Full details of foreign incomes affected by GRA taxes

The Ghana Revenue Authority (GRA) is intensifying its efforts to ensure compliance with taxation policies concerning the  foreign incomes of resident Ghanaians who have resided in the country for 183 days or more.

This measure, long in policy, is one of the measures aimed at  addressing the shortfall in revenue caused by the suspension of two tax handles, namely the 15% Value Added Tax (VAT) on electricity consumption and the GH₵100 annual levy on owners of petrol and diesel vehicles

Not applicable to residing abroad

Commissioner General of GRA Julie Essiam, clarified that this compliance measure does not extend to Ghanaians residing abroad.

She emphasised GRA’s commitment to exploring alternative revenue mobilization efforts in collaboration with the Organisation for Economic Cooperation and Development (OECD).

Together, she said they are implementing credible and sustainable structures to offset the GH₵1.8 billion revenue gap left by the suspended taxes.

“Its implementation has begun because the team is mobilising themselves and drafting the letters to be sent to individual account holders. So by the 2nd of May, those letters might have gone out.

“If individuals come forward within three months and say that, this is the amount in this account, the interest on the account will be waived and that is the voluntary disclosure aspect of this measure,” explained.

Under Ghanaian tax laws, resident individuals are taxed on their worldwide income, including income from employment, business, or investment, regardless of its source.

However, exemptions exist for employment income earned outside Ghana by residents present abroad for over 183 days.

Scope of taxable foreign incomes

The scope of taxable foreign incomes for resident individuals includes gains and profits from employment, business, profession, or vocation, as well as dividends, royalties, and profits arising from property.

Additionally, receipts from transactions involving natural resources in Ghana, whether paid within or outside the country, are subject to taxation.

Non-residents are also subject to Ghanaian income tax on income derived from trade, business, profession, or employment exercised within the country.

The GRA’s implementation of compliance measures underscores its commitment to ensuring a fair and equitable tax system while striving to meet revenue targets essential for national development.

As the authority ramps up efforts to address revenue shortfalls, it remains imperative for taxpayers to adhere to tax regulations to contribute effectively to the nation’s fiscal sustainability.

The law on taxing foreign income

According to Section 3(a) and 111 of the Income Tax Act, 2015 (Act 896), resident individuals and entities in Ghana are subject to taxation on their worldwide income sources, including income earned outside the country.

This means that all income, regardless of its source, must be declared and taxed by the Ghana Revenue Authority (GRA)

Provisions of the law

Under the provisions of Section 124 of the Income Tax Act 2015 (Act 896) and Section 28 of the Revenue Administration Act 2016 (Act 915), all taxpayers are required to file a return on income with the Commissioner-General of the GRA within four months after the end of each year of assessment.

However, Section 74 of the Revenue Administration Act, as amended, provides a window for taxpayers to voluntarily disclose any errors inadvertently made in the past regarding their tax affairs.

Taxpayers who voluntarily disclose such errors to the Commissioner-General before they are discovered by a tax officer or before the next tax audit will not face penalties or sanctions.

It is crucial for taxpayers to disclose all their income, including income earned outside Ghana, to avoid penalties.

Failure to disclose all income may result in penalties such as those for making false or misleading statements under Section 74 of the Income Tax Act, penalties for late filing of returns under Section 73 of the Act, administrative non-compliance penalties, and even criminal prosecution for tax offenses.

In summary, Ghanaian tax laws require residents to declare and pay taxes on their worldwide income, and failure to comply with these obligations may result in severe penalties and sanctions.

The provision for voluntary disclosure offers taxpayers an opportunity to rectify past errors and become compliant with tax regulations.