Businesses must adhere to several domestic and business taxes including corporate income tax, value-added taxes, withholding taxes, and capital gains taxes. Businesses must understand Ghana’s tax system and abide by tax laws to prevent legal and financial problems. This article will present a general overview of Ghana’s corporate tax structure, outlining the various domestic taxes, tax rates, and compliance requirements.

Do you have to pay taxes as a start-up or a new business?

YES, startups and new businesses must pay taxes in Ghana as long as the nature of business is a taxable activity. However, some sectors or business activities may enjoy tax incentives and tax holidays.  The taxes to be paid cover Pay-As-You-Earn (PAYE), Withholding Tax, Income Tax (Individual and Corporate), and Value Added Taxes among others.

After registering your business at the Registrar-General’s Department, it is required to also register with the Ghana Revenue Authority (GRA) before undertaking any taxable activity.

The amount of taxes a business pays depends on the type of business, the nature of the business activity, and the volume of transactions carried out within the tax assessment period.  Let me also quickly add that the nationality of the owners of a business does not affect the amount of corporate income taxes they pay, however, the sales revenue and profitability of the business affect the corporate income taxes that are paid.

Types of business taxes

Business taxes are classified under 2 broad categories;

DIRECT TAXES

Direct taxes are taxes levied on persons and organizations with the tax burden borne by the person or business. Examples include.

• Income taxes -Individual and Corporate
• Pay As You Earn
• Gift Tax
• Capital Gains Tax

INDIRECT TAXES

Indirect taxes are taxes levied on goods and services with the tax burden borne by the final consumer of the goods and services. Examples include;

• Value-Added Tax
• Ghana Education Trust Fund Levy
• Electronic Levy
• National Health Insurance Levy
• Communication Service Tax

To give further understanding of the above taxes, we have categorized the taxes into which ones apply to businesses and individuals;

Table 1: Individual and Business taxes

 Read Also:Taxation In Ghana: All You Need To Know

CORPORATE INCOME TAX

Corporate Income Taxes (CIT) are taxes levied on the income and gains from business and investments of companies for a year of assessment or financial year.

The corporate income tax rate is generally 25%. This rate may change per industry.

Table 2: Corporate tax rates per Industry in Ghana

Certain businesses enjoy tax holidays which means these businesses do not pay the actual tax rate during this period.

Table 3: Sectors and Tax Holiday Periods

CIT COMPLIANCE AND PENALTY

Companies are required by the Ghana Revenue Authority to file Corporate Income Tax returns by the fourth month after the just-ended year of assessment or financial year.

Companies unable to meet this deadline may apply for an extension to file their Corporate Income Tax (CIT) returns, and this extension should not exceed the sixth month of the year (not more than two months after the filing due date).

 In other words, CIT returns for the 2022 year of assessment are to be lodged/filed by 30th April 2023. Companies who may apply for an extension have up to 30th June 2023.

CIT returns are paid quarterly every year of assessment with the final payment due by the fourth month of the ensuing assessment year.

A person is liable to pay interest for failing to pay due tax which is calculated at 125% of the statutory rate, compounded monthly, and applied to the outstanding amount at the start of the period.

PAY-AS-YOU-EARN (PAYE)

When individuals receive income from employment (whether in cash or kind), taxes are levied on that income which is withheld by the employer and paid on behalf of the employee. This tax is known as Pay-As-You-Earn (PAYE).

In calculating the PAYE of resident individuals, it is essential to understand that allowances and benefits are added to the salary of the individual whiles deductions such as Social Security and National Insurance Trust (SSNIT) and donations for a good cause, are taken from the individual’s basic salary before arriving at the chargeable income (Final amount on which PAYE is calculated). The chargeable income of non-residents is charged at 25% flat.

Pay-As-You-Earn is calculated using the graduated tax rate

Table 4: Current Pay-As-You-Earn Graduated rates

PAYE COMPLIANCE AND PENALTY

Pay-As-You-Earn (PAYE) returns must be filed by the 15th of the month following the month to which the return relates (January PAYE should be filed by the 15th of February).

Failure to comply attracts a penalty of 500 currency points and a further penalty of 10 currency points for each day that the failure continues.

VALUE ADDED TAX

Every business that provides a service or sells a Vatable product must register with the GRA before they can charge VAT.

To register for VAT in Ghana, one must fill out a VAT application form which can be obtained at any Domestic Tax Revenue Division Office of GRA and attach copies of their business registration documents.

After a successful application, a VAT certificate (which should be displayed at the business premises), and a VAT invoice book will be issued. In cases where a business would like to issue its own VAT invoices, they need to write to the Commissioner General for approval.

Can you run a business without being VAT registered?

Unless otherwise exempted, businesses engaged in the supply of goods and services, importation of goods, and supply of imported services are required to charge Value Added Tax.

Value Added Tax is charged on the value added to goods and services.

The tax shall be paid;

• In the case of a taxable supply by the taxable person making the supply.
• In the case of imported goods, by the importer;
• In the case of imported services, by the receiver of the service. 

VAT STANDARD RATE (VSR)

Following The Value Added Tax, (Amendment) No. 2 Act, 2022 (Act 1087), there has been a change in the Value Added Tax Rate from 12.5% to 15%. National Health Insurance Levy (NHIL), Ghana Education Trust Fund Levy (GETFund Levy), and the Covid -19 Health Recovery Levy (COVID-19 HRL) are separate levies calculated on the chargeable amounts. The NHIL, GETFund Levy, and COVID-19 HRL cannot be deducted as input VAT. These changes have implications for the computation of tax for VAT Registered persons.

New VAT calculation and rates;

Table 5: VAT Standard Calculation

VAT FLAT RATE SCHEME (VFRS)

Retailers of taxable goods with an annual turnover of more than GHC200,000 but not exceeding GHC500,000 are to operate under VFRS. Businesses that meet this threshold shall register under the VFRS and charge a total VAT rate of 4% (3%VAT flat rate plus 1% Covid-19 levy) on taxable sales.

Businesses that do not meet the threshold, with annual turnover less than GHC200,000, may voluntarily register under VFRS.

Table 6:VAT flat rate calculation

VAT COMPLIANCE AND PENALTY

All Value Added Tax returns and levies should be lodged by the last working day of each month immediately following the month to which the returns relate. (June VAT should be filed by the last working day of July). 

Failure to comply attracts a penalty of 500 currency points and a further penalty of 10 currency points for each day that the failure continues.

WITHHOLDING TAX

It is a tax deducted by a withholding agent (a person or company required to subtract withholding tax), which the withholding agent accounts for later to the Ghana Revenue Authority.

Registered businesses that make payments to another person for goods or services bought have the right to withhold the tax unless the person is exempted from paying the tax. Only registered businesses are allowed to withhold tax from business transactions. The 15th day of the subsequent month is the deadline for filing withholding tax returns.

Rates of withholding taxes applied to resident individuals’ incomes under Ghanaian domestic tax laws are as follows:

Table 7: Withholding tax rates for Resident persons

Withholding tax rates for incomes of non-resident persons under domestic tax laws in Ghana;

Table 8: Withholding tax rates for Non-Resident persons

The following are the final withholding payments:

• Dividends paid by a resident company;
• Rent payments made by resident individuals under a lease of land or a building;
• Rent payment aside rent received in conducting a business of sale or letting;
• Payments made to non-resident persons that are subject to withholding other than payments derived through a Ghanaian permanent establishment;
• Subcontractor payments under petroleum operations; and
• Payments in respect of examination, part-time teaching, supervising examination, and endorsement fee among others.

CAPITAL GAINS TAX

Capital Gains Tax is a tax levied on the gains from the realization of chargeable assets and liabilities. The amount received from the sale of the asset is not what will be taxed but rather, the gains from the realization of the asset and liability.

Persons who realize gains from the sale of property, stocks, bonds, precious metals, etc., are mandated by law to declare and pay capital gains tax. The tax is payable on valuable items or assets sold at a profit.

Subject to Section 35 of Income Tax Act 896, 2015, as amended

A gain made by a person from the realization of an asset is the amount by which:

(a) The sum of the consideration received for the asset exceeds the cost of the asset at the time of realization; or

(b) The sum of the consideration offered for the liability is less than the amount outstanding at the time of realization.

2. A loss of a person from the realization of an asset or liability is the amount by which

(a) The cost of the asset exceeds the sum of the consideration received for the asset at the time of realization; or

(b) The sum of the consideration offered for the liability is more than the amount outstanding at the time of realization.

Rate of the Tax

Individuals and companies are charged different rates of Capital Gain tax.

For Individuals, the gains are treated as an isolated transaction and therefore taxed at a rate of 15% of the net gains realized.

Other Taxes and their rates:

Table 9: Other taxes and their rates

Concluding Remarks

Ghana’s domestic tax system comprises various taxes, including income tax, value-added taxes, withholding taxes, rent tax, capital gains tax, and other levies.

Understanding the tax legislation and regulations as a start-up or a business operating in Ghana is essential to ensure compliance, avoidance of penalties, and help in navigating Ghana’s tax system.

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