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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

 

All business travelers are likely to be taxed on their employment income relating to work done in Ghana. The taxable income could either have a source in Ghana or elsewhere. The income has a source in Ghana if the income accrues in or is derived from 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 income of that person from each employment, business or investment for the year, whether or not the source from which the income is derived has ceased. Resident individuals who are citizens are taxed on their worldwide income. Namely, incomes from any business, investment and employment with both Ghanaian and non-Ghanaian sources are taxable.
  • In the case of a non-resident person, the income of that person from employment, business or investment for the year, to the extent that income has a source in Ghana.

 

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 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).

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 GHS3,456 Free
Next GHS1,200 5%
Next GHS1,680 10%
Next GHS36,000 17.5%
Next GHS197,664 25%
Exceeding GHS240,000 30% 

Tax rates for Non-resident Employees

Non-residents are subject to tax on their employment income at a flat rate of 25 percent.

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 a mandatory Social Security scheme 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 from the employee. These contributions are further divided into payment to Social Security and National Insurance Scheme (SSNIT) – “Tier 1” Scheme and the “Tier 2” Scheme. The 3.5 percent of the contributions is remitted to SSNIT, which ultimately retains 11 percent and remits 2.5 percent to the National Health Insurance Authority as National Health Insurance Levy. The remaining 5 percent is remitted to the Tier 2 which is privately managed by a Fund Manager.

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 percent of the basic salary of the employee to a “Tier 3” Scheme. The total of all these contributions (35 percent of the employees’ base pay – both the mandatory and voluntary contributions) 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.

Employers are required by law to contribute to both the Tiers 1 and 2 for all employees.

Notwithstanding the above, the National Pensions Regulatory Authority (NPRA) has specified that expatriates who can demonstrate that they are already contributing to a social security scheme in another country/territory and will be on assignment for less than 36 months in Ghana have the opportunity to apply to the regulatory body for an exemption from contributing to the scheme in Ghana. Though they are yet to specify the documents to be attached to the application, the following documents may be relevant.

  • The contract of employment to confirm their assignment in Ghana and also stating the duration.
  • A certificate to prove their registration to their home social security scheme.
  • A notarized report/statement showing contributions made in the home country/territory and periods for which they have been made.
  • A clearance report to show that all contributions have been duly made. 

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 15 days after the year of assessment, that is, by 15 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/Territory 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 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.

Permanent establishment implications

A foreign permanent establishment (PE) means a fixed place of business of a resident person situated in a foreign country/territory where the business is conducted continuously for at least 6 months, but excludes any place at which only activities of a preparatory or auxiliary nature are conducted;

A Ghanaian PE includes:

  • a place in the country/territory where a non-resident person carries on business or that is at the disposal of the person for that purpose
  • a place in the country/territory where a person has, is using or is installing substantial equipment or substantial machinery
  • a place in the country/territory where a person is engaged in a construction, assembly or installation project for 90 days or more, including a place where a person is conducting supervisory activities in relation to that project
  • the provision of services in the country/territory
  • a place in the country/territory 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/territory.
    • 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, are liable to Value Added Tax (VAT), National Health Insurance Levy (NHIL) and Ghana Education Trust Fund Levy (GETFL). VAT is assessed on the taxable value (which the NHIL and GETFL) at a rate of 12.5 percent whereas the NHIL and GETFL are considered as straight levies assessed on the taxable value at 2.5 percent each. There are situations where certain tax payers are waived from paying the VAT. In that situation, the tax payer who has been granted such waiver would be issued with a VAT Relief Purchase Order (VPROs), which constitutes a waiver of the VAT.

The coming into effect of Value Added Tax (Amendment) Act, 2017 (Act 948) with gazette notification on 7 April 2017 has introduced a 3 percent VAT Flat Rate Scheme on taxable supply for wholesalers and retailers.

Transfer pricing

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. The Transfer Pricing Regulations, 2012 (LI 2188) 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 realized 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/territory.

To ensure Immigration Compliance – Work permits must be renewed yearly. An annual immigration return is also required to be filed with the Ghana Immigration Service by 14 January of the ensuing year.

Disclaimer

All information contained in this document is summarized by KPMG Tax, the Ghanaian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Ghanaian Income Tax Act, 2015 (Act 896) as amended; the Value Added Tax Act, 2013 (Act 870) as amended, National Pensions Act, 2008 (Act766) as amended, Guidelines for the registration of Expatriate (Foreign) workers issued by the National Pensions Regulatory Authority - NPRA/GD/RGEX/01/17, Immigration Act, 2000 (Act 573) and The Transfer Pricing Regulations, 2012 (LI 2188).

© 2019 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.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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