In accordance with Paragraph 2 of the Seventh Schedule of the Income Tax Act, 2015, Act 896 (as amended), the Commissioner-General (CG) of the Ghana Revenue Authority (GRA) has issued a number of Practice Notes setting out the CG’s interpretation of certain provisions in the Income Tax Act, 2015, Act 896 (as amended).1 The Practice Notes are currently in the draft form and may be modified, altered or withdrawn by the CG.
The issues discussed in the Practice Notes are outlined below.
- Priority sectors have been defined to include agro processing, tourism, information and communication technology, farming, manufacturing, venture capital financing, energy and power, petroleum operations and mining operations.
- The Practice Note defines ”Goods,” ”Works,” and ”Service” to provide clarity in distinguishing between the type of certain transactions and the applicable withholding tax rates to be applied.
- Persons carrying on other activities in addition to the business of banking are required to separately account for the chargeable income from the banking business and the chargeable income from the other activities. Separate books of account are also required to be kept for this purpose.
- The CG provides two alternate approaches to be used in calculating the limit on deduction of repairs and improvements.
- Further guidance has been provided with respect to the ring fencing provisions applicable in the upstream petroleum sector.
- Unutilized capital allowance prior to 2016 and certified by a tax audit will be converted into a tax loss and carried forward for five years (priority sectors) or three years (other sectors).
- The statutory rate has been defined as the monetary policy rate for the purposes of calculating loan benefits and interest imposed for non-compliance. Presently, the monetary policy rate is 26%.
- Benefits provided in kind to employees are to be quantified in accordance with the market value in the absence of a quantification basis provided in Act 896 (as amended).
- Individuals shall account for income tax on employment income on a cash basis and the tax payable calculated based on a 12-month period ending on 31 December each year regardless of the period the employment is exercised or commences during the year.
- Dental, medical services and health insurance payments made to all full-time employees on a non-discriminatory basis (i.e., on equal terms) are exempt from tax. An example is where the same categories of staff enjoy and have access to the same medical facility on a non-discriminatory basis.
- Payments made by an employer for the passage of an individual to or from the country in respect of the individual’s first employment and/or termination are generally considered to be tax-exempt. However, where these payments also cover the family relations of the individual such payments made should be added to the total cash emoluments of the individual and taxed accordingly.
- The form required to be used for applying to the CG for approval as a charitable organization has been provided in the Practice Note.
1. See EY Global Tax Alert, Ghana enacts income tax amendments, dated 20 January 2016, and EY Global Tax Alert, Ghana enacts income tax amendments related to interest payments and withholding taxes, dated 8 March 2016.
EYG no. 01171-161Gbl