Taxable Income

Section 8 Internal Revenue Act, 2000 (Act 592) As Amended

Taxable income from an employment is a person¶s gains or profit from employment, including any allowances or benefits paid in cash or given in kind to or on behalf of the person from that employment, other than exempt income

Note ` Not the entire employee¶s income is taxable (Non taxable/exempt employment income) ` Benefits in kind are also Taxable ` Some tax reliefs (reductions) are granted to employees under certain conditions .

00 207.00 7.5% 25% Tax Amount 0.00 104.00 164.00 Over 1.00 - Tax rate 0% 5% 10% 17.Assessable Income First 84.00 1.00 6.00 214.00 Cumulative Total 84.00 1.00 1.186.55 Amount per month in Ghana Cedis .00 Next 1.350.00 Next 20.00 Next 60.350.55 Cumulative Total 0.

00 .The income tax of an Employee with an Taxable Income of GHc 847.

00 Over 1.00 8.690.00 Next 30.65 Amount per month in Ghana Cedis .5% 25% Tax Amount 0.50 7.50 270.00 - Tax rate 0% 5% 10% 17.383.00 270.00 Next 1.498.65 Cumulative Total 0.00 125.00 Next 70.00 195.00 Cumulative Total 95.00 1.00 1.00 3.Assessable Income First 95.

Investment and Employment. Tax paid on his employment income constitutes his final assessment. .Note: ` Non residential are taxed 20% flat rate ` Personal income includes incomes from Business. ` For an employee who earns income exclusively from employment.

Tax Exempt Incomes .

00/month (1008.` ` Minimum wage is exempt from Tax.11 a day) Note: Minimum wage calculations are based on: ‡27 working days a month (Not 21. Minimum wage equals GHC 84.00/year or 3.67 days) ‡324 working days a year (Not 260 days) .

building or construction industries. ` Clothing (Protective) allowances . timber. dental. farming. ` A passage for the commencement or completion of employment in or out of Ghana.The following incomes are exempt from Tax in Ghana: ` A reimbursement/discharge of an employee¶s medical. or health insurance expense where the benefit is available to all employees on equal basis ` A discharge or reimbursement of expenses incurred by the employee on behalf of the employer ` A severance pay ` Night duty allowances to night workers not exceeding 50% of basic salary ` Accommodation on site in mining.

Taxation of Benefits in kind .

Benefits in kind received as a result of an employment contract are (for tax purpose) value as a percentage of Total Cash Emoluments (TCE). Total Cash Emolument is the total of an employee¶s cash income less exempt income. and incomes taxed at concessionary rate (overtime and bonus). .

Accommodation Benefits Shared accommodation Furnishing only Accommodation only Accommodation with furnishing Tax value 2.00 .00 350.00 150.5% of TCE Maximum Tax Value per month (GHc) 150.00 300.5% of TCE 10% of TCE Transport Benefits Fuel Only Vehicle only Vehicle + Fuel Vehicle + Fuel + Driver Tax value 5% of TCE 5% of TCE 10% of TCE 12.5% of Total Cash Emolument 2.5% of TCE 7.

Personal Income Tax Reliefs .

5%) .00 200.00 100.00/person 100.00 (Dependant spouse or two children) 100.00 25.00 100.The assessable income of an individual (employee) is reduced by the following amounts: Reliefs description Marriage/Dependant Child education Old age relief (60 years and above) Aged (60+) dependant relatives Training and development Disability relief Social Security oluntary ension Contribution (Tier 3) (Maximum 2 persons) Relief amounts Proposed Relief per annum (GHc) per annum 35.00 30.00/Child (Maximum 3 children) 35.00 25% of assessable income (As contributed) 35% of basic salary less Tier 1&2 contributions (16.00 50.

Note: Only the excess over GHc1620.00 or 15% of TQI is added back to the gross salary and taxed at the graduated rate.` A tax rate of 5% shall be applied to bonus income that does not exceed the lesser of: 1620 Currency points (per annum) 15% of employee¶s Total Qualifying Income ` Total Qualifying Income is the total of the person¶s income for the year. .

600.5% of Gross Amount of Payment 10% of Gross Amount of Payment Add entire overtime to beneficiary¶s income and tax at the prevailing personal tax rate If annual income exceeds GHc 9.00 per annum (800/month).Overtime income is taxed at a concessionary rate for qualifying Junior employees if: x Total overtime income for the year does not exceed 50% of employees¶ Total Qualifying Income.600 (800 per month). Employee overtime per month (GHc) GHC 120 or less Between GHC 120 and GHC 400 Above GHC 400 Overtime Tax Rate 2. Overtime relief does not apply to the individual . A qualifying junior employee is an employee whose income from employment does not exceed GHc 9.

New Pension Act (2008) .

The Act provides for a three tier scheme A mandatory basic national Social Security Scheme managed by SSNIT (Tier 1) A mandatory occupational pension privately managed (Tier 2) A voluntary Personal Pension scheme privately managed (Tier 3) .

5% of the monthly equivalent of the national daily minimum wage. SSF Employee contribution: 5.` Basic SSNIT contribution is applicable to all persons with employment contracts that are: Aged not less than 15 and not more than 45 at entry People who are currently 55yrs are exempt but can join ` ` ` ` ` Self employed persons can opt to join. Minimum contribution is 18.5% until retirement. .5% Basic salary SSF Employer contribution: 13% Basic salary Exempt members shall continue to pay 17.

` DEFINITION A fund governed by a trust to which a contributor or the contributor¶s employer or both contribute. Benefits are linked to the level of contribution Benefits are based on defined contribution Part or all accrued benefits can be assessed before retirement age. x 10 years from contribution date for Provident Fund¶s x 5 years from contribution date for Personal Pension¶s .

` ` ` 35% less percentage utilized on tier 1 and tier 2 Difference represents the maximum contribution that the employee and employer can make to the fund An employer may fully sponsor the scheme .

` ` Provide the administrative and accounting services required to enable a worker join Make appropriate payroll deductions and remit within 14 days. .

.` Employees contribution to tier3 is taxable only to the extent by which it exceeds it¶s share of the allowable difference.

` Should be governed by a trust x Can be a company x Individual ` ` The fund must be registered with the Pensions Authority Trustee must be approved by the Pensions Authority SCG CONSULTING .

5% Maximum limit for exempt employees is 17.` ` ` ` Withdrawals from tier3 shall be subject to tax if it takes place before retirement Maximum limit for employee on tier 1 and tier 2 will be 16.5% Maximum limit for non tier 1&2 employees is 35% .

Other payroll considerations .

Prohibited deductions ` An employer shall not make any deduction by way of discount. ` If the employee performs work on a public holiday. Holiday pay ` All categories of employees are entitled to full pay on every public holiday. the remuneration which would have been payable if that day was not a holiday. . then the employer shall pay in addition to the normal pay. interest or any similar charge on account of an advance of remuneration made to a worker in anticipation of the regular period of remuneration.

67 days per month (260/12 months =21. .67) Paid overtime Act 651(35) ` A worker shall not be compelled to do overtime except Very nature of business requires overtime In cases of emergencies that require that workers engage in overtime An overtime rate must exist ` All hours worked in excess of the hours fixed by the rules of that undertaken shall be regarded as overtime work.Working days Act 651 (34) ` 8 hours per day ` 40 hours per week ` 5 working days a week ` 260 working days a year (52 weeks in a year x 5 days per week) ` 21.

. ` At least 48 consecutive hours in every seven normal working days Leave days Act 651 (20) ` In any undertaking every worker is entitled to not less than fifteen working days leave with full (including the cash equivalent of any remuneration in kind) pay in any calendar year of continuous service. ` Continuous service ` The worker should have worked for not less than 200 day in the tax year.Rest period Act 651(40-42) ` At least 30min break during the 8 hours period. but forms part of normal hours ` A daily continuous rest of at least 12 hours duration between two consecutive working days.

` In the case of an employee whose assessable income for the year consist exclusively of income from employment. ` An employer shall not later than the 31st march. .Leave records Act 651(27) Every employer shall keep a record showing: ` The date of employment of each worker ` Annual leave entitlement ` Date on which leave is taken ` Remuneration received whiles on leave Filling of Tax returns ` Monthly filings are required to be done by the employer latest by the 15th day of the month following the month in which the deduction relates. furnish a (annual) return of each person employed by him. ` The employer is required to furnish each employee with a copy of the employee¶s return at the time of filing the returns. the copy of the return provided to him is treated as an assessment served on the employee by the commissioner.

Penalties for late filling ` Failure to furnish return: GHc12 for each day of delay ` Failure to pay tax on due date: Less than 3 months: 20% of tax payable (+ tax unpaid) More than 3 months: 30% of the tax payable (+ tax unpaid) .

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