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January 7, 2022
2022-5022

Ghana enacts various tax amendments introduced in 2022 Budget

Executive summary

Ghana’s Parliament has enacted the following tax amendments:

  • Income Tax (Amendment) (No. 2) Act, 2021, Act 1071

  • Value Added Tax (Amendment) Act, 2021, Act 1072

  • Penalty and Interest Waiver (Amendment) Act, 2021, Act 1073

These amendments were enacted as part of the various tax measures introduced by the Government in the 2022 Budget Statement and Economic Policy (the 2022 Budget). For background on the 2022 Budget, see EY Global Tax Alert, Ghana issues Budget Statement and Economic Policy for 2022 Financial Year, dated 19 November 2021.

This Alert summarizes key aspects of the Amended Acts.

Detailed discussion

The Parliament of Ghana has enacted these Acts in line with the various measures introduced by the Government in the 2022 Budget to foster a supportive private environment for domestic businesses and foreign direct investments.

The amendments were published in the Official Gazette on 31 December 2021. As the Amendment Acts did not set forth effective dates, the amendments came into force on the date of publication, 31 December 2021.

Income Tax (Amendment) (No. 2) Act, 2021, Act 1071

The Act has revised the graduated annual income tax rate for individuals, reduced the withholding tax rate for the sale of unprocessed gold by small scale miners, increased the threshold for an individual to whom the presumptive tax under the Modified Taxation Scheme applies and extended the COVID-19 concessions granted in 2021 for an additional six months in 2022.

The graduated annual income tax rate applicable to individuals has been revised as follows:

Band

Rate (%)

Old Chargeable income (GHS)

New Chargeable Income (GHS)

Difference (GHS)

First

Nil

3,828

4,380

552

Next

5

1,200

1,320

120

Next

10

1,440

1,560

120

Next

17.5

36,000

36,000

Nil

Next

25

197,532

196,740

(792)

Exceeding

30

240,000

240,000

Nil

The Act requires a resident person to withhold tax at a rate of 1.5% where the person pays for unprocessed precious minerals located in Ghana or won from Ghana.

The Act applies the presumptive tax to an individual who has annual turnover of not more than GHS20,000 from the business computed as an average of the turnover for three consecutive years ending in the year of assessment as provided in Paragraph 2(1)(c)(i) of the Second Schedule to the Income Tax Act, 2015, Act 896 (as amended) (the ITA). Prior to this amendment, presumptive tax applied to individuals who were not registered for Value Added Tax (VAT) purposes.

In the case of presumptive tax based on turnover as provided in Paragraph 5 of the Second Schedule to the ITA, the Act has revised the tax payable to 3% of the turnover of the business exceeding GHS20,000 but not more than GHS500,000. Previously, the threshold was a turnover of the business exceeding GHS20,000 but not more than GHS120,000.

The Act has increased the turnover threshold required to apply the modified cash basis to GHS500,000. Modified cash basis applies where the assessable income of a resident individual for a year of assessment from all business conducted by that individual consists exclusively of income from sources within Ghana and the turnover of the individual does not exceed GHS500,000, calculated using the modified cash basis.

The quarterly income tax installment payment required of certain categories[i] of persons in Paragraph 14 of the Sixth Schedule to the ITA has been deferred for the first, second and third quarters of 2022.

The Act has included the owner of the following class of vehicles in the category of persons whose quarterly income tax installments have been deferred for the first, second and third quarters of 2022:

Class of Vehicle

Description

 C1

Commuter (up to 15 persons)

C2 

Commuter (16 to 19 persons)

C3 

Ford Buses and Commuter (up to 23 persons)

C5 

Commuter (up to 38 persons)

C7 

Commuter (39 to 45 persons)

C9

Commuter (46 persons and above)

Value Added Tax (Amendment) Act, 2021, Act 1072

The Act has amended the Value Added Tax Act, 2013, (Act 870) (the VAT Act) to limit the application of the flat rate to a retailer with turnover not exceeding GHS500,000 annually and extended the VAT zero-rate on African textile prints for local textile manufacturers for a period of two years.

The Act provides that a taxable person who is a retailer of goods and makes at the end of any 12 months, a taxable supply not less than GHS200,000 but not exceeding GHS500,000 to account for the VAT payable at a flat rate of 3% calculated on the value of the taxable supply unless otherwise directed by the Commissioner-General (CG) of Ghana Revenue Authority (GRA) in writing.

The Second Schedule to the VAT Act has been amended in Paragraph 2 to recognize a supply of locally manufactured textiles up to 31 December 2023 by a local manufacturer who has been approved by the Minister responsible for Trade and Industry as a zero-rated supply.

Penalty and Interest Waiver (Amendment) Act, 2021, Act 1073

The Act has extended the period to apply for a waiver of penalty and interest on accumulated tax arrears up to 31 December 2020 for persons who make arrangements with the GRA for payment of the principal tax up to 30 June 2022.

The Act provides that the CG of the GRA shall not recover assessed penalties and interest on the tax arrears paid in respect of the relevant period, where a person on or before 30 June 2022:

  • Pays tax arrears to the GRA

  • Files outstanding returns for the previous years through 31 December 2020

The relevant period refers to the period where there are tax arrears or outstanding returns to be filed by 31 December 2020. A person granted the waiver is not liable to prosecution or any other enforcement action with respect to the tax due for the relevant period.

Conditions for the waiver of penalty and interest

To qualify for a waiver of penalty and interest, a person must, on or before 30 June 2022:

  • Submit returns or amended returns, containing full disclosure of undisclosed liabilities through 31 December 2020 and pay or make the necessary arrangements to pay all resulting taxes; or

  • Pay or make the necessary arrangements to pay assessed and outstanding taxes.

Application for waiver

A person who qualifies for the waiver is required, during the period commencing from 1 April 2021 and ending on 30 June 2022, to submit to the CG at the address specified by him:

  • A written application in the form and manner determined by the CG

  • The outstanding returns for prior periods through 31 December 2020

_________________________________________

For additional information with respect to this Alert, please contact the following:

Ernst & Young Chartered Accountants, Accra

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York

_________________________________________

Endnotes

1. Category A: Retail traders, susu collectors, drinking and chop bar owners, bakeries, business centers, estates and accommodation agents.

Category B: Dressmakers and tailors, hairdressers, beauticians and barbers, artisans including masons, carpenters, plumbers, electricians, tilers, steel benders and laborers, hiring services other than vehicle hiring, freelance photographers who make a living out of photography other than operating in a photo studio or a specific location.

Category C: Butchers, Individual undertakers, corn millers and other millers, charcoal and firewood vendors, vulcanizers and alignment operators, auto technicians, shoes and equipment repairs, traditional healers.

 
 

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