Sectorial and locational incentives
Tax incentives are available to companies based on the business the company is engaged and its location. Some of the available incentives are as follows:
Locational incentives
A free zone enterprise that imports items into a free zone or single factory zone is exempt from customs duties and customs taxes. However, a company licensed as a free zone enterprise but does not export a minimum of 70% of the output of the company or the relevant authority specified in the issued license shall pay 300% of all taxes due [3].
Enterprises located in free zone enclaves have a tax holiday on their income for the first 10 years of operation and are charged at the rate of 15% on their income from exports of their products outside Ghana after the tax holiday period (i.e., after 10 years in operation). Income received from goods and services provided by free zone enterprises within the domestic market does not enjoy any tax exemption and is subject to a 25% tax [5].
Income of manufacturing companies located in a regional capital of Ghana (outside Accra, Tema) is charged at a rate of 18.75%. Manufacturing companies located elsewhere in the country (other than Accra and Tema and a regional capital) are also subject to income tax of 12.5% [6].
Sectoral incentives
In addition to granting a general tax incentive to a sector by regulations [7], the State may grant a specially-negotiated tax exemption for strategic investment in priority sectors of the economy where the State takes commensurate equity stake in the investment project [8]. The priority sectors are yet to be prescribed by the Cabinet.
Income of companies engaged in non-traditional exports is charged at a rate of 8%;
Income of real estate companies derived from construction for sale or letting of low cost affordable residential premises is charged at a rate 5% for the first 5 years (a company engaged in the construction for sale or letting of low cost affordable residential premises shall be issued with a certificate certifying that it is engaged in the construction of low cost affordable residential premises by the Minister responsible for Works and Housing before it can claim on this tax incentive);
Income of companies engaged in farming tree crops is charged at a rate of 5% for the first 10 years; and
Income of Companies engaged in cattle farming is charged at a rate of 5% for the first 10 years.
Exchange control
The Ghana Cedi is the sole legal tender of the Republic of Ghana and a person is prohibited from dealing in foreign currency without a licence from the Bank of Ghana for that purpose [9]. Dealing is defined as the purchasing and selling of foreign exchange, receipt of payment in foreign exchange, importation and exportation of foreign exchange and lending and borrowing of foreign exchange [10].
The Bank of Ghana notice dated 5 April 2022 (No. BG/GOV/SEC/2022/04), further states that, “Bank of Ghana hereby cautions the general public to desist from dealing in illegal forex activities (black market transactions), pricing, advertising, receipting or making payments for goods and services in foreign currency in Ghana, without the requisite licence or authorization from Bank of Ghana.”. A person may, therefore, price, advertise or receive payment in a foreign currency only if it is duly licensed by the Bank of Ghana.
Capital gains tax
Ghanaian law does not separately levy capital gains tax. The gains made by a person must be computed as part of the income of the person from business or investment and taxed as part of the person's chargeable income for the relevant year [11]. Individuals may, however, elect to treat the capital gain realised from an investment asset as an isolated transaction to be taxed at a rate of 25% [12].
Personal income tax
Levied on income from business, employment and investment. For a resident person, tax is paid on worldwide income i.e., whether or not the income has a source in Ghana. For a non-resident person, tax is levied on income having a source in Ghana. Pay As You Earn is the method of collection.
Rate: 0% - 35% dependent on income band for residents.
25% for non-residents.
Withholding tax
Applies to assorted payments including:
payment to employees;
payments subcontractors for works and services connected to a petroleum agreement;
payment for unprocessed precious minerals located in Ghana or won from Ghana;
directors' fees;
payment of interest;
fees to part-time lecturers and teachers;
dividends to shareholders;
commission to insurance and sales agents;
endorsement fees
commission to lottery agents;
winning from lottery;
natural resource payments;
royalties;
payment for goods and services supplied;
payments for realisation of assets or liabilities; and
rent.
Rate of withholding ranges generally from 1% - 20%
Personal income tax rates apply in respect of payment to employees.
Rate for residents: 5% - 15%
Rate for non-residents: 5 - 20%
Personal income tax rates apply in respect of payment to employees.
Dividends
Exemption for resident companies holding a minimum of 25% shareholding of the resident company which pays the dividend. Note: where a company (controlled by not more than 5 persons) records profit over a reasonable period but does not declare dividends, the Commissioner has the authority to treat part of the company income as distributed and demand tax on dividends. The rate of withholding tax charged on dividends is 8% for both residents and non-residents.
Corporation tax
It is a direct tax on income relating to business and investment irrespective of the source, for resident companies, and having a source in Ghana, for non-resident companies.
Corporation tax rate is 25%
For companies engaged in petroleum operations and mining operations, the corporate income tax rate is 35%.
Transfer pricing rules
Nothing in the legislation disallows related party transactions provided that the dealings between related parties are conducted in accordance with the arm’s length standard. The Commissioner General has the authority to adjust income or deductions in transactions to reflect an arrangement that would have been made between independent persons.
Capital allowances
Capital Allowances are granted in respect of depreciable assets owned and used by a person during a year of assessment in the production of income from a business [13].
Thin cap regulations
A resident company (50% or more owned or controlled by an “exempt person”), other than a financial institution, is deemed to be thinly capitalised if the ratio of interest-bearing debt (from its shareholders) to equity exceeds 3:1 [14]. Any excess interest or foreign exchange currency loss may not be deducted on the part of the debt that exceeds the 3:1 ratio.
Losses
Tax losses can be carried forward for 5 years, subsequent to the year in which the losses were incurred, by certain industries. This includes foreign currency exchange losses, subject to certain conditions.
Foreign tax relief
Foreign tax credits are available to relieve double taxation on overseas income. Credits are calculated separately for each source of business, employment and investment income. A resident is entitled to a credit in respect of any foreign income tax paid, to the extent to which the tax paid is in respect of the resident’s foreign taxable income. The foreign tax credit available on a specific income type should not exceed the average rate of Ghanaian income tax of the resident for a year [15].
Branch profits tax
Where a foreign company doing business in Ghana earns repatriated profits, it will be required to pay a tax on the repatriated profit at the rate of 8%.
Double taxation treaties
Ghana has double taxation treaties with: United Kingdom; Germany; France; Italy; South Africa; Netherlands; Switzerland; Belgium; Denmark; Czech Republic; Mauritius; Morocco; Singapore and Qatar.
Ghana is currently awaiting cabinet approval for double taxation treaties with Ireland; Iran; Barbados; Seychelles; Malta; United Arab Emirates; and Luxembourg.
There are also ongoing negotiations for double taxation treaties with Portugal; Norway; Nigeria; Jersey; Turkey; South Korea; Saudi Arabia; Israel; Hungary; Rwanda; Tunisia; Japan; Egypt; and China.
Gift tax
A person who makes a gift to another person is deemed to have received an amount equal to either the market value of the assets being gifted or the cost of the assets immediately before the gift, whichever is greater [16]. Any derived gain must be computed as part of the income of the person making the gift for the given year and taxed as part of the person’s chargeable income.
Where an individual receives a gift other than a gift received in respect of business or employment, the individual may elect to pay tax at the rate of 25% [17].
Value added tax
Standard Rate: 15%
Flat rate scheme for retailers: 3%
Export of goods: 0% zero-rated
Stamp duty
Levied on a wide range of instruments. Rate: Varies
Mineral royalties
Levied on persons for the extraction of minerals. Rate: 5%
Export processing zone
8% tax rate if the company exports non-traditional goods [18].
National insurance levy
Imposed on the supply of certain goods and services at a rate of 2.5% [19].
Rent tax
Levied on income derived from rents at a rate of 8%.
Communication service tax
Levied on communication services at a rate of 5%.
Manufacturing
Manufacturing companies which have their plant situated outside Accra and Tema shall enjoy the tax incentive stated below:
a. All regional capitals except Accra and Tema - 18.75%
b. Outside regional capitals - 12.50% [20]
Turnover tax
5% of turnover where a person has been declaring losses for the previous five years of assessment [21].
Industrial concessions (exemption period) [22]
The income of a person entitled to a concession is subject to tax at the rate of five per cent of chargeable income [23].
Hotel and hospitality
Taxed at a rate of 22% [24].
Intangible assets
1 divided by the useful life of the asset in the pool.
Real estate companies (low cost affordable)
1% tax rate for the first five years, actual tax rate of 25% thereafter.
Assets relating to minerals and petroleum
Rate: 20% [25]
Buildings and structures
Rate: 10%
Computers and data handling equipment
Rate: 40%
Automobiles, plant and machinery
Rate: 30%
Assets in respect of long term crop planting
Rate: 30%
Rail, water, air-transport, plant, machinery and fixtures
Rate: 20%
Farming tree crops
5% tax rate for the first five years, actual tax rate of 25% thereafter.
Farming cattle
5% tax rate for the first five years, actual tax rate of 25% thereafter.
Rural banking
5% tax rate for the first ten years.
Venture capital investments
10 years concessionary period of 5% tax.
Construction (low cost affordable residential)
5% tax rate for 5 years and 25% after concessionary period.
Cocoa farming and processing cocoa by-products
5% tax rate for the first five years if wholly conducted in Ghana, actual tax rate of 25% thereafter.
Livestock
5% tax rate for the first five years, actual tax rate of 25% thereafter.
Processing waste materials
5% tax rate for the first seven years, actual tax rate of 25% thereafter.
Agro-processing business
5 years tax concession, 5% tax rate during concessionary period and 25% thereafter.
Vehicle income tax
Varies based on the class of the vehicle. For Class A, the rationalised annual rate is from GHS 40 - GHS64; for Class B, GHS120.00 - GHS480.00; for Class C, GHS80 – GHS600; and for Class D, GHS88 - GHS800.
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