Ghana's new laws introduce new taxes affecting individuals and businesses

Ghana’s Parliament has enacted several laws affecting the taxation of individuals and businesses, effective 3 April 2023. These law changes seek to increase the duty on certain excisable products, revise the income tax rates applicable to individuals and how the motor vehicle benefit is quantified, and introduce withholding tax on the realization of assets and liabilities. In addition to consolidating laws subject to administration by the Ghana Revenue Authority, the new laws also unify the unrelieved loss regime, revise the treatment of foreign exchange losses, and introduce a growth and stability levy applicable to entities.

Executive summary

Ghana’s Parliament has enacted or amended five laws (together, “the Acts”) affecting individual and business taxpayers. These Acts were enacted as part of the various fiscal measures introduced under the 2023 Budget Statement and Economic Policy (the 2023 Budget).

This Alert summarizes key aspects of the Acts.

Detailed discussion

The recent macroeconomic challenges occasioned by the Russia-Ukraine war and the post-effects of COVID-19 have brought about food shortages, high inflation and high debt levels. These circumstances have spurred the Government of Ghana to introduce various fiscal measures to reset the economy, restore macroeconomic stability and help individuals to thrive.

As a result, the following Acts have been passed by the Parliament of Ghana:

• Excise Duty (Amendment) Act, 2023 (Act 1093)
• Ghana Revenue Authority (Amendment) Act, 2023 (Act 1096)
• Growth and Sustainability Levy Act, 2023 (Act 1095)
• Income Tax (Amendment) (No. 2) Act, 2023 (Act 1094)
• Revenue Administration Act, 2022 (Act 1086)

The Acts were gazetted on 3 April 2023. Because none of the Acts specifies an effective date, the gazette notification date (3 April 2023) constitutes the date of entry into force for the Acts.

Excise Duty (Amendment) Act, 2023 (Act 1093)

The object of the Excise Duty (Amendment) Act, 2023 (Act 1093) is to

• Amend the Excise Duty Act, 2014 (Act 878) to revise the excise duty for cigarettes and other tobacco products to conform with the Economic Community of West African States (ECOWAS) Protocols
• Mitigate the harmful effects of some excisable products
• Increase the excise duty on wine, malt drinks and spirits
• Impose an excise duty on sweetened beverages (including fruit juices), electronic cigarettes and electronic liquids

The Act has amended Act 878 by replacing the First Schedule with a new Schedule, which reads as follows:

The excise duty indicated in the third column in relation to the goods listed under Commodity Description for Tariff Number 8 has been amended to be both:

1. Computed on the Cost, Insurance and Freight (CIF) value of the goods listed in the second column
2. Paid at the point of entry

Ghana Revenue Authority (Amendment) Act, 2023 (Act 1096)

This Act amends the Ghana Revenue Authority Act, 2009 (Act 791) to provide for laws subject to the administration of the Ghana Revenue Authority (GRA).

Act 1096 has amended the First Schedule to Act 791 and substituted it with the following:

Part I – Laws subject to full administration:

1. African Union Import Levy Act, 2017, (Act 952)
2. Airport Tax Act, 1963, (Act 209)
3. Casino Revenue Tax Act, 1973 (N.R.C.D 200)
4. COVID-19 Health Recovery Act, 2021 (Act 1068)
5. Communications Service Tax Act, 2008 (Act 754) as amended
6. Customs Act, 2015 (Act 891) as amended
7. Customs and Excise (Petroleum Taxes and Petroleum Related Levies) Act, 2005, (Act 685) as amended
8. Debt Recovery (Tema Oil Refinery Company) Fund Act, 2003, (Act 642)
9. Electronic Transfer Levy Act, 2022, (Act 1075) as amended
10. Excise Duty Act, 2014 (Act 878) as amended
11. Excise Tax Stamp Act, 2013 (Act 873) as amended
12. Exemptions Act, 2022 (Act 1083)
13. Financial Sector Recovery Levy Act, 2021 (Act 1067)
14. Income Tax Act, 2015 (Act 896) as amended
15. Internal Revenue (Registration of Businesses) Act, 2005 (Act 684)
16. National Fiscal Stabilisation Levy Act, 2013 (Act 862) as amended
17. Revenue Administration Act, 2016, (Act 915) as amended
18. Special Import Levy Act, 2013 (Act 861) as amended
19. Special Petroleum Tax Act, 2014, (Act 879) as amended
20. Stamp Duty Act, 2005, (Act 689) as amended
21. Taxation (Use of Fiscal Electronic Device) Act, 2018 (Act 966)
22. Value Added Tax Act, 2013 (Act 870) as amended

Part II – Laws subject to part administration:

1. Copyright Act, 2005 (Act 690)
2. Energy Sector Levies Act, 2015 (Act 899) as amended
3. Free Zone Act, 1995, (Act 504)
4. Ghana Education Trust Fund Act, 2000 (Act 581) as amended
5. Ghana Export-Import Bank Act, 2016 (Act 911)
6. Ghana Investment Promotion Centre Act, 2013 (Act 865)
7. Minerals and Mining Act, 2006 (Act 703) as amended
8. National Health Insurance Act, 2012 (Act 852) as amended
9. Petroleum Revenue Management Act, 2011 (Act 815)

Part III

Any other law that provides for administration in whole or in part by the GRA

Growth and Sustainability Levy Act, 2023 (Act 1095)

The object of this Act is to impose a special levy, the Growth and Sustainability Levy (Levy), to raise revenue for the growth and fiscal sustainability of the Ghanaian economy.

The Levy shall be imposed on (1) profit before tax of companies and institutions and (2) production in the case of mining and upstream oil and gas companies specified in the first column of the Schedule (below).

The Levy applies to specified companies and institutions, regardless of any provision to the contrary in any agreement or enactment relating to a tax holiday or exemption from direct or indirect tax applicable to a company or institution.

The Levy is not an allowable deduction for corporate income tax purposes. The Levy applies to profits before tax or production for the 2023, 2024 and 2025 years of assessment.

By the due date of the first installment payment, anyone who is subject to the Levy for a year of assessment specified under the Act must file with the GRA Commissioner-General (CG) an estimate of the Levy payable for the year of assessment. The Levy is payable quarterly and is due on 31 March, 30 June, 30 September and 31 December of each year.

The Act provides that a person¹ specified in the first column of the following Schedule shall file a return in respect of the Levy with the CG in the manner and at the time and place that the CG determines.

Income Tax (Amendment) (No. 2) Act 2023 (Act 1094)

The Act seeks to amend the Income Tax Act, 2015 (Act 896) (ITA) to

• Revise the income tax rates for individuals and introduce an additional income tax bracket
• Introduce a withholding tax rate on the realization of assets and liabilities and on lottery winnings
• Revise the treatment of foreign exchange losses
• Revise the upper limits for the quantification of motor vehicle benefits
• Provide for related matters

The amendments may be summarized as follows: 

• A person may be required to compute and pay tax on a minimum chargeable income of 5% of turnover (i.e., generally, gross revenue) where the person has been declaring losses for the previous five years of assessment. This, however, does not apply to a person engaged in farming or within the first five years of commencing operations. This implies that businesses may be required to pay tax despite that they may be making losses.
• Winnings from lottery are now considered as investment income
• The losses regime has been unified such that persons (whether in priority or nonpriority sectors) are entitled to deduct unrelieved losses from any of the previous five years of assessment. Previously, persons in nonpriority sectors were allowed to deduct losses from the previous three years of assessment whereas those in priority sectors were allowed to deduct unrelieved losses for five years.
• Foreign currency and financial instruments: Unrealized foreign exchange losses that a person incurs are not deductible in ascertaining the person’s income for a basis period from any business.

Realized foreign exchange losses, other than those of a capital nature, are deductible if incurred by a person in the production of business income during the period pertinent to a debt claim, debt obligation or foreign currency holding.

• A foreign exchange loss of a capital nature may be capitalized and capital allowance may be granted under section 14 of the ITA for the foreign exchange loss. A foreign exchange loss arising from a transaction between two resident persons is not deductible.
• A person who realizes an asset or liability is required to file a return on the realization with the CG within 30 days after the realization.
• A withdrawal from a provident fund or personal pension scheme before retirement, due to the Novel Coronavirus (COVID-19) pandemic or the current economic hardships, is exempt from tax for 2023 if the withdrawal is made by either
  • An employee due to a loss of permanent employment
  • A self-employed person from the personal savings account provided for under paragraph (a) of subsection (2) of section 109 of the National Pensions Act, 2008, Act 766
• Lottery operations: The gains and profits of a person engaged in a lottery operation for a year of assessment shall be the total amount staked or wagered. The chargeable income of a person from a lottery operation is the gross gaming revenue.
• Gross gaming revenue is defined as the total amount staked or wagered, less prizes or winnings paid or payable. Where a person has a chargeable income other than from a lottery operation, the person shall be charged separately under section 1 of the ITA (i.e., the section of the ITA that imposes income tax on a person who has a chargeable income and a person who receives a final withholding tax payment). The income of a lottery operator is taxed at 20% on the gross gaming revenue.
• Withholding from investment returns: Section 115 of the ITA has been amended to require that a resident person withhold tax at the applicable rate where that person pays either
  • Any dividend, winnings or lottery, interest, natural resource payment, rent or royalty to another person
  • Consideration to another person for the realization of an asset or liability and the payment has a source in the country.

• Withholding from investment returns:
  • Withholding from consideration on the realization of assets and liabilities: A resident person (other than an individual) who pays consideration to another person with respect to the realization of an asset or liability is required to withhold tax on the payment at the rate of:
    •  3% if the asset or liability is realized by a resident person
    • 10% if the asset or liability is realized by a nonresident person
  • Withholding from winnings from lottery: A resident person is required to withhold tax where that person pays any winnings from lottery at the end of each game at the rate of 10%
• Final withholding payment: Payments for winnings from lottery are considered as final withholding tax payments under section 119 of the ITA.
• Persons in a controlled relationship: The meaning of “persons in a controlled relationship” has been amended as follows:
  • Two or more persons are in a controlled relationship if the persons are
    1. Related individuals
    2. Partners in the same partnership
    3. An entity and an associate of that entity
    4. A settlor, trustee and beneficiary
    5. In a relationship other than those described in (a) to (d) in which one person, who is not an employee of the other, acts at the direction, request, suggestion or wish of the other person, whether or not the two are in a business relationship and whether or not the direction, request or suggestion or wish is expressly communicated
  • An associate of an entity means either a person who
    1. Participates, directly or through one or more interposed entities, in the management or control of the entity
    2. Is managed or controlled directly or through one or more interposed entities by the same persons who manage or control the entity.
  • Control in relation to an entity has been defined as holding 25% or more of the voting power or rights to income or capital of the entity, either directly or through one or more interposed entities; the previous threshold was 50%
  • A relative of an individual has also been defined to mean the individual’s child, spouse, parent, grandparent, grandchild, sibling, aunt, uncle, nephew, niece or first cousin including by way of marriage or adoption
• General interpretation section: The meaning of the following words and phrases have been provided in the Act:
  • “Betting” means an arrangement that involves risking money or any other valuable thing in an event that has an uncertain result
  • “Game of chance” means a game other than lotto in which participants pay money for the right to participate in a game in anticipation of winning a reward based on the results of the game, which depends on luck and cannot be determined before the end of game
  • “Gaming” means playing a game, whether of skill or chance or partly of skill and partly of chance, for stakes hazarded by the players but does include lotto
  • “Lottery” means a scheme in which rights are sold to participate in a draw by a lot for a prize including betting, gaming and any game of chance
  • “Stake” includes a payment or benefit in kind accrued for the right to take part in any lottery operation
• The income tax rates applicable to individuals have been revised as follows:
  • The graduated income tax rate (PAYE) has been amended as follows:

• • The chargeable income of a nonresident individual is taxed at 25%
  • Where the chargeable income of an individual includes a gain from the realization of an investment asset, less any loss from the realization of an investment asset not charged elsewhere, the individual may elect that the gain from the realization of the investment asset, less any loss from the realization of that asset is taxed at the rate of 25%
  • An individual who receives a gift other than a gift received in respect of business or employment may elect to pay tax on the income at the rate of 25%; the remainder of the income will be taxed at the appropriate rate depending on the individual’s residency status
• The chargeable income of a company and income from goods and services provided to the domestic market by a free zone enterprise after the concessionary period, other than a company principally engaged in the hotel industry, for a year of assessment is taxed at the rate of 25%.
• The tax rate applicable to the income of a person entitled to a concession in the Sixth Schedule (temporary concessions) has been increased from 1% to 5%. Temporary concession applies to persons stated in the Sixth Schedule of the ITA, including those engaged in agriculture, rural banking, waste processing, low-cost residential housing, an approved unit trust scheme and mutual fund and a venture capital financing company.
• Motor vehicle benefits provided by an employer to an employee or by an entity to a member or manager during a year of assessment are quantified as follows:

Revenue Administration (Amendment) Act, 2022, (Act 1086)

• The object of this Amendment Act is to amend the Revenue Administration Act, 2016 (Act 915) to enable the CG to establish a monitoring mechanism to determine or verify the actual revenue collected by a taxpayer, to introduce the requirement for a tax clearance certificate for registration of vehicles and renewal of professional drivers’ licenses and related matters.
• The amendments include:
  

  Access to physical network node: The CG is empowered to establish a monitoring mechanism to verify the actual revenue that accrues to a taxpayer for the purpose of computing taxes due under the Act. Also, a person is required to provide the CG or an authorized tax officer with physical access to the physical network node or infrastructure or system of that person at an equivalent point in the network or infrastructure or system where the system of the taxpayer is connected. A person who fails to comply with this requirement may, in addition to the general penalty for failure to comply with the tax law under section 78 of Act 915, incur a penalty of 5% of the annual gross revenue of that person.

• The definition of a “tax return” includes
  • The submission of a return for gains on the realization of assets and liabilities
  • A return of income under section 124 of the ITA
  • A statement of tax withheld under section 117 of the ITA

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

Ernst & Young Chartered Accountants, Accra

• Isaac Sarpong

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

• Bruno Messerschmitt

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Kwasi Owiredu

Ernst & Young LLP (United States), Pan African Tax Desk, New York

• Brigitte Keirby-Smith
• Dele A. Olagun-Samuel

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.