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WELCOME TO IRS, GHANA

TABLE OF CONTENT Introduction Brief History Corporate Profile Vision Mission Imposition of Income Tax What is Tax Revenue Used For? Responsibilities of Internal Revenue Service Functions of Internal Revenue Service We Strive For/Core Values YOUR RIGHTS Information Courtesy and Transparency Our Service Standards GENERAL INFORMATION YOUR OBLIGATION AS A TAXPAYER - Registration - TIN - Assessment
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- Due Dates For Payment of Taxes - Types of Withholding Taxes - Penalties - Filing of Returns - Tax Clearance Certificate (TCC) TAXATION OF THE INFORMAL SECTOR Vehicle Income Tax(VIT) Tax Stamp Rent Income Tax(RIT)

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TAX INCENTIVES Personal / Individual Reliefs Objection and Appeals Complaints

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INTERNAL REVENUE SERVICE INTRODUCTION We are the INTERNAL REVENUE SERVICE (IRS) under the Ministry of Finance and Economic Planning of the Republic of Ghana. We are a public service organization charged with direct tax administration. IRS as a revenue agency is very strategic in the achievement of national goals. It has therefore embarked on a mission of improving the quality of service delivery to taxpayers and the general public through simplifying processes and clarifying rules and procedures. It has set up time frames for prompt completion of tasks in order to render them more transparent to the public. The objective is to create a customer oriented revenue collection organization focused on providing quality service to enhance voluntary tax compliance. The Internal Revenue Service is assisted in its endeavor at improved quality service delivery by the Ministry of Public Sector Reform. BRIEF HISTORY Income Tax Administration started in the then Gold Coast in September, 1943 with the passing into law of the Income Tax Ordinance No.27 of 1943 on 22nd September,1943. Initially, the Department collected tax from only a few limited liability companies and a very small number of individuals. The year of Assessment (tax year) was 1st April-March 31st.

Now the Year of Assessment is on current basis, 1st January,-31st December of the same year. Personal income tax in Ghana has always been progressive i.e. tax rates are graduated with higher income earners paying more tax. Over the years other taxes and duties were added to the income tax. These were: i. ii. iii. Minerals Duty 1952 Betting Tax 1952 Casino Revenue Tax 1955

Between 1961 and 1963, additional taxes and duties were introduced. Among these were Property Tax (1961), Entertainment Duty Tax (1962) Airport Tax, Hotel Customers Tax, Standard Assessment and Excess Profits Tax, all in 1963. On 1st July 1961, the tax year was changed to 1st July-30th June. The Pay As You Earn (PAYE) system was also introduced. In July 1963, with the addition of more taxes, the Income Tax Department was renamed Central Revenue Department to reflect the broad scope of taxes collected. All these years 1943 to 1985 the Department was a civil service department. In July 1986 government took a decision on structural changes in the Department. The Internal Revenue Service(IRS) Law 1986(PNDCL.143) was passed. This law transformed the hitherto Central Revenue Department into a public service organization, the Internal Revenue Service, with its own Board of Directors. With the change, the Service is now able to recruit a pool of dedicated professionals to ensure effective tax administration.

The promulgation of the Revenue Agencies (Governing) Board Act, 1998 (Act 558) established a central governing body to replace the existing governing boards of IRS, CEPS and VATs. Consequently the Revenue Agencies Governing Board was constituted in 2001 to ensure supervision and co-ordination of the activities of all three Revenue Agencies. CORPORATE PROFILE The Commissioner is responsible for the day-to day running of the Service. He is subject to the direction of the Board on matters of policy. He is assisted by five(5) Deputy Commissioners who head the five main departments 1. Operations 2. Research, Planning and Monitoring 3. Finance 4. Administration 5. Legal services HEAD QUARTERS It is located in Accra and implements policies formulated by RAGB REGIONAL OFFICES There are two regional offices in Greater Accra region and one each in the remaining nine regions. Their core functions are monitoring and supervision of District offices.

LARGE TAXPAYER UNIT (LTU) There is also the Large Taxpayer Unit(LTU) located in the Revenue Towers at Osu. The LTU is a one stop tax office responsible for large taxpayers of the three revenue agencies especially IRS and VAT Service. All taxpayers at the LTU are on self-assessment. DISTRICT OFFICES The Service has a total of fifty tax Districts, thirty eight sub offices and twenty five collection points located at vantage points throughout the country. These offices are the focal points for the identification of taxpayers, assessment and collection of direct taxes. VISION To excel as an effective tax administration agency MISSION STATEMENT To effectively and efficiently administer the tax laws through a well-trained and motivated staff in order to promote voluntary compliance for the maximization of tax revenue. IMPOSITION OF INCOME TAX - The principal enactment has been replaced with the Internal Revenue Service Act 2000 (Act 592) in the year 2000. - The legislation imposes tax on all income earners unless otherwise exempted (eg. income from cocoa of a cocoa farmer) - Income tax is assessed on a yearly basis. The source of income must accrue in or derived from Ghana

WHAT IS TAX REVENUE USED FOR? Taxation is a major source of revenue for governments worldwide. In Ghana tax revenue is Used for: - The provision of infrastructural development i.e. good roads, schools, potable water, provision of health and sporting facilities, electricity e.t.c. - Tax revenue is used for the maintenance of law and order for the security of the state and all individuals - Tax revenue is used to pay the salaries of government employees e.g. Doctors, teachers, civil servants etc. so as to keep government business running. - Provide welfare services eg. GETFUND, NHIL, RESPONSIBLITIES OF INTERNAL REVENUE SERVICE The Service is responsible for the collection of the following taxes: Income tax Stamp duty Gift tax Capital gains gift Tax

a. Income Tax Corporate Tax This is the tax paid by companies on their profits in the year. The rate has been reduced to 25% in 2006

Personal Income Tax Self-employed persons are required to pay income tax at graduated rates in four equal installments.
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PAYE AS YOU EARN The PAYE contributions are withholdings from salaries of employees in order to satisfy their income tax responsibilities. b. Stamp Duty Stamp duty is administered under the Stamp Duty Act, 2005 (Act 689) as amended by Act 764 of 2008. The Stamp Duty is not a tax on transactions, but on documents brought into being for the purposes of recording transactions. It is therefore a tax on documents or specific instruments which have legal effect. Duty is imposed on the wide range of instruments listed in the first schedule to the law. For example, there are stamp duty implications whenever any interest in landed property (or buildings) is transferred, a trustee is appointed, a power of attorney is given, property is mortgaged e.t.c Documents not listed in the first schedule are not dutiable, eg a Will c. Gift Tax

This is the tax payable by a recipient on the total value of taxable gifts received in a year of assessment. The total value of taxable gift(s) must exceed GH50.00 in a year of assessment. Assets on which tax is imposed include Land, Building, Money including Foreign Currency, Shares, Bonds and Securities, Business and Business Assets. The rate of tax is 5%.

d.

Capital Gains

This is a tax paid on the gains made from the realization/sale of a chargeable asset where gain exceeds GH50.00 Assets on which tax is imposed include Land, Building, Business Assets including Goodwill, and Shares of a resident company.
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The rate of tax is 5%. FUNCTIONS - To identify all taxpayers - Assess the taxpayer to tax - Collect the tax - Pay all amounts collected into the consolidated Fund. WE STRIVE FOR / CORE VALUES 1. Fairness in tax assessment 2. Convenience to the client by bringing our service to their doorstep. 3. Enhanced client consciousness and voluntary compliance through a sustained taxpayer education. 4. Provision of information in an open, supportive and transparent manner. 5. Improvement in tax administration through adoption of modern technology and processes. 6. Efficiency and effectiveness through the development of new procedures and by encouraging Research and Development. 7. Continuous improvement in service delivery through systematic human resource development.

YOUR RIGHTS INFORMATION 1. IRS will provide clients with the requisite information. 2. IRS will publicize all changes in the Tax Law 3. Tax literature, brochures and other information will be available at all IRS offices throughout the country.

4. IRS will continuously inform and educate clients through the mass media 5. Suggestion boxes will be placed at the receptions of all IRS offices to elicit feedback and suggestions. COURTESY AND TRANSPARENCY 1. Staff of the IRS will help you in every reasonable way to know your rights and to understand your obligations by effectively communicating these to you. 2. Staff of the IRS will at all times carry out their duties courteously and promptly. 3. You will have your tax liability decided impartially and be required to pay only the amount of tax due according to the law. 4. IRS will treat everyone equally by applying the law consistently and impartially. 5. Information about your tax affairs will be treated in strict confidence and used for purposes allowed by law only. 6. You have the right to ask the IRS to review your case, if you are dissatisfied with your assessment. OUR SERVICE STANDARDS We are committed to delivering excellent service and promise to: 1. Issue registration certificates to clients within twenty-four hours(1day) on receipt of all documents 2. Acknowledge receipt of all letters received within one(1) week from date of receipt. 3. Address your enquiries in a timely and professional manner. 4. Carry out random visits to business premises to know and appreciate your problems at firsthand. 5. Send quarterly reminders to clients to enable you meet your obligations on schedule 6. Examine accounts submitted within three months
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7. Issue Tax Clearance Certificate (TCC) to clients in good standing in a day. 8. Respect your privacy and ensure confidentiality in our dealings with you 9. Be accountable for what we do 10.Conduct regular surveys and measure our performance against the prescribed standards. GENERAL INFORMATION YOUR OBLIGATION AS A TAXPAYER REGISTRATION Before starting a business, the owner(s) is required by law to provide information on his business, himself and partners (as the case may be) to the RegistrarGenerals Department. Thereafter the business is registered at the nearest IRS District office. The registration with IRS is a one-off transaction in the life of the business and the specified fees as follows Categories Registration Fees GH Companies Professionals (lawyers, valuers e.t.c) Self-employed persons other than professionals Small- scale self employed persons 10.00 10.00 7.50 5.00

REGISTRATION CERTIFICATE: Upon payment of registration fees, the taxpayer is issued with a certificate of registration. This certificate must be conspicuously displayed on the business premises.
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TAXPAYER IDENTIFICATION NUMBER (TIN) This is a unique number given to taxpayers for official transactions. Quote this number in all your dealings with the three (3) revenue agencies IRS, VAT, CEPS BENEFITS IN REGISTRATION WITH IRS You are known to the tax authority and this ensures speedy and accurate treatment for you as a taxpayer. - You can claim capital allowances on your business assets - You can claim personal reliefs as an individual taxpayer - You can obtain Tax Clearance Certificate (TCC) speedily, thus minimizing disruptions o your business activities For further reading on registration, please read brochure IRS 03 taxpayer registration and identification number ASSESMENT SELF EMPLOYED PERSONS AND COMPANIES These persons are assessed based on their profits. The profits are subject to tax only after deducting allowable expenditure and expenses incurred at arriving at the profit EMPLOYEES Employees are assessed on their salaries and allowances. Social security and other reliefs are deducted before these salaries are subjected to tax.

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DUE DATES FOR PAYMENT OF TAXES COMPANIES AND SELF EMPLOYED PERSONS These persons are required to pay taxes in four equal installments by the end of every quarter i.e. 31st march, 30th, June, 30th September and 31st December of every year. PAYE (Employees) The PAYE system was introduced to lessen the burden of taxation on employees. Under this system, the tax is routinely deducted from employees emoluments each time they are paid. The PAYE payments serve as a final tax, with no further requirement by the employees to file a tax return unless he/she has more than one job or other sources of income in addition to the regular employment income. It is the obligation of an employer to withhold tax from the employees income and pay same to the Internal Revenue Service by the 15th day of the following month.

WITHHOLDING TAXES The law requires a person effecting payment to another person to deduct the exact tax at source and pay it to the Commissioner. The tax so withheld must be paid to the Commissioner within fifteen days after the end of the month in which tax was withheld. The person effecting the payment, who withholds the tax, is referred to as a withholding agent. Any withholding agent who fails to withhold tax is personally liable to pay the amount of tax which should have been withheld.
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TYPES OF WITHHOLDING TAXES 1 Withholding Tax By Employers Pay As You Earn(PAYE) All employers are to withhold tax from the salaries of their employers on every pay day. 2 Payment Of Interest To Resident Persons A resident person who pays interest to a resident company i.e. banks and other financial institutions, is to withhold tax at 8% Individuals do not suffer tax on interest earned 3. Payment Of Dividend To Resident Shareholders The tax is 8%and it is a final tax. 4.Payment For Goods And Services To Resident Persons The tax is 5%. This is payment on account. 5. Fees to a resident part time teacher, lecturer, examiner, examinations invigilator or supervisor. This law is 10% and it is the final tax 6.Rent Tax The tax is 8% of gross rent income. Institutions ,companies, embassies are required to withhold the tax and remit to IRS. This is a final tax. Individuals cannot withhold rent tax.

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PENALTIES Taxes that remain unpaid after due dates attract penalties as follows:

Within 90 days (corporate/individual) More than 90 days

10% of tax payable. 20%

PAYE/withholding within 90 days

20%

More than 90 days

30%

FILING OF RETURNS You need to file return on due dates:

Companies

four months after the accounting period. 30th April of every year employers to file employees returns by 31st March of every year.

Self - employed persons

Employees

FAILURE TO FILE RETURNS SANCTIONS GH Companies Self-employed persons 2.00 per each day of default 1.00 per each day of default

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TAX CLEARANCE CERTIFICATE (TCC) Tax Clearance Certificate (TCC) is proof that the taxpayer has honoured his tax obligations for the Year of Assessment. The TCC may be required in the following transactions: 1. To clear goods in commercial quantities from port or factory. 2. To effect the registration of a document conferring title to land i.e. to register a land document 3. To bid for contract 4. To obtain visa from Embassies and High Commissions Conditions For Obtaining TCC - Apply in writing to any of the IRS offices nearest your place of business. - Must have discharged their tax obligations up to the end of the last year or the relevant quarter of the current year - Must be current in the PAYE payments and other withholding taxes. - Must have submitted all returns and accounts up to date and - Have paid their wholesalers/retailers registration fees up to the current year.

TAXATION OF THE INFORMAL SECTOR Taxation of the informal sector poses a challenge to income tax administration because of its sheer vastness and constant mobility of the operators. Notwithstanding the formidable hurdles, IRS has evolved innovative measures to capture an appreciable number of taxpayers with the introduction of the Vehicle Income Tax (VIT) for the commercial transport operators in July 2003 and the Tax Stamp for the other small scale employed persons in February 2005.

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VEHICLE INCOME TAX (VIT) This is tax collected from commercial vehicle operators on quarterly basis. - The VIT system makes it obligatory for commercial vehicle operators to buy VIT stickers from any IRS District Office on a quarterly basis - These stickers are in various categories and rates depending on the vehicles passenger capacity and type of operation e.g. taxis, trotros, tour buses etc - The sticker must be pasted on the front windscreen - Monitoring is done by the Police Service. TAX STAMP This is tax collected from small scale self employed persons in the informal sector on quarterly basis. Under the Tax Stamp System, business operators in the informal sector are grouped according to business type e.g. Dressmakers, Susu collectors, chopbar owners, butchers e.t.c The business types are further grouped by class/size to arrive at equitable rates to be paid according to both type and size. The Tax Stamp must be conspicuously displayed at the place of business or must be carried on their persons (in the case of itinerant traders/hawkers) for inspection on demand by tax officers.

RENT INCOME TAX (RIT)


WHAT IS RENT INCOME? Rent income is the income derived from any consideration paid to the owner of a landed-property by a tenant in return for the use or occupation of the property for a specified period.

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HOW IS RENT TAX ASSESSED? The Year of Assessment is 1st January to 31st December of the same year and the tax is imposed during any basis period ending within the year of assessment.

Rent tax is imposed on gross rent income received within the year of assessment.

Currently, the rent tax is a flat rate of 8% and it is a final tax.

WHY IS RENT INCOME SUBJECT TO TAX? The money paid is subject to tax because it is classified as investment income accruing in or received in Ghana. The money becomes income in the hands of the recipient who may be the owner of the property or his representative. WHO PAYS THE RENT TAX? Rent tax is an assessment on the property owner and should in no way be borne by tenants. It is the obligation of the property owner to pay the tax. DO ALL PREMISES ATTRACT THE SAME RENT TAX OF 8%? Yes. The 8% tax is on the gross rent income of a property owner or their agent(s) and not on the number of rooms rented out to tenants. It is therefore possible that a small house with smaller number of rooms but attracting high rent would be assessed higher than a big house with more rooms but attracting lesser rent. WHY IS RENT TAX A FINAL TAX? It means that even if the individual or person has other sources of income, rent will not be added in assessing the other incomes. Rent is assessed separately and once the person liable to Rent Tax pays the tax, he is deemed to have discharged his responsibility under the Rent Tax Law. 18

TAX INCENTIVES The tax law provides incentives in various sectors to boost production and direct investments to priority area

1. CAPITAL ALLOWANCE The cost of assests eg. Plants, machinery, building vehicles etc. are considered capital expenditure. Capital allowances is granted to enable the owner of an asset recover the cost incurred in acquiring the asset.

2. LOCATION TAX INCENTIVE Manufacturing companies located outside Accra / Tema enjoy Tax Rebates as follows: (a) (b) All other regional capitals All other places 25% 50%

3 COMPANIES WHICH ENGAGE IN EXPORT OF NON-TRADITIONAL PRODUCTS ENJOY A CONCESSIONARY TAX RATE OF 8% Non- traditional product is defined as any product other than cocoa beans, timber and logs, electricity, unprocessed gold or any other minerals in its natural state.

4. TAX HOLIDAYS Certain businesses like Farming, Real Estates and Venture Capital Financing companies enjoy tax holidays

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FARMING: Companies engaged in processing of crops, fish or livestock produced in Ghana enjoy three years tax holiday.

ii

Companies engaged in Real Estate Development- five years tax holiday.

iii

Venture Capital Financing Companies enjoy five years tax holidays.

5.

DIVIDEND

Dividends are taxed at the rate of 8% and is a final tax. However, dividends earned from unit/mutual trusts are exempt from tax. 6. CAPITAL GAINS Capital gains is taxed at the rate of 5%. Shares issued on the Ghana Stock Exchange is exempt from tax. Capital Gains made by companies listed on the Ghana Stock Exchange are exempt. 7. CARRY-OVER LOSSES Farming, Manufacturing, Mining, Agro Processing, Tourism (companies registered with Ghana Tourist Board) and ICT industries (software) can carry forward their losses for five years. 8. EXPENSES All business expenses are allowed. Research and Development expenses is allowed and so are donations to Charity and Sports Development.

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9. DOUBLE TAXATION RELIEF Investors from the under-listed countries benefit from reduced tax rates on withholding tax from the following income sources; dividend, interest, royalty, management and technical service. The countries are United Kingdom, France, Germany, Italy, South Africa, and Belgium. For more on tax incentives, please refer to brochure IRS 11- tax incentives.

OBJECTIONS & APPEAL OBJECTION - As a taxpayer, you have the right to object to an assessment raised on you by the Tax Office. - You have nine (9) months from the commencement of your basis (accounting) period within which to lodge an objection against a provisional assessment. - In the case of a final assessment or additional assessment, you may lodge an objection within thirty days of the service of the Notice of Assessment. The objection should be in writing, and should state the grounds for the objection. APPEALS An appeal is when the objection against a tax assessment enters the court. - An appeal will not be entertained by the court unless 30% of the assessment has been paid.
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- For more information, please read brochure IRS 24, HOW YOU CAN APPEAL AGAINST YOUR TAX ASSESSMENT. SANCTIONS There are both administrative and court sanctions for infractions of the income tax law. COMPLAINTS As a taxpayer, you are entitled to complain against any officer who does not perform to your satisfaction. You may also lodge a complaint if you are not attended to within a reasonable time period. Your complaint will be investigated and responded to immediately. Such complaints should be made to the office of the Assistant Commissioner Public Relations and Tax Education, on Telephone 233(0)21-662032 or at IRS Regional Offices throughout the country.

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