Quiz - Session 1 (Basics of Tax) PDF

The Ghanaian Tax System An essential recap MSL Business School  THE GHANA REVENUE AUTHORITY Establishment of the GRA Reference & Further...

The Ghanaian Tax System An essential recap MSL Business School  THE GHANA REVENUE AUTHORITY Establishment of the GRA Reference & Further Reading The Ghana Revenue Authority (GRA) was established in 2009 as a merger of the three revenue agencies, the Customs, Excise and Preventive Service (CEPS), the Internal Section 1 & 2 of Act Revenue Service (IRS), the Value Added Tax Service (VATS); in addition to the then 791 Revenue Agencies Governing Board (RAGB) in accordance with the Ghana Revenue Authority Act 2009, (Act 791) Objects of the GRA The objects of the Authority are to provide a holistic approach to tax and customs administration reduce administrative and tax compliance cost and provide better service to taxpayers promote efficient collection of Revenue and the equitable distribution of tax burden and ensure greater transparency and integrity ensure greater accountability to Government for the professional management of tax administration  THE GHANA REVENUE AUTHORITY (continued) Objects of the GRA Reference & Further Reading improve information linkage and sharing of information among the Divisions of the Authority Section 2 & 3 of Act provide a one-stop service for taxpayers for the submission of returns and payment of 791 taxes provide common tax procedures that enable tax payers to be governed by a single set of rules provide for other matters related to the improvement of Revenue administration Functions of the GRA To achieve the objects, the Authority shall assess and collect taxes, interest and penalties on taxes due to the Republic with optimum efficiency pay the amounts collected into the Consolidated Fund unless otherwise provided by this Act and other Acts promote tax compliance and tax education  THE GHANA REVENUE AUTHORITY (continued) Functions of the GRA Reference & Further Reading combat tax fraud and evasion and co-operate to that effect with other competent law enforcement agencies and Revenue agencies in other countries Section 3 & 4 of Act advise District Assemblies on the assessment and collection of their Revenue 791 prepare and publish reports and statistics related to its Revenue collection make recommendations to the Minister on Revenue collection policy perform any other function in relation to revenue as directed by the Minister or assigned to it under any other enactment. Governing Body of the GRA The governing body of the Authority is a Board consisting of a chairperson the Commissioner-General of the Authority a representative of the Ministry not below the rank of a Director  THE GHANA REVENUE AUTHORITY (continued) Governing Body of the GRA Reference & Further a representative of the Ministry of Trade and Industry not below the rank of a Director Reading the Governor of the Bank of Ghana or a representative of the Governor not below the Section 4 of Act 791 rank of a Deputy-Governor Article 70 of the 1992 four other persons from the private sector two of whom are women Constitution of Ghana Note: The President shall appoint the chairperson and members of the Board in accordance with Article 70 - (Appointments by President) of the Constitution.  STRUCTURE OF THE GHANA REVENUE AUTHORITY Structure of the GRA Reference & Further Reading The Authority is headed by the Commissioner-General, with support from three Commissioners in charge of the following divisions; Domestic Tax Revenue Division (DTRD) Customs Division (CD) Support Services Division (SSD) Domestic Tax Revenue Division (DTRD) DTRD is responsible for the collection of both domestic direct and indirect taxes The Division’s core functions are to identify all taxpayers, assess the taxpayer for tax and levies, collect the taxes and levies and pay all amounts collected into the Consolidated Fund  STRUCTURE OF THE GHANA REVENUE AUTHORITY Customs Division (CD) Reference & Further Reading The Customs Division is responsible for the collection of taxes at the ports, borders and entry points The Division also performs a preventive function by patrolling the country’s borders and other strategic locations The Customs Division also performs agency duties on behalf of Ministries, Departments and Agencies. These duties relate to enforcing laws on prohibitions and restrictions of imports and exports, facilitation of international trade, foreign exchange control, public health, security and safety among others Support Services Division (SSD) The Support Services Division (SSD) provides administrative and managerial support to DTRD and Customs Division to enable them perform their operational functions efficiently The Support Service Division includes departments such as Finance, Administration, Human Resource, Training and Information Technology  STRUCTURE OF THE DOMESTIC TAX REVENUE DIVISION (DTRD) – OLD STRUCTURE Old DTRD Structure (effectively phased out in 2nd Half of 2020) Reference & Further Reading Under the old DTRD structure, taxpayers were categorised into: Large Taxpayers – These were large and complex organisations and businesses whose annual turnover is over GHS 5 million. These taxpayers were managed by the Large Taxpayer Office (LTO) Medium Taxpayers – These were businesses with an annual turnover of between GHS 5 million and GHS 200,000. These businesses were managed by Medium Taxpayer Offices (MTOs) spread across the country Small Taxpayers – These were small and micro businesses with annual turnover below GHS 200,000. There were Small Taxpayer Offices (STOs) spread across the country that catered for the special needs of these businesses to ensure that they complied with tax laws at minimal cost  STRUCTURE OF THE DOMESTIC TAX REVENUE DIVISION (DTRD) – NEW STRUCTURE New DTRD Structure (introduced in 2nd Half of 2020) Reference & Further Reading Under the new DTRD structure, we have: Large Taxpayer Office (LTO) Area Offices Taxpayer Service Centres (TSCs) Large Taxpayer Office (LTO) To focus on large corporate businesses, public institutions and high net worth individuals The LTO located in Accra will serve all large taxpayers across Ghana An LTO desk will be located in selected Taxpayer Service Centres outside the Greater Accra Region, where there is a concentration of large taxpayers  STRUCTURE OF THE DOMESTIC TAX REVENUE DIVISION (DTRD) – NEW STRUCTURE (continued) New DTRD Structure (introduced in 2nd Half of 2020) Reference & Further Reading Area Offices Ten area offices will provide technical and administrative support in the management of the TSCs including centralised Audit and Enforcement functions Taxpayer Service Centres (TSCs) These will serve taxpayers within their area of operation (both small and medium taxpayers) The TSCs will carry out registration, receiving of returns, complaints, enquiries and payments, compliance, debt management and tax education  THE CONCEPT OF THE PERSON Person Reference & Further Means any of the following: Reading Individual; or Section 133 of Act 896 An entity  YEAR OF ASSESSMENT & BASIS PERIOD Year of Assessment Reference & Further Reading The year of assessment for a person is the calendar year (January to December). Section 18 of Act 896 Basis Period The basis period of a person is, Individuals & Partnerships = the calendar year Companies & Trusts = the accounting year of the company or the trust  YEAR OF ASSESSMENT & BASIS PERIOD Change of Accounting Year Reference & Further Reading The Commissioner-General may, on application by a trust or company, approve a change of the accounting year of the trust or company on the terms and conditions Section 18 of Act 896 that the Commissioner-General may approve. Revocation of Approval Granted The Commissioner-General may revoke an approval granted for a change of the accounting year if the trust or company fails to comply with a condition attached to the approval. Impact of Change on Tax Compliance A change in the accounting year of a trust or company alters the time at which the trust or company is required to pay tax by instalments and on assessment.  IMPOSITION OF INCOME TAX Income tax is payable for each year of assessment by Reference & Further Reading a person who has chargeable income for the year; and a person who receives a final withholding payment during the year. Section 1 of Act 896 First Schedule of Act 896 Amount of Income Tax Payable for a Year of Assessment Second Schedule of Act 896 The total of the amounts payable above. Income Tax Payable (on chargeable income) Subject to special rules concerning modified taxation, the income tax payable by a person who has chargeable income for the year is calculated by applying the relevant rates of income tax to the chargeable income of that person; and deducting a foreign tax credit allowed to the person for the year.  IMPOSITION OF INCOME TAX Income Tax Payable (for final withholding payments) Reference & Further Reading The income tax payable by a person who receives a final withholding payment during the year is calculated by Section 1 of Act 896 applying the relevant rate to each final withholding payment First Schedule of Act 896 Second Schedule of Income Tax Payable (Modified Taxation) Act 896 Income tax payable by an individual with respect to assessable income from a business may be subject to the modified taxation rules.  THE CONCEPT OF TAX RESIDENCE Resident Individual Reference & Further An individual is resident in Ghana for a year of assessment if that individual is Reading Section 101 of Act 896 a citizen, other than a citizen who has a permanent home outside of Ghana and lives in that home for the whole of that year present in Ghana during that year for an aggregate period of 183 days or more in any 12-month period that commences or ends during that year an employee or an official of the Government of Ghana posted abroad during that year or a citizen who is temporarily absent from Ghana for a period of not more than 365 continuous days, where that citizen has a permanent home in Ghana  THE CONCEPT OF TAX RESIDENCE Resident Partnership Reference & Further Reading A partnership is resident in Ghana for a year of assessment if any of the partners resided in Ghana at any time during that year Section 101 of Act 896 Resident Trust A trust is resident in Ghana for a year of assessment if that trust is established in Ghana a trustee of the trust is resident in Ghana at any time during that year or a person resident in Ghana directs or may direct senior managerial decisions of the trust at any time during the year, whether the directive is given ○ alone or jointly with other persons; or ○ directly or through one or more interposed entities.  THE CONCEPT OF TAX RESIDENCE Resident Company Reference & Further A company is resident in Ghana for a year of assessment if Reading Section 101 of Act 896 that company is incorporated under the Companies Act, 2019 (Act 992) or the management and control of the affairs of that company are exercised in Ghana at any time during that year Non-Resident Person Any other person other than the above is a non-resident person  ASSESSABLE INCOME Assessable Income Reference & Further Reading The assessable income of a person for each year of assessment is the income of that person from any employment, business or investment (EBI) Section 3 of Act 896 Assessable Income - Resident Person The assessable income of a resident person for a year of assessment from any employment, business or investment is the income of that person from each employment, business or investment for the year, whether or not the source from which the income is derived has ceased  ASSESSABLE INCOME Assessable Income – Non-Resident Person Reference & Further Reading The assessable income of a non-resident person for a year of assessment from any employment, business or investment is Section 3 of Act 896 the income of that person from the employment, business or investment for the year, to the extent to which that income has a source in Ghana; and where the person has a Ghanaian permanent establishment, income for the year that is connected with the permanent establishment, irrespective of the source of the income Note: The income of a person from an employment, business or investment has a source in this country if the income accrues in or is derived from Ghana. Separate Determination Principle A person who is determining the assessable income of that person or of another person shall, determine the assessable income for each class of income separately.  CHARGEABLE INCOME Chargeable Income Reference & Further Reading The chargeable income of a person for a year of assessment is the total of the assessable income of that person for the year from each employment, business or investment less Section 2 of Act 896 the total amount of deduction allowed that person under the Income Tax Act. Separate Determination Principle A person who determines the chargeable income of that person or of another person shall, determine chargeable income from each source separately.  METHOD OF ACCOUNTING General Principle Reference & Further Reading The timing of inclusions and deductions in calculating the income of a person during a basis period shall be made in accordance with Generally Accepted Accounting Section 19 of Act 896 Principles (GAAP). **Section 20 of Act 896 Income of Individual (from employment or investment) **Section 21 of Act For the purpose of ascertaining the income of an individual for income tax purposes from 896 an employment or investment, an individual shall account on a cash basis. Method of Accounting for a Company A company shall account for income tax purposes on an accrual basis. Adoption of Alternative Method of Accounting A person, other than a company, shall account for income tax purposes on either a cash or accrual basis, whichever most clearly reflects the income of that person.  METHOD OF ACCOUNTING Adoption of Alternative Method of Accounting (continued) Reference & Further Reading Where the Commissioner-General is satisfied that a particular method of accounting reflects the income of a person, the Commissioner-General may, by written notice, Section 19 of Act 896 require that person to use a particular method of accounting; or **Section 20 of Act approve an application by a person to change the method of accounting of that person. 896 **Section 21 of Act Effect of Change in Accounting Method 896 Where the method of accounting of a person changes, an adjustment shall be made in the basis period following the change to ensure that an item is not omitted or taken, into account more than once. Withholding Tax A revision MSL Business School  Let’s revise the WHT rates - Resident Persons Visit taxlawgh.com/ghanataxrates for all tax rates Withholding Description Rate Dividends 8% Interest (excluding individuals and resident financial institutions) 8% Rent on properties ∙ Residential 8% ∙ Non-Residential 15% Natural resource payments and royalties 15% Fees or allowances, to a resident director, manager, trustee or board 20% member of a company or trust Fees for examiners, invigilators, supervisors of examination, or part 10% time teaching or lecturing Endorsement fee 10% Winnings from Lottery 10% Realisation of asset or liability 3%  Let’s revise the WHT rates - Resident Persons Visit taxlawgh.com/ghanataxrates for all tax rates Commission to a resident lotto receiver or agent 10% Commission to a sales agent 10% Commission to a resident insurance sales or canvassing agent 10% Insurance premium with a source in Ghana to a non-resident person 5% Supply or use of goods exceeding GH₵ 2,000 per annum 3% Supply of any works exceeding GH₵ 2,000 per annum 5% Supply of services by an entity exceeding GH₵ 2,000 per annum 7.5% Payment for unprocessed precious minerals 1.5% Payment to petroleum subcontractor 7.5%  Let’s revise the WHT rates - Non Resident Persons Visit taxlawgh.com/ghanataxrates for all tax rates Withholding Description Rate Income of non-resident individual from employment 25% Management, consulting and technical service fee 20% Dividend 8% Royalties, natural resources payments and rents 15% Endorsement Fees 20% Repatriated Branch after tax profits 8% Interest Income 8% Realisation of asset or liability 10%  Let’s revise the WHT rates - Non Resident Persons Visit taxlawgh.com/ghanataxrates for all tax rates General insurance premium 5% Petroleum sub-contractor 15% Supply of goods, or works or the supply of any services where the 20% contract gives rise to income from Ghana Payments received by a person who conducts a relevant transport 15% business Payments received by a person who conducts a business of transmitting 15% or receiving messages by cable, radio, optical fibre or satellite or electronic communication  Withholding by Employer - S.114 What is commonly referred to as PAYE An employer shall withhold tax from the payment of an amount to be included in ascertaining the income of an employee from the employment. The Minister may, by legislative instrument, make Regulations to prescribe the circumstances in which a resident employer shall withhold tax from a payment that is to be included in calculating the chargeable income of an employee. The obligation of an employer to withhold tax above is not reduced or extinguished because the employer has a right or is under an obligation to deduct and withhold any other amount from the payment; or any other law provides that the income of an employee from employment shall not be reduced or subject to attachment.  Withholding from Investment Returns - S.115 Subject to the below conditions, a resident person shall withhold tax at the specified rates where that person pays A. any dividend, winnings from lottery, interest, natural resource payment, rent or royalty to another person; or B. consideration to another person in respect of the realisation of an asset or a liability and the payment has a source in the country. The above does not apply to payments subject to withholding by employer; payments made by an individual, unless made in conducting a business; interest paid to a resident financial institution; or a payment that is an exempt amount.  Withholding from Supply of Goods, Service Fees and Contract Payments - S.116 Subject to the below, a resident person shall withhold tax at the rate provided for where that person pays a service fee with a source in the country to a resident individual as fees or allowances, to a resident director, manager, trustee or board member of a company or trust; for examining, invigilating, supervising an examination, or part time teaching or lecturing; as an endorsement fee; as a commission to a resident lotto receiver or agent; as a commission to a sales agent; as a commission to a resident insurance sales or canvassing agent; for any other supply of services; or for any other matter prescribed by Regulations; or a resident person shall withhold tax where that person pays a service fee or an insurance premium with a source in the country to a non-resident person.  Withholding from Consideration on Realisation of Assets & Liabilities - S.116A Where a resident person, other than an individual pays consideration to another person with respect to the realisation of an asset or a liability which does not fall under Section 115 (withholding from investment returns), the resident person shall withhold tax on the gross amount of the payment at the below rates: Resident Person: 3% Non-Resident Person: 10% Note: The withholding rate is applied on the consideration received  Withholding from Supply of Goods, Service Fees and Contract Payments - S.116 A resident person, other than an individual, shall withhold tax on the gross amount of the payment at the rate specified when the person makes a payment to another resident person who does not fall within any of the above payments or under withholding by an employer for the supply or use of goods, the supply of any works, or the supply of services, in respect of a contract between the payee and the resident person. Threshold The above applies to a contract between the payee and a resident person, where the amount of the contract exceeds GHS 2,000. For the purpose of determining whether a contract qualifies for the GHS 2,000 threshold above, two or more contracts in respect of the same goods, works or services shall, be treated as a single contract.  Withholding from Supply of Goods, Service Fees and Contract Payments (Exemptions) - S.116 Exemption The requirement to withhold on goods, works or services does not apply to a premium paid to a resident insurance company; to payments under a contract for the sale of goods which constitute trading stock of both the vendor and the purchaser; where the Commissioner-General, ▪ for a good cause shown, exempts in writing a person from deducting tax in respect of an institution or a specific contract entered into by an institution upon an application made by the institution; or ▪ is satisfied that a person has a satisfactory tax record and exempts in writing that person from the application of that subsection or exempts specific contracts entered into by that person from that application. Note A person who is granted an exemption above relating to trading stocks of both vendor and purchaser shall, at the end of every calendar quarter, submit a list of particulars of all payments which would have had to be withheld on but for the exemption.  Taxation of Shareholders - s.71 Another example of Withholding Tax Exemption (specific to Dividends) Subject to the exception below, a resident company which pays a dividend to a shareholder shall withhold tax on the amount of the dividend. Exception: A dividend paid to a resident company by another resident company is exempt from tax where the company that received the dividend controls indirectly or directly, at least 25% of the voting power of the company which paid the dividend. The above exception does not apply to a dividend paid to a company by virtue of its ownership of redeemable shares in the company that paid the dividend ; or a dividend that is the result of recharacterisation under sections 31(5) [Arm’s length standard and arrangements between associates] and 32(2) [Income Splitting].  Taxation of Shareholders - s.71 Another example of Withholding Tax Exemption (specific to Dividends) The dividend exemption does not apply also to a dividend paid by a company that conducts petroleum operations or that has conducted petroleum operations; or is a partner in a partnership that conducts petroleum operations or that has conducted petroleum operations. is a resident company that conducts or that has conducted a mineral operation, or is a resident company that is a partner in a partnership that conducts or that has conducted a mineral operation  Withholding from Supply of Goods, Service Fees and Contract Payments - S.116 Subject to the below, the Minister may by legislative instrument, make Regulations to prescribe that a resident person shall withhold tax when the person makes a payment to a non-resident person of a type referred to in section 105 (g) or (h) in respect of land, sea or air transport or telecommunications services (S. 105 – Payments sourced from the country); and the rate at which the tax referred to above shall be withheld. All the above do not apply to a payment subject to withholding by an employer (under section 114); or a payment that is an exempt amount.  Withholding from Supply of Goods, Service Fees and Contract Payments - S.116 A resident person shall withhold tax at the rate specified when the person makes a payment to a non-resident person for the rendering of management and technical services. A resident person shall withhold tax at the rate specified from a payment made under a contract with a non- resident person for the supply of goods or works, or the supply of any services where the contract gives rise to income from the country.  Withholding from Supply of Goods, Service Fees and Contract Payments - S.116 Key Compliance (Notification) Requirement Where the above requirement relating to contracts for goods, works or services with a non-resident person applies, the resident person shall within 30 days of the date of entering into the contract, give notice to the Commissioner-General in writing of the nature of the contract; the likely duration of the contract; the name and postal address of the non-resident person to whom payments under the contract are to be made; and the total sum estimated to be payable under the contract to the non-resident person. The above requirement relating to contracts for goods, works or services with a non-resident person does not apply to other payments which are subject to final withholding tax applicable to non-residents under the Income Tax Act.  Tax Compliance - Statement and Payment of Tax Withheld or Treated as Withheld - S.117 Tax Payment Requirement A withholding agent shall pay to the Commissioner-General within 15 days after the end of each calendar month a tax that has been withheld in accordance with the Income Tax Act during the month. Tax Return Filing Requirement A withholding agent shall file with the Commissioner- General within 15 days after the end of each calendar month a statement in the form prescribed, specifying ▪ payments made by the agent during the period that are subject to withholding under the Income Tax Act; ▪ the name, address and tax identification number of the withholdee; ▪ tax withheld from each payment; and ▪ any other information that the Commissioner-General may prescribe. Note: A withholding agent who fails to withhold tax in accordance with the Income Tax Act shall pay the tax that should have been withheld in the same manner and at the same time as tax that is withheld.  Tax Compliance - Statement and Payment of Tax Withheld or Treated as Withheld - S.117 A withholding agent who withholds tax under the Income Tax Act and pays the tax to the Commissioner-General is treated as having paid the amount withheld to the withholdee for the purposes of any claim by the withholdee for payment of the amount withheld. A withholding agent who fails to withhold tax under the Income Tax Act but pays the tax that should have been withheld to the Commissioner-General in accordance with the above provisions is entitled to recover an equal amount from the withholdee. Subject to this Act and except where an agreement is ratified by Parliament a provision in an agreement which prohibits the deduction or withholding of a tax required to be deducted or withheld under the Income Tax Act or any other enactment administered by the Commissioner-General is void. 41  Tax Compliance - Withholding Certificate - S.118 A withholding agent shall prepare and serve on a withholdee a withholding certificate, in the prescribed form, ○ separately for each period referred to below; and ○ at the time specified below. A withholding certificate shall specify the amount of payments made to the withholdee during the period; and the tax withheld by the withholding agent from the payments under the Income Tax Act.  Tax Compliance - Withholding Certificate - S.118 Subject to the below exception (for employers), a withholding certificate shall cover a calendar month and shall be served on the withholdee within 30 days after the end of the month. Where a tax is withheld under withholding by employer (section 114), a withholding certificate shall cover the part of the calendar year during which the employee is employed; and shall be served on the employee by the 30th of January after the end of the year or, where the employee has ceased employment with the withholding agent during the year, not more than 30 days from the date on which the employment ceased.  Final Withholding Payment - S.119 For the purposes of the Income Tax Act, the following are final withholding payments: dividends paid by a resident company; rent paid to a resident individual under a lease of land or a building, with or without associated fittings and fixtures, situate in the country, other than rent received by an individual in conducting a business, sale or letting; rent other than rent received in conducting a business of sale or letting, paid to a person other than an individual under a lease of land or a building situate in Ghana, with or without associated fittings and fixtures; payments made to non-resident persons that are subject to withholding under the Income Tax Act or would be subject to withholding if sections 115(2)(b) - payments made by an individual, unless made in conducting a business and 116(8)(b) - a payment that is an exempt amount were ignored, other than payments derived through a Ghanaian permanent establishment. payments made to a person under section 116 (1)(a)(ii) - for examining, invigilating, supervising an examination, or part time teaching or lecturing winnings from lottery  Final Withholding Payment - S.119 The following satisfy the tax liability of a withholdee under section 1(1)(b) – remember Imposition of Tax for final withholding tax?: tax withheld from a final withholding payment under the Income Tax Act; and tax paid with respect to a final withholding payment in accordance with section 117(3) - A withholding agent who fails to withhold tax in accordance with this Division shall pay the tax that should have been withheld in the same manner and at the same time as tax that is withheld. Where a final payment is not subject to withholding, by reason of the fact that the payer is a non-resident, the tax liability of the recipient under section 1(1)(b) with respect to the payment is payable by way of instalment and assessment. For the purposes of applying Divisions III (Tax payable by instalment) and IV (Tax payable on assessment), the liability is treated as a liability under section 1(1)(a).  Credit For Non-Final Withholding Tax A withholdee of a payment which is not a final withholding payment is treated as having paid the tax withheld from the payment under the Income Tax Act; or with respect to a payment in accordance with section 117(3) - A withholding agent who fails to withhold tax in accordance with this Division shall pay the tax that should have been withheld in the same manner and at the same time as tax that is withheld. A withholdee is entitled to a tax credit in an amount equal to the tax treated as paid above for the year of assessment in which the payment is derived.  Exempt Amounts (from Income Tax) MSL Business School  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 The following are exempt from tax Reference & Further Reading the salary, allowances, facilities, pension and gratuity of the President in accordance Section 7 of Act 896 with Article 68 (5) of the Constitution the income of the Government of Ghana or a local authority, other than income from activities which are only indirectly connected with the Government or status of the local authority the income of a public corporation, where ▪ that public corporation is not set up as a commercial venture; and ▪ the income is from an activity that is directly connected with the status of that public corporation pension  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 a capital sum paid to a person as compensation or a gratuity in relation to Reference & Further ▪ a personal injury suffered by that person; or Reading ▪ the death of another person Section 7 of Act 896 the income of a non-resident person from a business of operating ships or aircrafts, where the Commissioner-General is satisfied that an equivalent exemption is granted by the country of residence of that person to persons resident in this country the income from cocoa of a cocoa farmer the income of a person receiving instruction at an educational institution from a scholarship, exhibition, bursary or similar educational endowment  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 the income of an individual entitled to privileges to the extent provided for by ▪ the Diplomatic Immunities Act, 1962 (Act 148) or a similar enactment; Reference & Further ▪ an Act giving effect to the Convention on the Privileges and Immunities of the Reading United Nations and the Convention on the Privileges and Immunities of the Specialised Agencies of the United Nations; Section 7 of Act 896 ▪ an Act giving effect to a Convention, treaty or protocol conferring privileges and immunities on an officer of an African Union or Economic Community of West African States office or secretariat or an agency of the two institutions; or ▪ Regulations made under an Act referred to above the income of an individual to the extent provided for in an agreement between the Government of Ghana and a foreign government or a public international organisation for the provision of technical services to Ghana where ▪ the individual is a non-resident person or an individual who is resident in the country solely by reason of performing that service; and ▪ the agreement has been ratified by Parliament in accordance with article 75 of the Constitution  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 a cost of living allowance, other than training allowance paid in place of salary for services rendered abroad by members of the Ministry of Foreign Affairs, and officers attached to official Ghanaian diplomatic or consular missions abroad Reference & Further Reading Section 7 of Act 896 income from a temporary employment of an individual with the Government of Ghana, where ▪ that individual is not a citizen of the country; ▪ the income is expressly exempt under the employment contract; and ▪ the income is paid out of the Consolidated Fund the income of an individual from employment in the public service of the government of a foreign country, where ▪ the individual is either a non-resident, or is resident in the country solely by reason of performing that employment; ▪ the individual does not exercise any other employment or carry on a business in the country; ▪ the income is payable from the public funds of the foreign country; and ▪ the income is subject to tax in the foreign country  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 the income of a state-owned or state-sponsored educational institution Reference & Further Reading the income of an institution or trust of a public character established by an enactment solely for the purpose of scientific research Section 7 of Act 896 interest paid to an individual ▪ by a resident financial institution; or ▪ on bonds issued by the Government of Ghana the interest or dividend paid or credited to a holder or member on an investment in an approved unit trust scheme or mutual fund interest paid to a non-resident person on bonds issued by the government of Ghana  EXEMPT AMOUNTS These amounts do not attract income tax under Act 896 gains from the realisation of bonds issued by the Government of Ghana by a non-resident person Reference & Further Reading Section 7 of Act 896 gains from the realisation of securities traded on the Ghana Stock Exchange up to December 31st, 2021 the income of an approved unit trust scheme or mutual fund the income of an approved Real Estate Investment Trust (REIT)  Minimum Chargeable Income - s.2A Despite section 2 (Chargeable Income - see next slide for refresher), a person may be required to compute and pay tax on a minimum chargeable income of 5% of turnover where the person has been declaring losses for the previous 5 years of assessment. Note: The above does not apply to a person within the first 5 years of commencement of operations, or engaged in farming  Basic Definitions & Concepts What is a Company means a company incorporated under the laws of Ghana or elsewhere and includes - a friendly society, building society or similar society; Company? - s.133 - a pension fund, provident fund, retirement fund, superannuation fund or similar fund; and - a government, a political subdivision of a government, or a public international organisation but does not include a partnership or a trust. Despite the above Despite the definition of a company above, each of the following is treated as a company for the purposes of the definition, Income Tax Act, companies also - a partnership in which at least 20 of the partners have limited liability for the debts of the partnership; and include… - s.129 - a trust with at least 20 beneficiaries whose entitlements to participate in the income or capital of the trust are divided into units such that the entitlements are determined by the number of units owned. The income of a person from a business for a year of assessment is the gains and profits of that person from that business for the year or a part of the year. A person who is ascertaining the profits and gains of that person or of another person from a business for a Income from year of assessment shall include in the calculation, an amount specified in respect of; Business - s.5 - service fees; - consideration received in respect of trading stock; - a gain from the realisation of capital assets and liabilities of the business as calculated under Part IV of the Income Tax Act (Assets and Liabilities);  Basic Definitions & Concepts Continued… - an amount required by the Third Schedule (Capital Allowances) to be included on the realisation of the depreciable assets of the person which are used in the business; - an amount derived as consideration for accepting a restriction on the capacity of the person to conduct Income from - the business; a gift received by the person in respect of the business; Business - s.5 - an amount derived that is effectively connected with the business and that would otherwise be included in calculating the income of the person from an investment; and - any other amount required to be included under sections 54 (Taxation of Partners), 59 (Taxation of Shareholders), Part III (Rules Governing Amounts Used In Calculating The Income Tax Base) or Part VI (Special Industries) if they are derived by the person during the year from the business. A person who is ascertaining the profits and gains of that person or of another person from a business for a year of assessment shall exclude from the calculation, Income from - an amount specified in respect of an exemption under section 7 (Exempt Amounts); Business (exclusions) - s.5 - an amount specified in respect of a final withholding payment; and - - an amount that is included in calculating the income of the person from an employment.  Basic Definitions & Concepts The income of a person from an investment for a year of assessment is the gains and profits of that person from conducting the investment for the year or a part of the year. A person who is ascertaining the profits and gains of that person or of another person from an investment for a Income from year of assessment or for a part of the year shall include in the calculation, an amount specified in respect of - dividends, interest, annuity, natural resource payment, rent, and royalty; Investment - s.6 - a gain from the realisation of an investment asset as calculated under Part IV of the Income Tax Act (Assets and Liabilities); - an amount derived as consideration for accepting a restriction on the capacity of the individual to conduct the investment; - a gift received by a person other than a gift received in respect of business or employment; - any other amount required to be included under section 59 (Taxation of Shareholders), Part III (Rules Governing Amounts Used In Calculating The Income Tax Base) or Part VI (Special Industries) if the amount is derived by the person during the year from the investment; and - winnings from lottery A person who is ascertaining the profits and gains of that person or of another person from an investment for a year of assessment shall exclude from the calculation, Income from - an amount specified in respect of an exemption under section 7 (Exempt Amounts); Investment - a final withholding payment; and (exclusions) - s.6 - an amount that is included in calculating the income of the person from an employment or business.