Individual, corporate and transactional tax collection in Ghana

From 2014 to 2016 the administration made significant changes to the tax regime. Most of the tax laws were either revised or replaced with new legislation. Having made significant changes to tax laws during that period, the government is now focusing on widening the tax net to capture revenue from individuals and businesses operating in the informal sector, and on improving compliance among taxpayers who are already registered.

In Ghana tax can only be imposed by an act of Parliament or under the authority of an act. Similarly, securing a tax waiver or exemption requires parliamentary approval, though a waiver or exemption may not necessarily take the form of an act. These are the primary principles guiding the imposition of taxation and exemption from taxation in Ghana. An investor that is granted tax exemptions must ensure that the exemption is ratified by Parliament.

Income is taxed based on both source and residency. Generally, when income is generated from activities undertaken or paid for by a person in Ghana, it is deemed to be sourced from Ghana and is therefore taxable. Apart from source taxation, a person’s income may be taxed if they are tax-resident in Ghana. In this case, the person is taxed on all income regardless of source, which is generally referred to as taxation of worldwide income. While this can result in double taxation of the same income, tax credits and other reliefs are available to the person under domestic law and any applicable double taxation agreement.

Entities incorporated or registered in Ghana are generally treated as resident persons for tax purposes. An entity can also be considered tax resident based on the place where the entity’s management is held, though this is rarely enforced. For individuals, citizens of Ghana are typically considered tax resident, and there are very few situations in which a citizen may qualify as non-resident. A foreigner can also be considered tax resident in Ghana if the foreigner is present in the country for more than six months in a one-year period.

It is necessary to determine a person’s tax residency because when a person is tax resident, the person is taxed on all incomes earned, whether or not they are earned in Ghana or abroad. A non-resident person, meanwhile, is only taxed on income sourced from Ghana. Residency also determines the rate that should apply to the person, particularly for individuals. A resident individual is taxed based on a graduated scale, while a non-resident individual is taxed at a flat rate.

Income tax is levied by a year-end assessment. However, quarterly payments – and, in some cases, monthly payments – must be made on account towards whatever the annual liability will amount to at the end of the year. Withholding tax collected on business transactions among resident taxpayers also counts as advance payments of income tax. Meanwhile, the withholding tax that is collected on payments made to non-resident persons usually represents a full discharge of the non-resident’s tax obligation.

Value-added tax (VAT), communications service tax (CST), Customs duties and taxes, and excise taxes comprise some of the transactional taxes. VAT applies to all supplies unless specifically stated in the law as exempt or relieved by other means, including by parliamentary waiver. CST applies largely to the telecommunications sector, while Customs duties are applicable to imports and excise tax is applicable largely to cigarettes, beverages and similar goods.

Excepting a few levies and local government taxes, the Ghana Revenue Authority (GRA) is the body mandated to assess and collect taxes. It enforces the provisions of the tax acts and serves as the first arbiter in the event of a tax dispute. GRA offices across the country are organised into small, medium and large taxpayer offices. The Ministry of Finance and Economic Planning is responsible for overseeing the GRA.