Over the past few years, Ghana has been grappling with several economic issues including a fall in the generation of electricity and an increase in the cost of living, leading to a growth in its inflation. The tax system has been considered one of the more inefficient tax systems on the continent. However, the Ghanaian government has been putting in a lot of effort to rectify the issues currently afflicting the nation. The country’s parliament enacted a new income tax law in 2015, which is expected to replace the Internal Revenue Act of 2000. The tax law covers taxation of operations in industries providing financial services, Mineral and Mining as well as Petroleum. In light of the current situation in Ghana, the Oxford Business Group (OBG), produced a report known as the Ghana 2016 report, which can serve as a guide for investors, interested in the country. In partnership with Deloitte, the OBG laid out several important things investors need to know about income tax legislation in Ghana.
From the report, here are four things investors need to be aware of:
Classes of taxpayer: In Ghana taxpayers are classified into four different categories and these are Companies, Partnerships, Individuals and Trusts. Groups of companies are separated when it’s time to pay taxes and are not allowed to file consolidated tax returns. Companies are also taxed apart from shareholders. Ghana’s tax year runs from January to December. Companies are allowed to choose their calendar year while individuals and partnerships use the regular calendar year.
Tax rates and incentives: Ghana’s standard corporate tax rate is 25 percent on profit. The mining and petroleum exploration sectors pay the highest tax at 35 percent while hotels pay 22 percent. According to the report, the Ghanaian government offers various non-tax and tax incentives for investors depending on the industry or location of the business. Companies operating in agro-processing, rural banking and the waste processing sectors pay a corporate tax of one percent during the period of their temporary concession.
Taxation of non-resident entity/ individuals: Both establishments of non-resident persons in Ghana and resident companies are taxed in the same manner. Non-resident individuals are taxable only from income derived from or accrued in Ghana. An individual will be classified as a resident for tax purposes if he or she spends a period of at least 183 days in any 12-month period in Ghana.
Taxation of Corporate Bodies: A company is taxable if it is incorporated under the laws of Ghana or has its management and the control of its business exercised within Ghana at any given time during the year. Non-resident companies, on the other hand, are only taxed on income sourced in Ghana unless the company has a permanent establishment in Ghana, in this case, the worldwide income of the permanent establishment is taxable.
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