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Pay As You Earn (PAYE)

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GRADomestic TaxTax TypesPay As You Earn (PAYE)

Pay As You Earn

It is a tax deducted from an employee’s income and is paid by an employer on behalf of the employee. The tax is charged on all income of an individual in employment, whether it is received in cash or in kind. Monthly PAYE returns must be filed by the employer on behalf of employee on or before the fifteenth day of the month following the month in which the deduction was made. 

How PAYE Works

The monthly PAYE is deducted at source by your employer using the monthly graduated individual tax rates. These items are deducted from employee’s income before calculating PAYE.

Deductions and Allowances

These items are deducted from an employee’s income before calculating PAYE:

  • Social Security and National Insurance Trust (SSNIT) – 5.5% of basic salary.
  • Mortgage Interest paid on only one residential premise of the employee’s lifetime.
  • Provident fund up to 16.5% of your basic salary either paid by the employer or employee or both.
  • Contributions and donations to a worthwhile cause.

These are some of the allowances that will be added to salary for PAYE purposes such as; Transport allowance, Rent (Accommodation) allowance.

  • Risk allowance, Night duty allowance, Responsibility allowance, Child Education allowance, House help allowance, Cook allowance, Garden boy allowance, etc.
  • Allowances paid in cash are added to the salary. Benefits to the employees in kind are added for tax purposes, but when the benefit is paid in kind, it is quantified in monetary value before it is added to salary such as electricity, water, vehicle with driver and fuel, vehicle and fuel, vehicle only, fuel only, accommodation and loan benefits are also benefits in kind which are quantified in the law. (See link: The Fourth Schedule of Act 896,2015 for the tax rates applicable)

Overtime

Overtime rate is applicable to employees who are junior staff and their qualifying employment income including profits and gains to be taxed in the year is not more than Gh¢18,000. A junior staff whose qualifying employment emolument is more than Gh¢18,000 is not entitled to overtime pay.

When an employer pays overtime to any employee that is not more than 50% of the employee’s monthly basic salary, the employer will deduct 5% as overtime tax. However, if the overtime paid is more than 50% of the employee’s monthly basic salary, the excess of the 50% is taxed at 10%. Unlike bonus no overtime is added to basic salary. It should be noted that for a non- resident employee tax on bonus or overtime is 20%.

PAYE for Temporary Workers

When a resident individual is a temporary worker, his or her tax is calculated as any other employee.

Casual Workers

When a person makes payment to a casual worker, there should be a deduction of 5% tax on the amount which should be paid to Ghana Revenue Authority.

Income from Other Sources

Such as income from Employment, Business and Investment. At the end of the year income from each source is put together as one and taxed.

You have to file a return at the end of the year.

The table below details the new monthly income tax bands and rates generally applicable to the chargeable income of resident individuals:

Year 2021

Chargeable Income GH¢

Rate %

Tax Payable GH¢

Cumulative Income GH¢

Cumulative Tax GH¢

 First

319

0

0

319

0

 Next

100

5

5

419

5

Next

120

10

12

539

17

Next

3 000.00

17.5

525

3 539.00

542

Next

16 461.00

25

4 115.25

20 000.00

4 657.25

Exceeding

20 000.00

30

 

 

 

The chargeable income of non-resident individuals is generally taxed at a flat rate of 25%.

The table below indicates the new annual income tax bands and rates generally applicable to the chargeable income of resident individuals:

Year 2021

Chargeable Income GH¢

Rate %

Tax Payable GH¢

Cumulative Income GH¢

Cumulative Tax GH¢

 First

3,828

0

0

3,828

0

 Next

1,200

5

60

5,028

60

Next

1,440

10

144

6,468

204

Next

36,000

17.5

6,300

42,468

6,504

Next

197,532

25

49,383

240,000

55,887

Exceeding

240,000

30

 

 

 

These rates took effect from January 1st, 2020.

Relevant PAYE Downloads

Downloadable Forms and Online Tools for PAYE

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