Types of Taxes  in Ghana

In Ghana, businesses may be subject to various types of income tax. This guide provides a brief overview of these taxes and the current mechanisms for tax collection used by the Ghana Revenue Authority (GRA)

Personal Income Tax (PIT)

Personal income tax applies to income earned by individuals. This includes salaries, wages, bonuses, and other compensation for work. In Ghana, you must pay income tax if you are an employee, sole proprietor, or partner earning more than GH¢ 402 per month.

The Government of Ghana introduced the Income Tax Act, 2015 (Act 896), to regulate income tax and related matters.

Ghana uses a progressive tax system. This means higher earners pay a higher tax rate. Rates range from 0% to 25%, depending on income brackets.

Click here to read more on income tax filing in Ghana 

Corporate Income Tax

Corporate income tax is charged on the profits generated by companies and corporations operating in Ghana. It applies to both resident and non-resident entities. The standard corporate income tax rate in Ghana is currently set at 25%. However, certain sectors, such as manufacturing, may benefit from reduced rates.

In Ghana, corporate income tax is typically paid quarterly to the Ghana Revenue Authority. This process of paying taxes in installments ensures that businesses stay compliant throughout the financial year. This tax generally does not apply to small businesses. Small businesses are often structured as sole proprietorships or partnerships. Understanding your business’s registration type is essential. It helps determine the applicable taxes.

Additionally, companies can deduct specific expenses, including operational costs and depreciation, when calculating their taxable income. To claim these deductions accurately, businesses need to maintain a clear record of their assets and liabilities.

Withholding Tax

A withholding agent deducts withholding tax at payment. This agent may be an individual or a business. First, they deduct the tax before paying the recipient. Then, they pay the amount to the Ghana Revenue Authority (GRA). However, withholding tax rates vary by payment type. For example, rent usually attracts an 8% rate. In contrast, professional services often attract a 15% rate. In many cases, withholding tax is final. As a result, taxpayers do not report this income on their annual tax returns. Withholding tax is one of the types of taxes in Ghana.

Gift tax

This is a federal tax on the transfer of money or property. It applies when the recipient gives nothing of equal value in return. Some taxable gifts relate to employment. These include contributions from employers, associates, or third parties. Section 4(2)(vii) of Act 896 (2015) defines these gifts. They include:

• Assets in Ghana, such as buildings, land, shares, money (including foreign currency), business assets, and vehicles.
• Gifts to residents (those in Ghana for at least 183 days) and assets credited or invested on their behalf.
• Monetary favors that benefit residents.

Gifts from a will or close family are not subject to tax. Gifts used for public or charitable purposes by religious groups are also tax-free.

Rent Income Tax

This tax applies to individuals who rent or lease property. Rent income is the amount earned from leasing a property. The tax charged on this income is called the Rent Tax. Property owners must pay Rent Tax within 30 days of receiving the rent. Late payment attracts an interest penalty. The penalty applies at 125% of the statutory rate. The interest compounds monthly.

Vehicle Income Tax

Vehicle Income Tax (VIT) is collected from commercial transport operators every quarter. The tax is due on the 15th day of the first month of each quarter: January 15 for Q1, April 15 for Q2, and so on. After paying VIT, vehicle owners receive a sticker. They must affix this sticker to the front windscreen of their vehicle.

Pay As You Earn (PAYE)

Employers deduct this tax from employees’ income. They pay it on the employees’ behalf. The tax applies to all employment income. This includes cash and non-cash benefits. Employers must file a PAYE return every month. They must submit it by the 15th of the following month. This is one of the key types of taxes in Ghana.