Ghana Individual Tax Guide

Ghana

Accra GMT

EY Street address: Mail address: 60 Rangoon Lane P.O. Box 16009, Airport Cantonments City Accra Accra Ghana Ghana

Executive and immigration contacts

Robin McCone

+233 (302) 778-279

Fax: +233 (302) 778-894 Email: robin.mccone@gh.ey.com

Isaac Nketiah Sarpong +233 (302) 277-9742 Fax: +233 (302) 778-894 Email: isaac.sarpong@gh.ey.com

Isaac Quaye

+233 (302) 779-868

Fax: +233 (302) 778-894 Email: isaac.quaye@gh.ey.com

Peter Dodoo +233 (302) 779-868 Fax: +233 (302) 778-894 Email: peter.dodoo@gh.ey.com

A. Income tax

Who is liable. Resident individuals are subject to tax on their worldwide income. However, the employment income of a resi dent individual from employment exercised in a foreign country is exempt from tax if the employment is exercised with either of the following:

• A nonresident employer

• A resident employer if the individual is present in the foreign country for 183 continuous days or more during the year of assessment

Nonresidents are subject to tax only on chargeable income accru ing in or derived from Ghana.

Individuals are considered resident in Ghana if they meet any of the following conditions:

• A citizen of Ghana other than a citizen who has a permanent home outside Ghana and lives in that home for the whole year of assessment

• An individual who is present in Ghana for an aggregate of at least 183 days in a 12-month period that begins or ends during the year of assessment

• An employee or official of the government of Ghana posted abroad during the year of assessment

• A citizen with a permanent home in Ghana who is temporarily absent from Ghana for no longer than 365 successive days

Income subject to tax. The taxation of various types of income is described below.

Employment income. Employees, including directors of compa nies, are subject to tax on gains or profits from any employment,

including allowances, gifts or benefits paid in cash or in kind to or on behalf of an employee.

Taxable income of employees consists of the following:

• Salary, wages, leave pay, fees, commissions and gratuities

• Overtime pay and bonuses

• Individual allowances, including cost-of-living allowance, subsistence, rent, entertainment and travel allowance

• A discharge or reimbursement of an expense incurred by an individual or an associate of the individual

• A payment made for the individual’s agreement to the condi tions of the employment

• Other payments, including gifts received with respect to the employment

• Subject to the National Pensions Act, 2008 (Act 766), as amended, a retirement contribution made to a retirement fund on behalf of an employee and retirement payments received with respect to employment

The following items are excluded in the calculation of the taxable income of employees:

• Reimbursement of medical, dental or health insurance expens es, if all full-time employees are entitled to the same benefit

• Passage to and from Ghana for a nonresident individual appointed outside Ghana whose presence in Ghana is solely for the purpose of serving the employer

• Employer-provided accommodation at the field site of timber, mining, building, construction, farming business or petroleum operations

• Reimbursement for expenditure incurred by the employee that serves the proper business purposes of the employer

• Payments made to employees on a nondiscriminatory basis that, by reason of their size, type and frequency, are unreasonable or administratively impracticable for the employer to account for or to allocate to the individual

• Redundancy pay

Self-employment and business income. Self-employed individuals include traders, professionals or individuals carrying on any vocation, partners in partnerships and sole proprietors. Taxable business income consists of net accounting profit plus expenses that are not deductible for tax purposes, less capital (deprecia tion) allowances and personal reliefs.

The income of an individual from a business for a year of assess ment is the gains and profits of that individual from that business for the year or a part of the year. It includes the following:

• Service fees

• Consideration received with respect to trading stock

• An amount derived that is effectively connected with the business and that would otherwise be included in calculating the income of the individual from an investment

• Gains from the realization of capital assets and liabilities of the business

• A gift received by the individual with respect to the business

• Amounts derived as consideration for accepting a restriction on the capacity to conduct the business

Individuals who only have business income from sources within Ghana may qualify to be taxed on a modified basis (that is, based on installment, turnover or cash basis).

Investment income. Investment income includes the following:

• Dividends, interest income, annuities, natural resource pay ment, royalties and rents

• Gains from the realization of investment assets

• Amounts derived as consideration for accepting a restriction on the capacity of the individual to conduct an investment

• Lottery winnings in excess of GHS2,592

• Gifts received other than those received with respect to busi ness or employment

The dividend tax rate is 8%. The 8% tax is withheld at source, and it is imposed on dividends paid to resident and nonresident individuals.

Interest paid to individuals by resident financial institutions or the government is exempt from tax.

Capital gains. Capital gains are included in business income or investment income, depending on the source of the gain, and taxed accordingly. The separate taxation of capital gains has been abolished.

However, individuals may elect to pay a 15% tax on gains on the realization of an asset instead of including the gain in business income or investment income.

If the gains are included in business income or investment income and taxed as such, the tax rate is the same rate applicable to the individual on his or her business income or investment income.

Deductions. Expenses wholly, exclusively and necessarily incurred in the production of income from business or invest ments are deductible.

Mortgage interest incurred during the year with respect to only one residential premises during the lifetime of that individual is deductible.

Individuals may deduct the annual personal reliefs granted them as indicated in the following table.

Type of allowance Amount

Children’s education allowance

Dependent elderly relative

GHS600, per child or ward, up to a maximum of three children

GHS1,000 per dependent, allowance up to a maximum of two dependents

Marriage/responsibility relief

GHS1,200 Disability allowance

25% of assessable income from business or employment

Old age relief

Professional/vocational training

Up to GHS1,500 per year

Up to a maximum of allowance GHS2,000

Contributions of individuals to the mandatory pension schemes qualify as tax reliefs under the National Pensions Act, 2008 (Act 766), as amended. Contributions to the voluntary pension scheme of an individual employee up to 16.5% of the employee’s salary are also exempt from tax if certain conditions are met.

Rates. The table below presents the progressive rates of income tax applicable to resident individuals for a tax year. Nonresidents are subject to income tax at a flat rate of 25%.

Chargeable income Tax rate Tax due Cumulative tax due GHS % GHS GHS

First 3,828

0

Next 1,200 5 60 60

Next 1,440 10 144 204

Next 36,000 17.5 6,300 6,504

Next 197,532 25 49,383 55,887

Exceeding 240,000 30

Withholding tax. Management and technical service fees paid to nonresidents are subject to a 20% final withholding tax.

Relief for losses. Unrelieved losses incurred by persons in a specified priority sector can be carried forward for five years. Unrelieved losses incurred by persons in any other sectors can be carried forward for three years.

Unrelieved losses are losses that have not been deducted in cal culating the income of the individual.

B. Other taxes

Net worth tax. Ghana does not impose a net worth tax.

Estate and gift taxes. Estate and gift taxes apply. Gifts are taxed as part of employment, business or investment income.

C. Social security

Ghana imposes a mandatory social security tax at a rate of 18.5%. Employers must pay social security tax at a rate of 13% of the employees’ salaries, and must withhold an additional 5.5% from each employee’s salary. Employers remit 13.5% out of the 18.5% to the Social Security and National Insurance Trust. The remain ing 5% is remitted by the employers to the trustees appointed to manage the employees’ occupational pension schemes. In addition to the mandatory 18.5%, either the employer or the employ ee or both may contribute to a provident fund scheme for the benefit of the employees. Up to 16.5% of contributions to a provident fund scheme is exempt from tax if the conditions imposed on the withdrawal from the scheme are fulfilled. Selfemployed individuals who qualify may contribute toward the mandatory schemes. Persons in the informal sector who are not covered under the mandatory schemes must have 35% of their declared income treated as deductible income for the contributor for the purposes of income tax.

Non-Ghanaian individuals who have emigrated or are emigrating permanently from Ghana are entitled to a lump-sum benefit.

D. Tax filing and payment procedures

The tax year for individuals is the calendar year. Individuals, including employees, must file their returns within four months after the end of the tax year. In the case of employees, their pri mary employers are required to file their returns on their behalf within three months after the end of the year. If the employees and the Commissioner-General agree, the returns filed by the primary employers become final returns. An employee who has additional sources of income must file, in addition to the return filed by the primary employer, a separate return including details of the income from the primary employer within four months after the end of the year. Payment of tax by self-employed indi viduals must be made on a monthly basis. Employees are subject to withholding tax on their salaries under the Pay-As-You-Earn (PAYE) system.

E. Double tax relief and tax treaties

Tax paid on income earned outside Ghana by a resident of Ghana that is liable to tax in Ghana is credited against the total tax payable in Ghana. However, the credit is capped at the total tax pay able on that income in Ghana.

Ghana has entered into double tax treaties with the following countries.

Belgium Germany Singapore Czech Republic Italy South Africa Denmark Mauritius Switzerland France Netherlands United Kingdom

Ghana has ratified a double tax treaty with Morocco, but this treaty is not yet in force. Ghana has signed double tax treaties with Ireland and Malta, but it has not yet ratified these treaties.

F. Temporary permits

Ghana requires visitors to obtain entry visas, except visitors from countries that have visa abolition treaties with Ghana. Nationals of British Commonwealth countries in East Africa and Southern Africa, notably Botswana, Kenya, Malawi, Tanzania, Uganda, Zambia and Zimbabwe, nationals of the 16 member countries of the Economic Community of West African States (ECOWAS) and nationals of Malaysia, Singapore and Thailand do not need entry visas.

Visas and permits are used interchangeably. British Common wealth citizens need entry permits, while all other foreign nation als require visas. The government of Ghana issues the following permits and visas:

• Transit visas

• Visitors’ visas

• Business visas

• Work permits

• Residence permits

To obtain an entry visa, individuals must prove that they can sustain themselves financially while in Ghana, except foreign nationals who own assets in Ghana.

Emergency entry visas may be obtained on arrival in Ghana through direct application to the Comptroller-General of the Ghana Immigration Service. This facility is primarily for foreign nationals who come from countries where Ghana has no mission or consulate. Application for emergency entry visas should be made to the Comptroller-General at least seven days prior to the date of arrival.

Transit visas are issued to travelers who wish to pass through Ghana.

Visitors’ visas valid for 60 days are issued on arrival to visitors who have acquired entry permits or visas (either single- or multipleentry). Visitors’ visas may be extended up to six months by submit ting an application to the Ghana Immigration Service at Accra or to regional headquarters.

G. Work permits and self-employment

Work permits are generally granted by the Ministry of the Interior to expatriate employees or to individuals who have already been issued residence permits to enable them to take up specified employment for remuneration. Work permits may also be granted to foreign nationals engaged on a short-term basis for certain specific services and, in these cases, are not counted against a company’s immigrant quota (see Section H).

Other than reciprocity, when reviewing applications, the Ministry of the Interior considers whether the activity in which the foreign national will engage will be functional, whether the applicant honors his or her tax obligations, and whether the applicant has evidence of satisfactory financial support.

An applicant may not work in Ghana while his or her work per mit application and other papers are being processed. If possible, approval must be obtained from the nearest Ghana consulate before an expatriate employee travels to Ghana. However, such protocol can be received in Ghana.

It is an offense for a foreign national to change employers after he or she receives a work permit. If it is necessary to change employers, the Ghana Immigration Service should be notified within one week after the applicant knows he or she is changing jobs.

Work permits must be renewed annually. However, long-term (two or more years) work permits are issued if the applicant has worked consistently in Ghana for at least three years.

A foreign national may invest or start a business in Ghana by registering the company with the Registrar of Companies and then by applying to the Ghana Investment Promotion Centre, indicating his or her field of investments.

Foreign nationals may manage subsidiary companies in Ghana.

H. Residence permits

Residence permits are issued by the Comptroller-General of the Ghana Immigration Service to foreign nationals wishing to reside in Ghana. The initial residence permit is valid for one year.

Applications for renewals may be submitted to the ComptrollerGeneral within one month before the other permit expires.

Subsequent one-year renewals may be granted at the ComptrollerGeneral’s discretion. Applicants must normally be sponsored by established entities in Ghana or by universities or international organizations.

Residence permits are granted by the Ghana Immigration Service to expatriate personnel employed by companies or individuals under the immigration quota system. The immigration quota specifies the number of foreign nationals a person or firm is permitted to employ in Ghana in a particular occupation. A foreign national on a company’s quota automatically receives a residence permit but must apply for the permit to be stamped in his or her passport.

New investors who wish to take up residence in Ghana are granted residence permits only after satisfying the investment requirements of the following institutions:

• Petroleum Commission: for investment in the oil and gas sector

• Minerals Commission: for investment in the mining sector

• Department of Social Welfare: for nongovernmental organiza tions (NGOs)

• Ghana Investment Promotion Centre: investment in all sectors

Investors qualifying under the Free Zone Act have an open immigrant quota.

I. Family and personal considerations

Family members. Residence permits may be issued to a spouse and other dependents of a principal residence permit holder. Issuance is subject to the condition that the dependents may not undertake remunerated employment without authorization.

Driver’s permits. In general, it is illegal for foreign nationals to drive in Ghana without Ghana driver’s licenses. However, an inter national driver’s license may be used for a brief period. Applicants are required to pass written and practical tests to obtain a Ghana driver’s license.