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Ghana - Changes to Personal Income Tax Bands and Reliefs

Ghana - Changes to Personal Income Tax Bands and Relief

This report covers changes to Ghana’s personal income tax regime.

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Emmanuel Asiedu

Partner, Tax and Regulatory Services

KPMG in Ghana

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Recent changes to Ghana’s personal income tax regime amend the tax bands for resident individuals and increase their personal relief deductions in arriving at taxable income.

The revised personal income tax band took effect from 1 January 2020.1

The annual maximum tax rate applicable on chargeable income exceeding GHS 240, 000 remains at 30 percent.

WHY THIS MATTERS

The change in the tax brackets and personal relief will increase the net earnings of resident individuals and consequently result in a marginal decrease in taxes for the respective bands.

With the amendment of the tax band, employees within the 5-percent to 30-percent bands will save between GHS 18.60 and GHS 57.00 per annum while providing a total relief for *minimum wage earners.  In addition, resident individuals who qualify for any of the reliefs as outlined below will benefit from some degree of marginal tax savings.

Tax costs and budgeting for assignments to and from Ghana could therefore be reduced following the modification to the income tax bands (which we discuss further below).  Employers may need to make the necessary payroll adjustments and update hypothetical taxes for tax-equalised assignees.

Residents: Rates & Bands

The revised graduated tax bands are shown below:

Chargeable Income Tax

(Annual)

Rates

 

GHS

 

First

3,828

Nil

Next

1,200

5%

Next

1,440

10%

Next

36,000

17.5%

Next

197,532

25%

Exceeding

240,000

30%

Non-Residents: Rates & Bands

The tax rate applicable to the income of non-resident individuals remains set at 25 percent.

Tax Incentives and Savings

The revised income tax bands present the below incentives and savings:

1. Total relief for minimum wage earners*

2. Marginal decrease in taxes for each tax band presents the below tax savings: 

Tax Band

Tax Savings per annum GHS

5%

18.60

10%

37.20

17.5%

47.10

25%

57.00

30%

57.00

*Minimum wage earners are individuals who earn GHS 11.82 a day.

Personal Reliefs

In arriving at the chargeable income of a resident individual for a year of assessment, a deduction can be made for the below personal reliefs upon certification by the Commissioner-General:

Relief Previous (GHS) Amended (GHS)
Dependent Spouse or at least two (2) dependent children 200 1,200
Old Age (60 years and above) 200 1,500
Children’s Education (per child) – up to maximum of three (3) 200 600
Disability Relief 25% of the assessable income of the disabled individual No change
Aged Dependents (per dependent) – up to maximum of two (2) aged dependent relatives 100 1,000
Training and Development Relief Maximum of 400 2,000

FOOTNOTE

1  The Income Tax (Amendment) Act, 2019 (Act 1007), which amends the tax bands and the personal relief for resident individuals in the First and Fifth Schedules of the Income Tax Act, 2015 (Act 896) respectively. For coverage of the changes in 2019 budget, see GMS Flash Alert 2019-009 (23 January 2019).

The information contained in this newsletter was submitted by the KPMG International member firm in Ghana.

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© 2020 KPMG, a Ghanaian registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

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