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  • Service: Tax, Global Mobility Services
  • Type: Regulatory update, Survey report
  • Date: 5/1/2013

Ghana - Income Tax 

Taxation of international executives
Tax returns and compliance
Tax rates
Residence rules
Termination of residence
Economic employer approach
Types of taxable compensation
Tax-exempt income
Expatriate concessions
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits (reliefs)
Sample tax calculation


All income tax information is summarized by KPMG, the Ghana member firm of KPMG international based on the Ghanaian Internal Revenue Act, 2000 (Act 592).


Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?


Every individual subject to tax is to file his/her annual return on or before 31 March of the following year.


An individual whose source of income is from employment may have his/her annual returns filed on his/her behalf by the employer on or before 31 March of the following year.


What is the tax year-end?


The year of assessment for an individual is the calendar year from 1 January to 31 December.


What are the compliance requirements for tax returns in Ghana?


Residents and non-residents


Under the PAYE system, the employer is required to deduct from employees’ income the tax due and pay forthwith to the Internal Revenue Service (IRS) no later than the 15th day succeeding the month in which the payment to the employee was made.


Information on disposal (realization) of capital should be submitted to the IRS not later than 30 days after the realization.


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Tax rates

What are the current income tax rates for residents and non-residents in Ghana?


Residents


In the government's budget statement for the 2011 fiscal year, it was proposed to expand the income tax brackets. However, the proposal is yet to be approved by Parliament. Until such approval is given, the rates for 2010 will continue to apply. The annual tax rates for residents are as follows.


Chargeable income (GHC) Rate (Percent) Cumulative income (GHC) Cumulative tax (GHC)
First 1,008.00 0.0 1,008.00 0.00
Next 240.00 5.0 1,248.00 12.00
Next 720.00 10.0 1,968.00 84.00
Next 14,232.00 17.5 16,200.00 2,574.60
Over 16,200.00 25.0

* Proposed rates – 2011.


Chargeable income (GHC) Rate (Percent) Cumulative income (GHC) Cumulative tax (GHC)
First 1,104.00 0.0 1,104.00 0.00
Next 360.00 5.0 1,464.00 18.00
Next 840.00 10.0 2,304.00 102.00
Next 17,976.00 17.5 20,280.00 3,247.80
Over 20,280.00 25.0

Bonus up to a maximum of 15 percent of qualifying employment income or maximum of GHC1,620 (whichever is lower) is taxed at 5 percent. The excess is added to the individual’s income and taxed within the applicable brackets above.


Non-residents


Taxed at a flat rate of 15 percent.


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Residence rules

For the purposes of taxation, how is an individual defined as a resident of Ghana?


An individual is deemed resident for a year of assessment if that individual is:


  • a citizen of Ghana (other than one with a permanent residence outside Ghana for the whole year of assessment)
  • present in Ghana for a period, or periods amounting in total to 183 days or more in any 12-month period that commences or ends during the year of assessment
  • an employee or official of the Ghana government on posting abroad or
  • a citizen who is temporarily absent from Ghana for not more than 365 continuous days (where the individual has a permanent home in Ghana).

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.


No.


What if the assignee enters the country before their assignment begins?


The assignee will not be liable to pay taxes on income unless he/she is engaged to earn income.


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Termination of residence

Are there any tax compliance requirements when leaving Ghana?


Upon the termination of residence the individual is expected to file his/her annual tax return in respect of that year of assessment. A Tax Clearance Certificate is required before leaving Ghana on termination.


What if the assignee comes back for a trip after residency has terminated?


The assignee will not be liable to pay taxes except where he/she exercises employment or earns a taxable income during the period of visit.


Communication between immigration and taxation authorities


Do the immigration authorities in Ghana provide information to the local taxation authorities regarding when a person enters or leaves Ghana?


Presently, KPMG in Ghana is not aware of any such communication although, that is supposed to be the norm.


Filing requirements


Will an assignee have a filing requirement in the host country after they leave the country and repatriate?


A repatriated assignee will not be required to file returns in Ghana if he/she has already filed all his/her return at the time of repatriation.


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Economic employer approach1

Do the taxation authorities in Ghana adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Ghana considering the adoption of this interpretation of economic employer in the future?


No. KPMG in Ghana is not aware of Ghana considering the adoption of this approach to the interpretation of Article 15 of the OECD treaty.


De minimus number of days2


Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?


Not applicable.


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Types of taxable compensation

What categories are subject to income tax in general situations?


Residents


Income accruing in, derived from, brought into, or received in Ghana, except specifically exempt from tax.


Non-residents


Income accruing in or derived from exercising employment in Ghana, except specifically exempt from tax.


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Tax-exempt income

Are there any areas of income that are exempt from taxation in Ghana? If so, please provide a general definition of these areas.


The law allows certain exemptions. These are:


  • reimbursement/discharge of an employee’s medical, dental, or health insurance expense where the benefit is available to all employees on an equal basis
  • passage in and out of Ghana for the commencement and completion of assignment (employment) for a person recruited/engaged outside of Ghana, in Ghana solely for the employment and is not a resident of Ghana
  • provision of accommodation by employer carrying on a timber, mining, building, construction, or farming business to employees at the place or site where the field operation is undertaken
  • reimbursement/discharge of business expenditure incurred by the employee on behalf of the employer
  • severance pay
  • night duty allowance to night shift worker not exceeding 50 percent of basic salary.

Medical, dental, or health insurance


A dental, medical, and health insurance expense, where the benefit is available to all full-time employees on equal terms, is exempt from tax.


Passage in and out


Passage in and out of Ghana for the commencement and completion of assignment (employment) is non-taxable provided the person is recruited / engaged outside of Ghana, in Ghana solely for the employment, and is not a resident of Ghana.


Certain accommodation


Accommodation provided by the employer to the employee is deemed a benefit-in-kind and therefore, taxable unless specifically exempt.


Reimbursement/discharge of business expenditure


Reimbursement/discharge of business expenditure incurred by the employee on behalf of the employer is not taxable.


Severance pay


Severance pay to an employee is not taxable.


Night duty allowance


Night duty allowances not exceeding 50 percent of basic salary are not taxable.


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Expatriate concessions

Are there any concessions made for expatriates in Ghana?


No.


Residents


Not applicable.


Non-residents


Not applicable.


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Salary earned from working abroad

Is salary earned from working abroad taxed in Ghana? If so, how?


Salary earned from working outside Ghana is not subject to income tax. However, withholding tax at the rate of 15 percent is applicable where the said work can be deemed to be management or technical services provided to a Ghana resident.


A resident expatriate who brings income into Ghana is subject to tax on the income brought into or received in Ghana.


A foreign income tax credit is available for foreign income taxes paid.


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Taxation of investment income and capital gains

Are investment income and capital gains taxed in Ghana? If so, how?


Capital gains are taxed at 15 percent with the exception of gains arising out of disposal of stocks on the Ghana Stock Exchange following 20 years of the establishment of the Stock Exchange. This expired in November 2010.


Venture capital investors/shareholders are exempt from capital gains tax.


Capital gain is computed as the excess of consideration received from the realization of a chargeable asset over the cost base at the time of realization.


Dividends, interest, and rental income


Eight percent final tax applies to rent and dividend income.


Interest earned by an individual from a resident financial institution or from bonds issued by the government of Ghana is exempt from tax. Also, interest and dividends from an approved unit trust scheme or mutual trust is exempt from tax. Otherwise, interest income is treated as normal income and added to other sources of income.


Gains from stock option exercises


Residency status

Taxable at:

Grant Vest Exercise
Resident N N Y
Non-resident N N Y
Other N/A N/A N/A

Foreign exchange gains and losses


Realized foreign exchange losses are tax deductible provided the loss is not of a capital nature. Realized foreign exchange gains on the other hand, are taxable gains.


Principal residence gains and losses


Not applicable.


Capital losses


Carry forward of loss on disposal of shares in a venture capital company is available for five years.


Personal use items


Personal use items are not chargeable assets for the purpose of capital gains tax.


Gifts


Taxable gifts in excess GHC50 are taxed at the rate of 15 percent. Taxable gifts include buildings, land, shares and bonds in Ghana, and business and business assets, money including foreign currency. The following gifts are exempt from tax.


Gifts received:


  • by a person under a will or upon intestacy
  • by a person from that person’s spouse, child, parent, aunt, uncle, nephew, or niece
  • by a religious body which uses the gift for the benefit of the public or a section of the public or
  • for charitable purposes.

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Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Ghana? If so, please discuss?


None.


Gains from assets in classes one to four which include computers and data handling equipment, automobiles, minerals and petroleum exploration and production rights, plant and machinery, railroad cars, locomotives, vessels, furniture, and fittings, are not subject to capital gains tax. Such gains are treated under income tax.


Are there capital gains tax exceptions in Ghana? If so, please discuss.


Exemptions from capital gains tax applicable include the following:


  • capital gains of a person up to GHC50
  • capital gains resulting from a transfer of ownership of the asset by a person to that person’s spouse, child, parent, brother, sister, aunt, uncle, nephew, or niece
  • capital gains resulting from a transfer of the asset between former spouses as part of a divorce settlement or a genuine separation agreement
  • capital gains where the amount received on realization is, within one year of realization, used to acquire a chargeable asset of the same nature (referred to as replacement asset).

Pre-CGT assets


Not applicable.


Deemed disposal and acquisition


A chargeable asset is deemed disposed of when it is exchanged, surrendered, or distributed by the owner of the asset or redeemed, destroyed, lost, or used in such a way that it ceases to be a chargeable asset.


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General deductions from income

What are the general deductions from income allowed in Ghana?


The following are deductions allowable in determining taxable income of individuals:


  • 5.5 percent contributions to the Social Security Fund (SSF)
  • life insurance premium paid in Ghana.

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Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Ghana?


This comprise of expenses incurred for and on behalf of the employer by the employee.


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Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Ghana? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.


The PAYE applies on remuneration to employees on monthly basis by computing the appropriate tax and paid over to IRS.


Pay-as-you-go (PAYG) withholding


The PAYG system does not apply in Ghana. However, any additional tax due on filing annual returns must be settled on filing the said returns not later than four months after the end of the fiscal year that is 30 April, of the following year.


PAYG installments


Not applicable in Ghana.


When are estimates/prepayments/withholding of tax due in Ghana? For example: monthly, annually, both, and so on.


Withholding taxes are expected to be filed/paid monthly on or before the 15th day following the month in which the taxes were withheld.


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Relief for foreign taxes

Is there any Relief for Foreign Taxes in Ghana? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?


A resident person is entitled to a relief for foreign tax paid to the extent that it relates to and paid with respect to that person’s taxable foreign income for a year of assessment brought into or received in Ghana.


Foreign tax credits are calculated separately for taxable foreign income from each business, employment, or investment and shall not exceed the average rate of Ghanaian income tax of that person for the year of assessment as applied to the taxable foreign income from each business, employment, or investment.


Double taxation treaties exist between Ghana and the following countries: United Kingdom, France, Germany, South Africa, Italy, the Netherlands, Belgium and Swiss Confederation.


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General tax credits (reliefs)

What are the general tax credits that may be claimed in Ghana? Please list below.


There are no tax credits claimable in Ghana. However, personal reliefs on incomes of individuals can be claimed instead. These reliefs include the following:


  • marriage with at least two dependent children: GHC100
  • child(ren) education (maximum three): GHC100 per child
  • old age: GHC100
  • aged dependent: GHC50
  • cost of training: GHC200.

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Sample tax calculation3

This calculation assumes a married taxpayer resident in Ghana with two children whose three-year assignment begins 1 January 2011 and ends 31 December 2013. The taxpayer’s base salary is USD100,000 and the calculation covers three years.


2011
USD
2012
USD
2013
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = GHC1.52.


Other assumptions


  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Ghana.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income


Year ended 2011
GHC
2012
GHC
2013
GHC
Days in Ghana during year 365 365 366
Earned income subject to income tax
Salary 152,000 152,000 152,000
Bonus 30,400 30,400 30,400
Cost-of-living allowance 15,200 15,200 15,200
Housing allowance 18,240 18,240 18,240
Company car 0 0 0
Moving expense reimbursement 0 0 0
Home leave 0 7,600 0
Education allowance 4,560 4,560 4,560
Total earned income 220,400 228,000 220,400
Car Element 3,600 3,600 3,600
Total Assessable income 224,000 231,600 224,000
Deductions 500 500 500
Total taxable income 223,500 231,100 223,500

Calculation of tax liability


2011
GHC
2012
GHC
2013
GHC
Taxable income as above 223,500 231,100 223,500
Ghanaian tax thereon 48,945 50,645 48,945
Less:
Domestic tax rebates (dependent spouse rebate) 0 0 0
Foreign tax credits 0 0 0
Total Ghanaian tax 54,316 56,216 54,316



1Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.


2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.


3Sample employee tax computation generated by KPMG, the Ghanaian member firm of KPMG International, based on the Ghanaian Internal Revenue Act, 2000 (Act 592).




© 2013 KPMG, a Ghana partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

 

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Taxation of international executives