Frequently Asked Questions
We put together the following pertinent questions we get frequently from our clients. Take a look at them and get in touch with us if you need to talk to a professional.
Yes. The excess of the government’s stipulated allowance is taxable. The national service personnel should be treated as temporary staff and the allocated salary would be the excess allowance.
For instance, if the government’s stipulated allowance is $750.00 and the company decides to pay $1,200.00, the first $750 is tax-free because it’s a national service allowance. The $550 ($1,200-$750) excess should be taxed using the graduated tax rate.
Yes, and at a rate of 7.5% because it is a service the hotel is rendering. There is a difference between staying in a hotel and renting an apartment. For instance, there is the provision of ancillary services when you stay in a hotel but you don’t get that when you rent an apartment so it won’t fall under the residential 8% withholding. Let me hasten to add that $3,000 might include levies and VAT. It is prudent to get the actual cost before the levies and VAT were applied. It is on this actual cost that you would withhold the 7.5%
The VAT Act, 870, as amended states that retailers of goods whose annual revenue is expected to be between GHC200,000 and GHC500,000 and are engaged in taxable activities should charge the VAT flat rate. It considered two things, the taxable activity and the VAT threshold. The form of business does not matter here.
Section 7 (1) (k) of the ACT 896 states, a COLA is an exempt income for income tax purposes when a COLA, other than a training allowance paid in place of a salary for services rendered abroad by members of the Ministry of foreign affairs and officers attached to official Ghanaians diplomatic missions or consulars abroad. The only group of persons that their COLA cannot be taxed are the people working with the ministry of foreign affairs and other diplomatic missions outside Ghana. Even with that the COLA should not include training allowances which was paid to people as a form of payment of their salary. In simple terms if you are not working for Ministry of foreign affairs or any diplomatic missions outside Ghana, any COLA you receive is taxable.
If the intern will stay over a period of 6 MONTHS and above, then he or she is qualified to be a casual worker who will be taxed at 5% but because the intern will be staying for a longer period, we should treat him/her as a temporary worker taxed at the graduated rate and also pay SSNIT for them.
No, we can’t use VAT credit to reduce levies. The VAT act specifically states in section 48 (1), that a taxable person may deduct input tax from output tax (thus, 12.5% of the payable amount not the levies). In a situation where the credit excess shall be credited by the Commissioner General to the taxable person where there is a proof of excess taxes paid which led to a credit position, there is no provision for that in the VAT returns forms.
There are no tax concessions for newly set up sachet water companies in Ghana but there are some concessions that one can enjoy. Those are
- Sachet water companies are manufacturing companies therefore they can enjoy tax rebates depending on the location of the company. Those in Accra do not enjoy the tax rebates. Those located in the regional capitals aside Accra, will get 25% tax rebates, thus being taxed at 18.75% (25%*75%). Those outside the regional capitals enjoy 50% tax rebates, thus being charged at 12.5% (25%*50%).
- If the person who set up this sachet water company is a young entrepreneur, that is, if his/her age is below 35 years the company can enjoy 5% tax holiday, thereby, paying tax at the rate of 1% and also get tax rebates after the first years depending on the location of the company. But if you don’t classify the sachet water company as one of those then the corporate tax rate will be the normal 25%.
If the two invoices relate to the same class of withholding tax, for instance, if the two invoices all relate to goods or if they all relate to works, then you can add them and apply the same withholding tax rate but if one relates to works and the other relates to goods, adding them up will be problematic as the same withholding tax rate will not be applicable.
Firstly, the default currency for filing tax returns in Ghana is the Ghana Cedi, unless you have the Commissioner General’s express authorization in writing to file in a foreign currency by using the prevailing Bank of Ghana inter-bank exchange rates at the dates of the transactions to convert the Euro amount to Ghana Cedi.
Secondly, the determination of whether it is a good or service is important because the rules for Zero Rating for goods and services are quite different (Goods – you need to enter the goods for export under Act 891).
Reading items 2 and 3 of Act 870’s, under 3 of the second schedule for Zero-Rated, a supply of services to the extent that the services are consumed elsewhere than in the country can therefore be concluded that the export of drawings qualifies to be Zero-Rated.
According to the Value Added Tax (VAT) regulations, Regulation 11LI2243 states that, for the purpose of determining consideration in respect of taxable supply under section 43 of the ACT, any discount or rebate is acceptable only if the discount or rebate is non-discriminatory and available to every recipient of the supply. From the above, if a discount is given, VAT should be on the cost minus discount.
Section 118 of the Income Tax ACT 2015, ACT 896 as amended, which talks about withholding tax certificates does not categorically state WHEN or the TIME a withholding certificate should be submitted to GRA. Regulation 26 of the Income Tax Regulations 2016, LI2244, only gives guidance as to the form tax payers should use in issuing tax credit certificates to claims they have returned pending the issuance of the Commissioner General’s Tax Credit Certificate (TCC). The Revenue Administration ACT 2016, ACT 915, does not even make mention of tax credit certificates, let alone, give a clue about time of its submission.
From the above, it is clear that there are no timelines for the submission of withholding tax credit certificates to GRA. Legally, an officer of GRA, cannot reject a tax credit certificate which has been submitted for previous assessment periods but it becomes a little problematic when the tax credit certificate is submitted after an audit (especially Field Audit) has been concluded on the tax payer and liability assessed. For instance, if the audit conducted was based on the tax credit certificate already submitted, then it means the tax officer will have to perform the audit to include the new tax credit certificate and gross it up.
Also, imagine the revenue schedule from the tax payer did not include the revenue from which the newly submitted tax credit certificates relates. This will also call for reperformance of the audit. When the submission of the tax credit certificate is done after the audit, some tax officers presume the tax payer is suppressing information and might penalize the tax payer for it.
In conclusion, we encourage tax payers to submit tax credit certificates to their tax payers service centers as and when they receive them.
When submitting tax credit certificates, the tax payer keeps the original (colored yellow) and submits the duplicate (colored blue) to your Tax Service Center (TSC). You will have to write your TIN on the back of the duplicate for easy reference. You will not need to fill any forms which will require the quoting of the Tax Credit Certificate (TCC) number.
Withholding tax credit certificate issued shall cover a calendar month in a particular year of assessment. So, the most important period on the withholding tax credit certificate is the year of assessment. In some cases, the assessment period and the dates might not be in the same calendar year. For instance, tax credit certificate for December 2021 will be issued in 2022. The assessment period will be 2021 but the date could be around 24th January 2022.
Section 73 (1) of ACT 915 states that a person who fails to file a tax return as required by a tax law is required to pay a penalty. Companies are expected to file their tax returns 4 months after the end of their accounting year. If their accounting year ends on Dec 31st, then the filing should be on or before 30th April the following year. Section 30 (3), states that the Commissioner General may, by written notice, extend the dates by which the return is to be filed.
This means the due date for filing the tax returns moves from 30th April to the new date which section 30 (5) states the extended days shall not be more than 60 days. Let me hasten to add that there’s a caveat at section 30 (4) where it states that the extension granted under this section may be subject to the terms and conditions the Commissioner General deems appropriate.
Therefore, the Commissioner General may state other conditions in the extension letter such as the computation of penalties if the person fails to file returns on or before the extended period. But if you don’t find such conditions in your extension letter, then the computation of your penalties will start after your extension period as granted by the Commissioner General.
A subsidiary on its own does not constitute a permanent establishment. The fact that a company is under a common control or controlled by another person does not constitute a permanent establishment. A subsidiary is legally separate from their parents.
This means tax and debt are paid by the individual organization. Subsidiary companies will be aligned with the local regulations or laws. A subsidiary can be considered as a permanent establishment when it tries to act like an independent agent by acting exclusively on behalf of the principal (Section 107 of Income Tax ACT 896 for Taxation of Permanent Establishment).
It should be added to their income from employment and tax at the graduate rate. In my opinion, the incentive given is a payment received in respect of employment under sections 4(2)(a) (vii)and(ix)
Withholding taxes on goods is 3%. General Service is 7.5%. The supply of Labour is 7.5%. Unless the goods are incidental to the service or the service is incidental to the goods then a 1% rate is applied either 3% or 7.5%.
Section 57 of the Revenue Administration Act 2016
File nil returns for them and write to GRA that the directors of the firm are foreigners and don’t earn anything from the company with proof. Also, check form 3 from the registrar general department to find out whether the directors registered as Ghanaian or Nigerian.
If its company is limited by shares then YES. But if it’s limited by guarantee then NO.
Per section 115 act 896 (investment returns)
A resident person shall withhold tax at a rate in the first schedule where that person pays dividends, lottery winnings, and interest.
This section does not apply to a payment that is an exempt amount.
Section 99 of act 896 ( building society and friendly societies)
The income of a statutory building society or a registered building society is exempt from taxes.
This means that the investment of a cooperative society is not liable to withholding taxes.
The recent decision of the High Court of Ghana in the case of Beiersdorf v Commissioner-General of Ghana Revenue Authority shown that a Ghanaian company cannot claim a tax deduction for any payment made to the foreign entity if the TTA is not registered with the GIPC.
Yes you have to pay import VAT as they are considered to be imported services
Refer to Section 53 of the Value Added Tax Act, 870
There are some exceptions to services incidental to the supply of goods if the value of those incidental services does not exceed the value of goods considered as goods.
Section 21(3)of the revenue administration act indicated that
CG may in a written application, require a person to take a foreign currency amount into account for the purposes of keeping records and submission of accounts or any other tax transactions under a tax law
There are conditions in subsection 4(a,b,c), 5 and 6
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