Income Tax Basics

What is Income Tax

Income Tax is a tax charged on a person’s income from employment, business and investment. Persons such as employees, self-employed, persons in partnership, shareholders and directors of companies and trustees and beneficiaries of a trust are all charged tax on income earned.

Do I need to pay Income Tax

You must pay Income Tax if you are an employee, sole proprietor or a person in a partnership and you earn income above Gh¢ 261 per month.

How do I pay my taxes if I do not live in Ghana?

If you do not live in Ghana but earn an income in Ghana, you will have to pay the taxes in Ghana. You will have to register with the Ghana Revenue Authority. If you live outside Ghana and you earn an income from a business transaction, Income Tax will be paid by the business.

Types of Income Tax

The main types of Income Tax are:

Pay As You Earn (PAYE)

It is a tax deducted from employees’ 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 benefit or in kind. A monthly PAYE return must be filed by the employer on behalf of employees on or before the fifteenth day of the month following the month in which the deduction was made.

Personal Income Tax (PIT)

It is a tax charged on an individual’s total income (income from employment, business and investment). You must pay Income Tax if you are a sole proprietor or a person in partnership and you earn income above Gh¢ 261 per month.

Corporate Income Tax (CIT)

It is a tax charged on a company’s total income sources at the end of the company’s accounting income year. Companies pay tax on business and investment income known as gains and profit. This income does not include expenses made while obtaining the income.

Withholding Tax (WHT)

It is a tax which is deducted at source by a withholding agent (a person required to deduct tax) when making payment to another person and accounted for later to the GRA.

A registered partnership, company and trust and other businesses that make payment to another person for goods or services bought qualify to withhold the tax unless the person is exempted from paying the tax.  You must be registered to be allowed to withhold tax from business transactions.

Rent Income Tax

It is the tax on income that accrues to someone as a result of rental or leasing a property (residential and commercial) to another person.

Income Tax Stamp

It is a tax designed for individuals operating in the informal sector, for example, small-scale self-employed dressmakers / tailors, hairdressers / beauticians / barbers, susu collectors, chop bar owners, cooked food sellers, butchers, container / kiosks / table top operators, garage owners, artisans (masons, carpenters, welders, mechanics, vulcanizers, electricians, sprayers), hawkers and itinerant traders.

Income Tax Stamp is paid on quarterly basis. The due dates are 15th January, 15th April, 15th July and 15th October. It is categorized based on the size, nature and volume of the business. A Tax Stamp must be conspicuously displayed at the business premises or carried on your person (in the case of itinerant traders) for inspection at any time.

Vehicle Income Tax (VIT)

It is a tax designed for commercial transport operators. Due dates for payment of VIT are 15th January, 15th April, 15th July and 15th October. It is categorized based on the tonnage and number of passengers. The VIT sticker must be conspicuously displayed on the windscreen of all commercial vehicles.