When it comes to tax laws in Ghana, many citizens and non-citizens might view them as a necessary evil, a complex web of rules and regulations that can be daunting to navigate.
However, amidst the intricacies of Ghana’s tax law, there are indeed some redeeming qualities that can benefit individuals and businesses alike.
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Ghana’s tax laws are often viewed as being designed to burden rather than benefit.
Yet, amidst the seeming chaos, lies a paradox: Ghana’s tax law, much like a richly vain ore, holds within its nuggets of opportunity and incentives waiting to be uncovered.
This article aims to challenge the conventional narrative, to sift through the complexities and reveal the hidden gems that can empower businesses, stimulate investment, and foster economic growth especially in the era where Ghana’s economy needs its citizens than the citizens need it.
The question is no longer whether Ghana’s tax law is perfect, rather, where does the good lie? The answer, as we shall soon discover, lies in the details.
Tax as we all know is a creation of statute or law.
The 1992 Constitution, vide article 174 on “Taxation”. “No taxation shall be imposed otherwise than by or under the authority of an Act of Parliament”.
This is an “entrenched provision” vide article 290(I). It therefore means that, a tax is not, until it is passed by an act of parliament.
These laws may be both substantive or procedural/administrative.
There are a lot of tax incentives in a form of temporary concessions and some in a form of reliefs.
These tax concessions are in Section 134 and the sixth (6th) schedule of the income tax act 2015, (Act 896) and section 51, (Act 896) to wit, personal reliefs respectively.
In the case of the Value added tax (VAT), 2013, (Act 870), sections 35, 36, 37 & 38 talks about Exempt, Zero-rated, Exempt import and Relief supplies.
The focus for today’s article will be on Temporary concessions & personal reliefs as stipulated in the Income tax act, and as implemented by the Ghana Revenue Authority (GRA).
Temporary concessions & location tax incentives (Sec: 134 & 6th Schedule of Act 896, 2015 as amended)
As the name connotes, temporary to mean brief or for a period of time mostly in years; are available incentives in a form of tax holidays, location-based tax incentives, exemptions, or reduced tax rates usually to certain category of businesses or individuals selected from certain sectors of the economy aim to attract or motivate jobs creation or to encourage the growth of certain businesses and the like.
I shall list some of the sectors & businesses, or group of individuals who qualify to enjoy these concessions or location benefits.
Some of these businesses are; Farmers of Tree Crops, Cattle Farmers, Agro-Processing Businesses, Young Entrepreneurs engaged in certain businesses, Waste Processing businesses, Employers or Companies engaging the services of Fresh Graduates, Venture Capital Financing Companies, Private Universities who plough-back 100% of their profits into the business, Companies engaged in the construction of the sale & letting of low-cost affordable residential houses and more.
I will try to throw more light on a few listed above for want of space.
Young Entrepreneur
A young entrepreneur in this case is defined as any entrepreneur not above the age of thirty-five (35) years old. Th income of a young entrepreneur engaged in the business of manufacturing (look for what constitute manufacturing), ICT, agro-processing, tourism, energy production, waste processing, creative arts, horticulture & medical plant shall be exempt from the payment of tax for a period of Five (5) years. After the first five years, the young entrepreneur is entitled to a location tax incentive such as:
| PLACE OR LOCATION OF BUZ | TAX RATE OR PERCENTATAGE |
| Accra/Tema | 15% |
| Other Regional Capitals outside the 5 Northern Regions | 12.5% |
| Outside Other Regional Capitals | 10% |
| The Five Northern Regions | 5% |
After the location period expires, the person (former young entrepreneur) will be subject to tax at the corporate rate of 25% or at the graduated rate in the case of an individual. Looses may be carried forward for five (5) years basis period.
Employment of fresh graduates
Companies who engage the services of Fresh-Graduates from recognized Ghanaian Tertiary institutions, when computing their income from their business, in addition to the already allowable deduction of staff cost is allowed an additional deduction if they engage the services of fresh graduates as follows:
| Percentage of Fresh Graduates engaged | TAX RATE OR PERCENTATAGE |
| Up to 1 % | 10% Salaries & Wages |
| Above 1% but not more than 5% | 30% Salaries & Wages |
| Above 5% | 50% Salaries & Wages |
Please be aware that the company is only entitled to make the additional deduction only in the year that the fresh graduates were or are engaged.
Residential premises
Companies into the construction for sales and renting of low-cost affordable residential apartments and certified by the Minister for works & housing to the effect that the Company is in the business so stated, that company for the first Five (5) years of commencement is entitled to a tax rate of 5% instead of the normal 25%.
Certain industries, such as agriculture and manufacturing, may be eligible for tax holidays or reduced tax rates, providing a much-needed boost to businesses in their early stages.
With the above light shared, I invite all well-meaning citizens to get involved and derive the benefits enshrined in the tax laws of Ghana by staying informed, and strategically engaging in tax planning through the development of strategies that align with their business objectives and take advantage of the available incentives.
By understanding these incentives and support measures, taxpayers can navigate the tax system more effectively and take advantage of the “good Lies in the details.”
As the tax landscape continues to evolve, it is essential to stay informed and leverage on these opportunities to drive economic growth and development.
Catch me up in my next episode.
References:
- The 1992 Constitution of Ghana
- The Income Tax Act 2015, (Act 896) as amended
- The VAT Act 2013, (Act 870) as amended
- Lawrence Hotsonyame : Sir Law Series; The Scope & coverage of Income Taxation in Ghana
- Dominic D. Naab: 3rd Edition; The Essential Pillars of Tax Audit & Special Investigations
The writer is a Chartered Marketer, a tax expert, & a Marketing Consultant with over 10 years of experience.
For tax related Insights, Contact him via christopher.k@actepafrica.org or +233246440723
