The Ghana Revenue Authority (GRA) is the agency mandated to assess and collect taxes in the country. The administration falls under the umbrella of the Ministry of Finance.
Tax Residency
An individual is tax resident in Ghana if that individual is:
• Present in Ghana for an aggregate period of 183 days or more in any 12-month period that commences or ends during the year;
• A citizen who is temporarily absent from Ghana for a period of not more than 365 continuous days where that citizen has a permanent home in Ghana; or
• An employee of the government of Ghana who has been posted abroad. A partnership qualifies as a resident for a year if any of the partners resided in Ghana at any time during that year. Similarly, a company is resident if it is incorporated under the Companies Act, or if management and control of the company is exercised in Ghana at any time during the year.
A Ghanaian permanent establishment is treated as a resident company for the purposes of income tax. Persons that do not meet the above criteria are considered non-resident for purposes of taxation.
Income Tax
Income tax is the principal direct tax charged on the income or profit of taxpayers. Resident persons are taxed on their worldwide income while non-resident persons are taxed on income which has a source in Ghana. Generally, income has a source in Ghana if it accrues in or is derived from Ghana.
Sources of Income
The taxable income of a person for a year of assessment comprises the total of that person’s income from business, employment and investment, minus the total amount of deductions that are allowed for the person. For resident persons, this income is defined as worldwide income, or income from sources within and outside Ghana.
For non-resident taxpayers, the income must be sourced from Ghana – that is, generated in Ghana or having sufficient connection to the country. Some of the payments that are considered sourced from – and therefore as taxable in – Ghana are as follows:
• Dividend payments made by a tax-resident company;
• Interest payments made by a tax-resident person (including Ghanaian permanent establishments) or made in relation to a debt obligation secured by a real estate property located in Ghana;
• Payments related to natural resources in Ghana;
• Rent and royalty paid for the use of, right to use or forbearance from using an asset in Ghana;
• Payments made for conducting or forbearance from conducting an activity in Ghana; and
• Any other payments brought into or received in Ghana by a resident person.
Tax Year
Income or profit is calculated, taxed and collected in accordance with Ghana’s definitions of the tax year. A tax year is interpreted in two ways:
• Year of assessment: the fiscal or government year that corresponds with the calendar year. This does not change regardless of the taxpayer’s year and is typically the year in which the tax is collected.
• Basis period: the year or period of reference for calculating a particular type of tax. This will align with the taxpayer’s accounting year in some cases. For example, a company that has an accounting year that ends on June 30, 2022 can have a year of assessment spanning January 1, 2022 to December 31, 2022 as the basis period for its corporate income tax calculations. For an individual, the year of assessment is always the same period as the basis period.
For every tax assessment or filing, it is necessary to note the year of assessment, as well as the basis period in question. However, taxpayers should focus on the basis period, as this is usually the reference period used for calculating the amount that is owed.
Taxation of Individuals
Individuals who are resident in Ghana are currently taxed according to a graduated scale (see annual rate table), while non-resident individuals are taxed at a flat rate of 25%. The tax on employment income is required to be withheld at its source and remitted to the GRA by the 15th of the month following the month for which the employment income tax was withheld. Individuals are required to account for their investment and employment income, and expenses on a cash basis. As such, when computing their taxable income for each calendar year, individuals must include income received and exclude expenses paid.
Individuals may claim tax deductions for statutory contributions towards retirement, and for mortgage interest and other personal relief ranging from GHS600 ($54.48) to GHS2000 ($182.00), or 25% of their non-investment taxable income, subject to meeting qualifying criteria and approval. The tax year for individuals is the calendar year. Every individual is required to file personal income tax returns by the end of April each year and settle any outstanding taxes, especially on their total income.
Taxation of Entities
A typical Ghanaian company is taxed first on the company’s taxable profit, and shareholders are taxed on the residual profits distributed by the company. Similarly, the net profit of a branch is deemed as repatriated profit and attracts a final withholding tax even if the profit is not repatriated to the head office. The profit of a resident trust is taxed, while the amount distributed to beneficiaries is not.
In a partnership, only the partners are taxed; the partnership as an entity is not. Unlike individuals, companies and other corporate bodies are required to account for income and expenses on an accrual basis for each accounting year instead of calendar year. Most companies in Ghana are taxed at a rate of 25%; those in the extractive sector are generally taxed at a rate of 35%. However, there are varying concessionary tax rates available to companies based on the nature of their business, industry and location.
Companies pay taxes through self-assessments and withholding at the source, with the companies themselves acting as withholding agents for the government (see table for the various withholding tax rates). By the end of the third month of each resident company’s accounting year, the firm is required to file a self-assessment form declaring an estimate of taxes payable for the accounting year. The estimated tax must then be paid to the GRA in quarterly instalments, and the amount paid must constitute at least 90% of the actual tax payable for the accounting year. Resident companies are also required to file corporate income tax returns no more than four months after the end of their accounting year.
Deductions
In ascertaining taxpayers’ taxable income, taxpayers are permitted to deduct expenses incurred in generating their income, subject to certain conditions. Permitted deductions include:
• Tax depreciation or capital allowance;
• Tax losses for the five previous years, in line with specified conditions; and
• Research and development costs, even if they are capital in nature. Deductions may also be granted as an incentive for hiring recent graduates. Meanwhile, non-deductible payments include:
• Accounting depreciation;
• Domestic expenditure;
• Bribes, fines and penalties;
• Losses incurred on the realisation of business or investment assets and liabilities; and
• Interest on established excessive debt. Payment for repairs and improvements, financial costs and bad debts are restricted under certain conditions.
Double Taxation
Double tax treaties provide relief from the double taxation of income that accrues to residents of contracting states within either of the jurisdictions covered by the treaty. Ghana has operational double tax treaties with Belgium, the Czech Republic, Denmark, France, Germany, Italy, Mauritius, Morocco, the Netherlands, the UK, Singapore, South Africa and Switzerland. There are a Personal income tax brackets, 2023 First 4824 0 Next 1320 5 Next 1560 10 Next 36,000 17.5 Next 196,740 25 Next 359,556 20 Exceeding 600,000 35 few other treaties at different levels of completion. These treaties are intended to relieve residents of the contracting states of double taxation on income accrued in both states.
Resident taxpayers (excluding partnerships) are able to claim a tax credit in Ghana for income tax they pay in a foreign country with respect to foreign-sourced income, to the extent that the foreign-sourced income is included in the taxable income of that taxpayer.
Financial Sector Recovery Levy
The Financial Sector Recovery Levy is a direct tax levied at 5% of the accounting profit of banks, with an exception granted for the country’s rural and community banks. The tax is designed to be a temporary tax and aims to raise revenue to support financial sector reforms. The levy was introduced in March 2021 and is expected to expire in December 2024.
Growth & Sustainability Levy
The Growth and Sustainability Levy is a quarterly levy chargeable on the accounting profit before tax (PBT) or gross production of some specified companies and institutions. The rate of this levy is 2.5%, 5% of PBT or 1% of gross production. It is applicable for the years of assessment between 2023 and 2025.
Tax Incentives
Tax incentives offered in Ghana usually take the form of tax holidays, tax exemptions and concessionary tax rates. Fixed-term tax holidays include a five-year tax exemption on the business income of real estate companies, cash crops or livestock (other than cattle or fish) farmers, agro-processing companies and young entrepreneurs operating in certain industries; and a 10-year tax concessionary period for free zone developers and enterprises, rural banks, venture capital financiers, tree crop farmers and cattle farmers. Tax exemptions are also available for the following sources of income:
• Profit after tax of a private university, on the condition that 100% of the profit be ploughed back into the business;
• Interest paid to individuals by resident financial institutions or on bonds issued by the government;
• Proceeds paid to life insurance policyholders by a resident insurer;
• Income of approved real estate investment trusts, unit trusts and mutual funds; and
• Dividends paid by one resident company to another, where the company receiving the dividend controls at least 25% of the voting power in the company paying the dividend. This exemption does not apply to certain special industries. Lastly, concessionary tax rates on certain kinds of income are available to individuals and companies active in specified industries:
• Income of free zone developers and enterprises derived from exports is taxed at 15%;
• Income generated by manufacturing companies that are located outside of either Accra or Tema is taxed at 18.75% if the companies are located in another regional capital and 12.5% if they are located outside the regional capital; GETFL and CHRL are charged on any supply of goods and services that is a taxable supply and is made by a taxable person in the course of its taxable activity. A taxable activity is an activity, whether or not for a pecuniary profit, carried out by a person in Ghana or partly in Ghana that involves the supply of goods or services to another person for consideration.
Aside from exempt goods and services, VAT, NHIL, GETFL and CHRL are generally charged on the supply of goods and services made in Ghana, and the imports of goods and services. Liability for VAT, NHIL, GETFL and CHRL occurs in the case of:
• A taxable supply, by the taxable person making the supply;
• Imported goods, by the importer;
• An imported service, by the receiver of the service under certain conditions; and
• The supply of telecommunication services, digital services or electronic commerce for use in Ghana, by the non-resident person making the supply or its agent. The general mandatory registration turnover threshold for taxable supplies over a 12-month period is GHS200,000 ($18,200) Except for supplies considered to be zero-rated or subject to a flat rate of 3%, the standard rate of VAT is 15%, the NHIL is 2.5%, the GETFL is 2.5% and the CHRL is 1%. The CHRL is also charged on flat rate supplies, bringing the rate to 4%.
The VAT base for local supplies is equal to the sum of the invoice value, plus the values of the NHIL, the GETFL and the CHRL. In the case of imported supplies, the VAT base is equal to the sum of duty-inclusive costs, insurance costs and freight value. VAT-registered suppliers are required to submit monthly VAT returns and remit VAT payable to the GRA by the last working day of the month following the month to which the return relates. In determining the VAT payable for each month, VAT-registered suppliers are permitted to deduct VAT incurred in their registered business activities, provided certain conditions are met. Some specifically exempted supplies include:
• Agricultural inputs;
• Financial services;
• Domestic transport;
• Crude oil and hydrocarbons products;
• Medical services and medical supplies;
• Machinery and parts of machinery;
• Accommodation in a dwelling or land for agricultural use, as well as for civil engineering public works; and
• Wager of stake in any form of betting or gaming, including lotteries and from gaming machines.
Withholding Vat
The commissioner-general has appointed some persons as VAT withholding agents. These agents are required to withhold payments for standard rated supplies, 7% of the taxable output value for VAT purposes – the taxable value inclusive of NHIL, GETFL and CHRL – and issue a withholding VAT credit certificate at the time of payment.
Certified Invoicing System
Taxpayers under VAT are required to introduce an electronic invoicing system that is integrated with the invoicing system of the GRA: the Certified Invoicing System. There are several approaches to adopting the electronic invoicing system.
Import Duties
Imports typically attract duties of up to 35% of the cost of insuring and freight of imported items, depending on the nature of the item. Certain goods also attract an additional 2% special import levy, though this levy is expected to expire in December 2024.
An additional African Union (AU) levy of 0.2% applies to eligible goods that are imported from non-AU member states to AU member states for consumption in the member state. The aim of this particular levy is to provide a reliable and predictable source of funding for the AU and some of its specialised agencies. Similarly, ECOWAS imposes a levy of 0.5% on imports of goods from non-ECOWAS member states to finance the activities of the ECOWAS Commission, as well as other community institutions.
An export and import levy of 0.75% applies to all imports of goods to Ghana. The proceeds thereof are allocated to the Ghana Export-Import Bank and the Ghana Export Promotion Agency. There are statutory administrative charges that range between 0.4% and 3.45% and are applied on the value of goods imported to Ghana. These charges apply regardless of any import duty exemptions.
Digital Transfer Levy
Unless specifically excluded, an Electronic Transfer Levy (e-levy) of 1% is applicable on electronic transfers conducted through electronic money issuers, payment service providers, banks, specialised deposit-taking institutions and other financial institutions prescribed by regulations made under the Electronic Transfer Levy Act 2022 as amended. The e-levy is applicable to the following transactions:
• Mobile money transfers done between accounts on the same electronic money issuer;
• Mobile money transfers from an account on one electronic money issuer to a recipient on another electronic money issuer;
• Transfers from bank accounts to mobile money accounts;
• Transfers from mobile money accounts to bank accounts;
• Bank transfers on an instant pay digital platform or application originating from a bank account belonging to an individual subject to a threshold to be determined by the minister of finance. This threshold is currently GHS20,000 ($1820) per day per person. Some transfers not subject to e-levy include cumulative transfers of GHS100 ($9.08) per day by the same person, and transfers for the payment of taxes, fees and charges on government approved platforms.
E-levy returns are required to be filed by designated charging entities at a time and place determined by the commissioner-general. The levy is required to be paid to the commissioner-general within 24 hours upon charging.
Miscellaneous Taxes
Other taxes imposed in Ghana include:
• Environmental excise tax of 10% on plastic goods;
• Airport tax of GHS5 ($0.45) on local travel and $60-200 on foreign travel;
• Stamp duty on the issuance of new shares and written contracts at various rates;
• Communication service tax of 5% on electronic communication services;
• Excise duties generally range from between 0% and 50% of the qualifying price (in addition to specific rates for some products). These taxes apply to products such as beer, spirits, tobacco, electronic cigarettes, etc. Excise tax stamps are to be affixed on such products that are manufactured in or imported to Ghana; and
• Mineral royalty of 5% from mining and extraction firms, subject to any fiscal stability agreement.
Transfer Pricing
Ghana’s Transfer Pricing Regulations (TPRs) require that transactions conducted between persons who are in a controlled relationship – for example, parent-subsidiaries, associates or relatives – be done at arm’s length. Controlled relationships with entities are based on participation, management or control of the entity; the threshold for control determination is 25% or more of the entity’s voting power, income or capital.
The TPRs also cover transactions conducted between an employer and employee. A transaction is conducted at arm’s length if the terms of the transaction do not differ from the terms of a comparable transaction between independent persons. The acceptable methods under the TPRs are similar to those contained in the guidance of the OECD on transfer pricing.
At the end of the year taxpayers who conducted business with other persons with whom they have controlled relationships are required to complete and file:
• Annual transfer pricing returns within four months of the end of the basis period;
• A country-by-country report within 12 months of the last day of the reporting fiscal year of the multinational enterprise group (where certain conditions are satisfied; and
• Supporting documentation or information on transactions with connected persons in the form of master file and local file.
Tax Administration
The GRA is made up of two operational divisions: the Domestic Tax Revenue Division and the Customs Division, with assistance from the Support Services Division and the Commissioner-General’s Secretariat.
Taxes are divided into two main categories: direct taxes which are levied on income or profit, and indirect taxes which are levied on undertaken transactions. Taxable persons are categorised as individuals or entities. Entities mainly comprise companies – including branches – trusts and partnerships.
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