The Ghanaian Tax System
The Ghana Revenue Authority (GRA) is mandated to collect all tax on behalf of Government of Ghana (GoG). At the moment, there are about ten (10) different types of taxes that investors may face while doing business in Ghana. These are described briefly below:
Corporate Tax: the general corporate tax rate is 25% but 35% for companies in the mining sector and 20% for those in the hospitality industry. This said however, incentive provisions are made in the Internal Revenue Act that enables companies to enjoy tax rates lower than the stipulated figures.
Withholding Tax: When individuals supply goods and services to companies exceeding GHS 500, the companies are obliged to withhold tax varying from 5 – 15 percent from them, depending on whether they are resident or not as well as the type of transaction.
Capital Gains Tax: When companies dispose of chargeable assets such as business and business assets, buildings, lands, rights in stocks, etc., they are required to pay 15 percent capital gains tax. Capital gains from agricultural land and capital assets listed on the Ghana Stock Exchange (GSE) are exempt from capital gains tax.
Value Added Tax (VAT): For supply of goods and services made in Ghana, goods imported into Ghana and the supply of imported services, companies and persons are required to pay 15.5 percent VAT. However, some goods such as locally produced or goods brought in the raw state, petrol, kerosene and diesel, agriculture and fishery equipment, etc. are exempt from VAT and NHIL.
National Health Insurance Levey (NHIL): Made in Ghana goods and services supplied as well as goods imported into Ghana and the supply of imported services, companies/persons are obliged to pay 2.5 percent NHIL.
Employment Tax: Individuals resident in Ghana pay up to a maximum of 25 percent tax on income from employment. Sole proprietors and partnerships also pay graduated tax rates up to 25% maximum. Several types of tax holidays exist for persons resident in Ghana. For non-residents, a flat tax rate of 20 percent is charged on income derived from Ghana.
Customs and Excise Duties: These taxes are paid on the import of certain goods into the country. Import duty levied on the cost, insurance and freight (CIF) of the imported item ranges from 0% to 20% depending on the nature of imported good. A number of goods are exempted from import tax. These include agricultural and industrial plant, machinery and equipment, commercial buses with seating capacity above 30, workshop vans, among others. On the other hand, excise duties are usually applied on such products as beer, spirits and tobacco. Values range between 10% and 170% of ex-factory price.
Communication Service Tax (CST): This tax is payable by individuals and corporate organizations who use electronic communication services (ECS) provided by a person permitted or authorized under the Communication Services Act, 2008 (Act 775) and its regulations. The providers of ECS also pay the CST.
Rates of Income Tax Contained in Income Tax Act, 2015 (Act 896)
|Entity||Rate of Tax %|
|Corporate income tax||25%|
|Company principally engaged in the hotel industry||22|
|Company income from the export of non-traditional goods||8|
|Chargeable income derived by a financial institution from loan granted to a farming enterprise in the production of income of the enterprise||20|
|Chargeable income derived by a financial institution from loan granted to a leasing company to fund acquisition of assets for lease||20|
|Manufacturing business located in regional capitals (except Accra & Tema)||75% of corporate tax rate|
|Manufacturing business located outside the Regional capitals||50% of corporate tax rate|
|Free zone enterprise/developers for the first ten (10) years in operation||0|
|Free zone enterprise/developers after 10 years in operation (on export of goods and services)||15|
|Free zone enterprise/developers after 10 years in operation (on domestic sales)||25|
|Chargeable income of a person from petroleum operations||35|
|Chargeable income of a person from mineral operations||35|
AGRO PROCESSING COMPANIES
|Agro processing business conducted wholly in the country for the first 5 years||1|
|Cocoa- by product business conducted wholly in the country for the first 5 years||1|
|Rural banking business for the first 10 years||1|
|Tree crop farming for the first 5 years||1|
|Cash crops or livestock (excluding cattle) for the first 5 years||1|
|Interest (excluding individuals and resident financial institutions)||8||On Account|
|Interest paid to Individual||1||On Account|
|Rent of residential property (for individuals and as investment income)||8||Final tax|
|Rent of non-residential property||15||Final tax|
|Fees, allowance to resident director/manager, board member, trustee||20||On Account|
|Fees to lecturers, invigilators, examiners, part-time teachers, non-executive directors/board members and endorsement fees||10||Final|
|Commissions to insurance agents, sales and persons||10||On account|
|Commissions to resident lotto receivers or agents||10||On account|
|Supply of goods exceeding GH₵ 2,000 p.a||3||On account|
|Supply of works||5||On account|
|Supply of services||15||On account|
|Payment to petroleum subcontractor||15||Final|
|Payment for unprocessed precious minerals||10||On account|
|Royalty, natural resource payment||15||On account|
|Income of non-resident individual from employment||20||Final|
|Royalties, natural resources payments and rents||15||Final tax|
|Management, consulting and technical service fee and endorsement||20||Final tax|
|Repatriated Branch after tax profits||8||Final tax|
|Interest income||8||Final tax|
|Short term insurance premium||5||Final tax|
|Endorsement fees||20||Final tax|
|Payment for services||20||Final tax|
|Goods, works and services that give rise to income accruing in or derived from Ghana (that is trading in Ghana (i.e. where a Permanent Establishment exists) as against with Ghana)||20||Final tax|
|Payments received by a person who conducts a relevant transport business as payment for
(i) carrying passengers, cargo, mail or other movable tangible assets that are embarked in the country, other than as a result of transhipment; or
(ii) renting containers and related equipment which are supplementary or incidental to the business referred to in subparagraph (i);
|Payments received by a person who conducts a business of transmitting or receiving messages by cable, radio, optical fibre or satellite or electronic communication in respect of the transmission, reception or emission of messages by an apparatus located in the country, whether or not the messages originate, terminate or are used in the country;||15%||Final|
Source: Ghana Revenue Authority (GRA)