Withholding tax in Ghana 2022: current rates and everything you need to know

Withholding tax in Ghana 2022: current rates and everything you need to know

The new Tax act made some adjustments to the withholding tax in Ghana. As a result, dissatisfied members of the public raised concerns regarding the raised minimum threshold and changes made in numerous deductive rates. Learn about the current rates here.

Withholding tax in Ghana
Someone using a phone calculator. Photo: unsplash.com, @Kelly Sikkema (modified by author)
Source: UGC

Although withholding taxes are deducted at the source. There are some exemptions. To be excused from withholding tax, you should not owe federal income tax from the prior tax year and expect to owe no federal income tax in the current tax year.

What is withholding tax in Ghana?

Withholding tax is an amount of money held back by a party making tax payments for another. A registered partnership, company, trust, or individual buying goods or services from someone can withhold the person's tax unless the individual is exempted from paying the tax.

You must be registered to withhold tax from business transactions. The Ghana Revenue Authority (GRA) allows registered parties to deduct the money before being issuing the recipient. For instance, if you earn a GHC 10,000 payment for your services, a withholding tax of 15% means taking home GHC 8500. Your employer retains GHC 1500 and submits it to GRA on your behalf.

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Types of withholding taxes in Ghana

Pay As You Earn (PAYE) is the most common withholding tax type. An employer deducts PAYE from the employee's income and submits it to the Domestic Tax Revenue Division (DTRD) (a GRA department) by the 15th of every month.

Withholding tax (WHT) can be final or on the account. WHT is described as final when your income or profit has already suffered the WHT tax. Hence, it will not be included in your returns.

Meanwhile, WHT rendered on account means your income must still be included in the tax returns. The WHT tax is then deducted to arrive at your final tax liability. For instance, if you owe GHC 20000 but paid a withholding tax of GHC 1500 during that financial period, your tax liability is GHC 8500. Here are all types of withholding taxes in Ghana.

  • Withholding tax from payment for goods and services.
  • Withholding tax from payment of dividends to resident shareholders.
  • Withholding tax from interest paid to a resident company, i.e., banks and other financial institutions.
  • Withholding tax from payment and non-resident persons.
  • Withholding tax from fees to a resident part-time teacher, lecturer, examiner, examinations invigilator, or supervisor.
  • Withholding tax on management and technical service fees.
  • Royalties, natural resource payments.
  • Endorsement fees.
  • Withholding tax from employment income (PAYE).

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What are the withholding rates for 2022?

The threshold for withholding tax in Ghana is GHC 2000 (the minimum amount that attracts WHT by law). However, applicable rates keep on changing from time to time.

1. Corporate withholding tax rates

Ghana has DTTs with some countries for relief from double taxation on income arising in Ghana. The country's corporate withholding tax rates include:

RESIDENT PERSONS

INCOMEWHT RATE (%)FINAL TAX
Interest (excluding individuals and resident financial institutions)8No
Dividend8Yes
Rent (on residential properties as investment income)8Yes
Rent (on commercial properties as investment income)15Yes
Royalties and natural resource payments15No
Fees to lecturers, invigilators, examiners, part-time teachers, and endorsement fees10Yes
Commissions to insurance agents and salespersons10No
Fees, emoluments, and other benefits to a resident director, manager, or board member of a body of persons20No
Commissions to lotto agents10No
Supply of goods exceeding GHS 2,0003No
Supply of works exceeding GHS 2,0005No
Supply of services exceeding GHS 2,000 (payments to persons other than individuals)7.5No
Payment to individuals for the provision of services7.5No
Payment to petroleum subcontractors7.5No
Payment for unprocessed precious minerals3No

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NON-RESIDENT PERSONS

INCOMEWHT RATE (%)FINAL TAX
Dividend8Yes
Royalties, natural resources payments, and rents15Yes
Management, consulting, and technical service fees, and endorsement fees20Yes
Repatriated branch after-tax profits8Yes
Interest income8Yes
Short-term insurance premium5Yes
Income from telecommunication, shipping, and air transport 15Yes
Payment to petroleum subcontractors15Yes

2. Personal income tax rates

There are no local taxes on personal income in Ghana. Non-residents pay taxes at the flat rate of 25%, while residents are subject to 0% to 30% tax rates. Check out this annual graduated scale of income:

CHARGEABLE INCOME (GHC)RATE OF TAX (%)
First 3,8280
Next 1,2005
Next 1,44010
Next 36,00017.5
Next 197,53225
Exceeding 240,00030

What is the current rate for withholding tax in Ghana?

The law requires the VAT withholding agents to hold back 7% on the taxable value and submit that amount to the GRA.

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How to calculate withholding tax in Ghana

Calculating withholding tax in Ghana may seem like rocket science and somehow incomprehensible, but with a careful understanding of the procedure, everything falls into place. Take PAYE, for example, because many people encounter it:

An employer deducts the worker's monthly PAYE at source using the monthly graduated individual tax rates. Computation of withholding tax from employment income is as follows;

  • Deducting 5.5% Social Security from basic salary.
  • Then add all allowances after the 5.5% social security deduction.
  • Deduct applicable personal relief(s).
  • Use the right table to compute the tax on the remainder, which is the taxable income.

The cash payable derived from that calculation is also referred to as the withholding tax. Passage costs of an employee engaged or recruited outside Ghana or a non-resident chiefly serving an employer within the country are not subject to any tax deductions. Other non-taxable benefits/income include:

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  • Lump-sum payment upon retirement or pension upon retirement because of old age, sickness, among other infirmities.
  • The employer provides accommodation to an employee on either mining, timber, construction, or farming business site the business operates.
  • Compensation of costs incurred on behalf of the employer.
  • Night duty allowances (It is limited to 50% of the salary)
  • Gains that arise from trading on the Ghana Stock Exchange are also excused from taxation for twenty years of assessment starting from the basis period in which operations began.
  • Interest or dividend is given to an individual investing in a capital venture financing company.

Finally, bear in mind that in a situation of a married couple, one individual only can claim the marriage or child education relief. Use an automated PAYE calculator for Ghana to estimate your withholding and income taxes.

Withholding certificate of Ghana

Ghana's withholding tax act stipulates that a withholding agent such as an employer should give the person paying the tax a withholding certificate of Ghana. The agent prepares the certificate before serving the taxpayer.

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The withholding tax act of Ghana

The law compels a withholding tax agent to deduct the exact money at the source and issue it to the commissioner. Any details concerning the payment are also to be submitted alongside the tax.

As for the submission period, the law states that the agent must submit the withheld tax within fifteen days after the end of the month.

Failure to adhere to any of the rules calls for consequences. For example, the law states that in case the withholding agent fails to do the assigned task, he is personally liable to pay the commissioner the amount of money that has been withheld.

Aside from withholding taxes, the new income tax laws introduced one percent on interest paid to an individual. Any interest accrued on fixed income deposits, interest from banks, treasury bills, etc., would automatically attract a one percent deduction.

In addition, the interest and dividends paid to a member of an approved unit or mutual trust are also taxed at one percent. This applies in the case of the holder being an individual. Earlier, such interests, dividends, or any other form of income relating to approved mutual funds were not taxed.

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The withholding tax in Ghana maintains the pay-as-you-go tax collection system by ensuring that employees comfortably pay income tax. It also fights tax evasion by eliminating the need to send taxpayers huge and unaffordable tax bills at the end of the tax year.

READ ALSO: How to check your Glo number in Ghana in 2022: step-by-step

Yen.com.gh also shared how to check your Glo number in Ghana. The company's excellent network and internet coverage attract millions of subscribers.

Glo has several self-service options for customers to efficiently access services at their convenience. For instance, you can check your Glo number in Ghana from your phone.

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Source: YEN.com.gh

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