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 aretaxes 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;
| INDIVIDUALS | BUSINESSES |
| P-A-Y-E | Value added tax |
| Tax stamp | Communication service tax |
| Gift tax | Mineral royalties' tax |
| Vehicle income tax | Withholding tax |
| Personal income tax | Rent tax |
| Vehicle income tax | Corporate income tax |
| Capital gains tax | Capital gains tax |
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.
| CORPORATE INCOME TAX RATES PER INDUSTRY IN GHANA | |
| INDUSTRY | RATE |
| Income of a Trust | 25% |
| Companies principally engaged in the hotel industry | 22% |
| Companies engaged in the export of non-traditional exports | 8% |
| Financial institutions from loans granted to farming enterprises | 20% |
| Financial institutions from loans granted to a leasing company | 20% |
| Manufacturing companies located in regional capitals (except Accra and Tema) | 18.5% |
| Manufacturing companies located outside Accra, Tema, and the regional capitals | 12.5% |
| Free Zone Enterprises after 10 years tax holiday (on domestic sales) | 25% |
| Free Zone Enterprises after 10 years tax holiday (on the export of goods and services) | 15% |
| Petroleum income tax | 35% |
| Mineral income tax | 35% |
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.
| Sector/ Business | Period of Tax Holiday |
| Agro-processing business conducted wholly in the country | First Five (5) years |
| Cocoa-by-product business wholly in the country | First Five (5) years |
| Tree crop farming | First Ten (10) years |
| Cash crops or livestock (excluding cattle) | First Five (5) years |
| Cattle farming | First Ten (10) years |
| Waste processing business | First Seven (7) years |
| Rural Banks | First Ten (10) years |
| Real Estate (certified low-cost housing) | First Five (5) years |
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
| CHARGEABLE INCOME | RATE % | TAX PAYABLE | |
| First | 402 | 0 | 0 |
| Next | 110 | 5 | 5.50 |
| Next | 130 | 10 | 13 |
| Next | 3 000.00 | 17.5 | 525.00 |
| Next | 6,395.00 | 25 | 4,098.75 |
| Next | 29,963.00 | 30 | 8,988.9 |
| Exceeding | 50,000.00 | 35 | 17,500.00 |
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.
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