Tax Reliefs Available to Individuals Businesses in Ghana

Understanding and complying with Ghana’s tax laws not only ensures legal and financial security but also provides businesses and individuals with various tax reliefs designed to reduce their tax burden.

What Are Tax Reliefs?

Tax reliefs are allowances granted to resident individuals and corporate entities to lower their taxable income, ultimately reducing the amount of tax payable. In Ghana, the tax system applies graduated tax rates to the chargeable income of resident individuals (such as sole proprietors, employees, and partners in a partnership), while corporate entities are taxed at a standard corporate tax rate. These reliefs are deducted when calculating chargeable income from business, employment, or investment sources.

Types of Tax Reliefs

1. Personal Reliefs

According to Section 51 of the Income Tax Act, 2015 (Act 896), personal reliefs are available to resident individuals and are deducted when determining chargeable income. These reliefs, outlined in the Fifth Schedule of the Act, include:

  • Marriage Relief
  • Child Education Relief
  • Dependent Spouse or Relative Relief
  • Old Age Relief
  • Aged Dependent Relative Relief
  • Disability Relief
  • Educational Relief

To claim these reliefs, individuals must submit a prescribed form to the Ghana Revenue Authority (GRA) each year. Once approved, the reliefs are factored into payroll calculations, reducing the individual's taxable income and increasing their net salary. These are commonly referred to as "Upfront Tax Reliefs."

2. Statutory Reliefs (Pension Contributions)

Employee and employer contributions to Ghana’s pension schemes also provide tax relief:

  • First-Tier & Second-Tier Pension Scheme (Mandatory & Occupational Pensions):
    • The 5.5% employee contribution is deductible for tax purposes.
    • The 13% employer contribution is also treated as a deductible expense for the employer.
  • Third-Tier Pension Scheme (Provident Fund – Voluntary Pension):
    • Contributions from both the employer and employee (not exceeding 16.5%) qualify as tax-deductible.
  • Informal Sector Contributions:
    • Individuals in the informal sector who do not contribute to the mandatory pension schemes can deduct 35% of their declared income as tax relief.

3. Capital Allowances

Businesses that invest in depreciable assets are eligible for capital allowances, which serve as tax relief for businesses using such assets.

4. Deductible Business Expenses

All expenses that are wholly, exclusively, and necessarily incurred in generating business income are deductible for tax purposes.

The Role of Accountants in Maximizing Tax Benefits

As accountants, we play a critical role in ensuring businesses take full advantage of available tax reliefs. Proper tax planning helps reduce financial, operational, and legal risks while enhancing the overall value of an organization.

Written by:
JENNIFER AYAMPOKA KUKUA (MRS.), CA
#NextGen of Accountants

Comments

Post a Comment

Popular posts from this blog

BASIC WAYS TO IMPROVE BUSINESS SUCCESS THROUGH RISK MANAGEMENT

  Introduction Risk is a constant in business, and while it cannot be eliminated entirely, it can be managed. Proactive risk management is essential to any business's growth, survival, and long-term success. Effective risk management involves identifying, assessing, and prioritizing risks and implementing strategies to minimize or mitigate their impact. Business risks can arise from market fluctuations, operational inefficiencies, financial uncertainties, legal obligations, or unforeseen events. Below are some major types of business risks and practical ways to manage them. 1. Operational Risk Operational risk is the risk associated with the day-to-day functioning of the business, from the top executive to the most junior staff member. Ways to minimize operational risk: Create awareness of inherent operational risks. Develop and enforce an Operating Manual. Strictly follow established organizational procedures. Design a robust succession plan. Recruit quali...
Read more

Understanding and Complying with Withholding Taxes: A Basic Guide to Business Success

What is Withholding Tax (WHT)? Withholding Tax (WHT) is a tax deducted at source by a withholding agent before making final payments to a seller, contractor, or consultant. The withholding agent (resident individual or entity), is responsible for withholding the tax when making payments to resident or non-resident persons. The amount withheld is subsequently remitted to the Ghana Revenue Authority (GRA). The power to deduct or withhold is provided by the Income Tax Act, 2015 (ACT 896). The Act provides the following rates to be applied to a resident person: 1.      The supply of goods - 3% 2.      The supply of works - 5% 3.      The supply of services – 7.5%. The rate for a non–resident person is 20% on Goods, Services, and Works. Definition of Key Terms 1. Goods “Goods” refer to objects of every kind, including raw materials, products, and equipment, as well as solid, liquid, or gaseous items, and electricity. It also inclu...
Read more

DEMYSTIFYING ACCOUNTING: DEFINITIONS, FUNCTIONS AND REAL-WORLD APPLICATIONS.

  INTRODUCTION: This paper is put together to share knowledge with students of accounting in high schools, tertiary institutions, accounting practitioners, managers with no or limited accounting background, and other people interested in accounting.  DEFINITION OF TERMS: Accounting is the art of recording, classifying, and analyzing financial transactions. Accounting is defined by Frank Wood and Alan Sangster (Frank Wood's Business Accounting 1, 12th edition @ Pearson Education Limited 2012) as 'The process of identifying, measuring and communicating economic information to permit informed judgment and economic decisions by users of that information'. The keywords in this definition are explained below: 1. The process of identifying: Identification means determining what transactions are to be recorded and what should not be recorded. That is items or elements of financial character or nature that are to be recorded and non-financial items or elements in nature ...
Read more