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Tax me if you can - Frequently asked questions

Celebrated author Mark Twain once quoted that ‘the only two certainties in life are death and taxes’. Whilst this may seem a little exaggerated, there is no arguing that if you are gainfully employed, the chances are that you will pay taxes on the income that you earn in one way or another.

So then, it stands to reason that you should know a little bit about this portion of money that you earn but don’t keep. Frequently asked questions by taxpayers usually centre on whether they are paying the right amount of taxes and how they can keep as much of their money in their pockets as possible. Below, we provide answers to some frequently asked questions which should hopefully help you better understand your personal income tax obligations within Ghana’s tax environment.

Are all allowances taxable?

Certain categories of employees are often paid cash allowances as part of their total pay packet. Examples range from the commonly known “fuel and rent allowances” to the interestingly named “swimming pool and maid allowances”. Whatever you choose to call these allowances, once they are paid in cash either directly to you or to someone else on your behalf, are generally taxable as part of your total income.

There are instances however, where your employer could provide you with accommodation and / or a vehicle, driver and fuel. These are known as “benefits in kind”. The deemed values of these benefits are specifically provided for in the income tax laws and taxed appropriately.

What happens when I am paid a bonus?

Bonuses often call for celebration and I am pleased to say that the tax treatment is also quite favourable! The tax rate for bonuses is just 5%, subject to certain thresholds and criteria being met.

Do we get personal tax reliefs in Ghana?

Yes you do. These reliefs relate to amongst others, individuals with a dependant spouse or at least two children, individuals with disabilities, individuals who are at least 60 years, individuals who have school-going children and individuals pursuing professional or skills training. Ensure that you claim the reliefs you are entitled to.

How about when I provide independent consulting services? Do I still need to pay taxes?

You may be providing consulting services to organisations outside of your normal employment activities. Although your clients may withhold tax from you at the rate of 5%, as it applies to the provision of goods and services in Ghana, this is not where your tax obligations end. You still have to report the income received, and pay taxes at the personal income tax rates as provided in the tax laws.

Is there anything that is not taxable?

I know it appears as though everything is taxable but there are some categories of income and income thresholds which are exempt from tax. A quick reference to the applicable tax laws should clarify this.

Individual Annual Returns

Individual annual returns summarise your taxable earnings and payments for the tax year. For individuals who earn income exclusively from employment, this is not a requirement but can still be done on a voluntary basis. However, where you may earn income from other sources, a return will be required.

... and that's 5 tax minutes.