Global Tax Alert | 3 December 2013

Ghana issues 2014 Budget

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On 19 November 2013, the Government of Ghana issued its 2014 Budget (Budget). The Budget re-aligns a number of tax initiatives in order to meet key national priorities. This Alert highlights fiscal policy initiatives from the 2014 Budget Statement and Economic Policy in relation to:

  • Direct taxes
  • Indirect taxes
  • Others

The proposed tax initiatives are subject to parliamentary approval before they become effective.

Direct taxes

Transfer pricing

In 2014, the Ghana Revenue Authority will commence an effective auditing of companies to help reduce abuses and under declaration of profits.

Capital gains tax

It is proposed that the capital gains tax provisions in the Internal Revenue Act 2000, (Act 592) as amended should now be applied to companies in petroleum operations.

Tax stamps

To strengthen measures of enforcement, compliance and broadening the tax base, the Government may introduce tax stamps on selected excisable products.

Management and technical fees

It is proposed that the tax on management and technical fees be increased from 15% to 20% to help reduce tax avoidance.

Withholding tax on rents

It is also proposed that the withholding tax rate for commercial buildings be increased to 15% whereas the rate for residential accommodation is maintained at 8%.

Windfall profit tax

A Windfall Profit Tax Bill on mining activities will be re-introduced in Parliament for its consideration after due consultation with all relevant stakeholders.

Tax exemption regime

Te Government also intends to streamline the country’s tax exemption regime.

Government reviews on free zones

The Government has proposed a review of the tax rates for free zones enterprises. The proposal seeks to tax domestic income of free zone enterprises at the same rate of non-free zone enterprises.

Indirect taxes

VAT rate

The VAT rate has been increased by 2.5%. Parliament passed a new VAT Act which increased the rate from 12.5% to 15%.

Duty free on imported raw materials

As part of the measures to promote local industries and to make them competitive, it has been proposed that raw materials imported for the local printing of textbooks and exercise books through tenders administered by the Ministry of Education will be exempted from import duty and VAT.

Similarly, raw materials imported into the country for the manufacturing of HIV/AIDS drugs under the supervision of the Ministry of Health will also be exempted from import duty and VAT.

National Fiscal Stabilization Levy (NFSL)

It is proposed that the NFSL which is expected to end at December 2014 will now terminate at the end of June 2014.

Special import levy

The levy imposed on imported goods at the point of entry is proposed to terminate by the end of 2014. Agriculture and fishing inputs such as cutlasses, outboard motors and fishing nets; medical supplies such as condoms and educational materials & energy bulbs have been exempted.

Customs assurance/destination inspection

With respect to streamlining measures adopted by the World Trade Organization, the Customs Division of the Ghana Revenue Authority are on course with improving measures adopted for the valuation, quality and quantity of imports into the country.

Others

Government Infrastructure Fund

It is expected that the Government will establish a Ghana Infrastructure Fund to address the significant infrastructure deficit and concentrate on ways to enhance job creation and economic growth.

Establishment of Free Income Tax Assessment Bureau (FITAB)

The Government intends to establishment FITAB to help traders and other potential tax payers to keep their financial records up-to-date and file their tax returns thereon.

Construction Industry Scheme

A Construction Industry Scheme (CIS) will be set-up to help regulate payments made by contractors to subcontractors in the building and construction industry.

New Legislation

The following Bills will be considered for passage in the 2014 fiscal year:

  • Financial Administration Act
  • Financial Administration Regulations
  • Bank of Ghana Act
  • The Banking Act
  • Borrowers and Lenders Act
  • The Loans Act

For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Services Limited, Accra, Ghana
  • Wilfred Okine
    +233 21 779 742
    wilfred.okine@gh.ey.com
Ernst & Young (China) Advisory Services Limited, Pan African Tax Desk, Beijing
  • Rendani Neluvhalani
    +86 10 5815 2831
    rendani.neluvhalani@cn.ey.com
Ernst & Young LLP, Pan African Tax Desk, New York
  • Dele Olaogun
    +1 212 773 2546
    dele.olaogun@ey.com
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
  • Leon Steenkamp
    +44 20 7951 1976
    lsteenkamp@uk.ey.com

EYG no. CM4004