Understanding Tax Filing Obligations for Companies in Ghana
Corporate Tax
Companies registered in Ghana are required to pay corporate tax on the company's annual profit. The current corporate tax rate is 25%.
Filing Process for Corporate Tax:
Provisional Assessment: The Company will be provided a provisional assessment of the company's tax liability based on its revenue, as determined by the Commissioner at the start of the financial year. This is an initial assessment that serves as a preliminary estimation.
The taxpayer is required to pay the assessed amount based on the initial assessment in four quarters of the related year.
Preparation of Financials: At the end of the financial year, the Company is required to prepare its financial accounts, including the profit and loss account, balance sheet, and cash flow statement, which should be audited and signed off by an auditor.
Submission of Company Income Tax Return and Financial Statement: The Company is required to submit a Company Income Tax Return along with the financial accounts to the GRA. This return must be completed using the prescribed form and filing is due by April of the following year.
Final Assessment: The GRA issues a final tax assessment based on the submitted financial accounts. Any outstanding tax liabilities must be settled by the company.
Personal Income Tax (P.I.T)
Individuals are required to pay Personal Income Tax (PIT) on the total of their chargeable income, which encompasses all income generated from employment, business or investments less any allowable deductions for the year.
Personal Income Tax is applied based on graduated tax rates rather than a flat rate. This means that the tax payable is dependent on the taxpayer's income. Consequently, higher earnings result in a proportionally higher tax obligation.
Filing Process for Personal Income Tax:
Provisional Assessment: The taxpayer receives a provisional assessment of tax, which is based on an initial evaluation of the individual's chargeable income. This provisional assessment provides an estimated amount that the taxpayer is required to pay.
Submitting an Income Tax Return: at the end of the period, the taxpayer is required to submit an income tax return for the assessment year. This return must be completed using the prescribed form and submitted no later than 4 months after the conclusion of the basis period.
Final Assessment: Upon receiving the return of income and any other relevant information, the Commissioner will proceed to make a final assessment of the taxpayer's chargeable income and determine the tax payable based on this assessment. Any outstanding payments will be communicated to the taxpayer, who is required to settle them promptly.
Pay–As–You–Earn (PAYE):
Employers in Ghana are required to withhold income tax from the wages and salaries of their employees (Pay-As-You-Earn or PAYE) and remit the withheld taxes to the Ghana Revenue Authority. The PAYE tax is graduated depending on the income range.
All employers are also required to file annual returns of employees with the GRA, disclosing income paid to and tax withheld from each employee, within four months of the end of the calendar year.
Filing Process for Pay–As–You–Earn (PAYE)
Employers are required to deduct Pay As You Earn (PAYE) from the monthly salary of each employee.
The accumulated PAYE amount for the month is to be remitted to the Ghana Revenue Authority (GRA) at the end of the month.
Employers must fill out and submit monthly PAYE deductions returns along with a schedule detailing the names and Ghana card numbers of employees and the corresponding amounts paid. Payment of the amount due must be paid to the GRA.
Consequences for Non-Compliance
Companies that fail to comply with their tax filing obligations within the stipulated timeframe become liable to administrative penalties for the duration that the default continues.
By understanding the filing requirements, adhering to deadlines, and seeking appropriate legal assistance, companies can ensure compliance with Ghanaian laws and avoid potential penalties for non-compliance.
For more information on how we can assist your company in meeting regulatory requirements and ensuring compliance with the law, please contact us at contact@olaryealaw.com / +233 (0)201068192.
