilized where there are no withdrawals until after the tenth (10th) anniversary of the contribution.

This calculation assumes a taxpayer on a Long-Term Assignment (Host Based) whose 3-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s compensation details are as follows:

Exchange rate used for calculation: USD1.00 = GHS5.0850 (Bank of Ghana Inter-bank forex rate as at 27 March 2019).

• All earned income is attributable to local sources.
• The assignee is provided with furnished accommodation and company vehicle with fuel and driver.    
• Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.      
• The employee is deemed resident throughout the assignment.
• Any hypothetical tax ignored.

Calculation of taxable income and tax payable for 2019 Year of Assessment

¹Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.