Following the major overhaul of Ghana’s tax regime in 2015 (i.e. the repeal of the Internal Revenue Act 2000 (Act 592) and the introduction of the Income Tax Act, 2015 (Act 896)), there have been many amendments in the subsequent years. This article focuses on the key tax developments in 2019, which includes amendments to the tax laws in the second half of 2018, which applied through the 2019 assessment year, and amendments in 2019, which are intended to take effect in 2020.
2019 started with a change in the income tax rate of individuals, under the Income Tax (Amendment) No. 2 Act 2018 (Act 979). Significantly, the 35% tax rate introduced in the initial amendment, Act 973 was removed and replaced with a 30% tax rate. However, the PAYE scale has been amended for the 2020 assessment year with only minor changes to the 1st, 3rd and 5th bands on the scale under the First Schedule to the Income Tax (Amendment) Act, 2019 (Act 1007).
Non-resident Individual Tax Rate
Another amendment introduced in 2018, which run through the 2019 assessment year and is still applicable is the increase in non-resident individual tax rate from 20% to 25%. This change was made in the Income Tax (Amendment) Act, 2018 (Act 973). Under Act 896, a person is resident in Ghana for a year of assessment if that individual is:
- A citizen, other than a citizen who has a permanent home outside the country and lives in that home for the whole of that year.
- Present in the country during that year for an aggregate period of 183 days or more in any 12 month period.
- An employee or an official of the Government of Ghana posted abroad during that that year.
- A citizen who is temporarily absent from the country for a period of not more that 365 continuous days, where that citizen has a permanent home in Ghana.
Any individual outside this criteria is a non-resident individual and subject to the tax rate of 25%.
Repeal of Luxury Vehicle Levy
The luxury vehicle levy was introduced in the Luxury Vehicle Levy Act, 2018 (Act 969) to apply from August 2018. The Act imposed an annual levy based on the engine capacity of vehicles. However, the Act did not see the end of 2019 as it was repealed by the Luxury Vehicle Levy (Repeal) Act, 2019 (Act 996).
The Value Added Tax (Amendment) Act, 2018 recalibrated the VAT into a GETFund and NHIL straight levy of 2.5% each and VAT rate of 12.5%. The effect of the straight levies was that, input tax in respect of GETFUND and NHIL levies were made non-deductible, hence businesses could only deduct input tax in respect of the 12.5% VAT.
Locally manufactured textile
The Value Added Tax (Amendment) No.2 Act, 2018 (Act 980) made the supply of locally manufactured textiles a zero-rate supply for a period of three years ending 31 December, 2021. Under the Act, textile manufacturers were granted a special dispensation to apply for refunds of excess VAT credit directly attributable to sale of locally manufactured textiles.
Communication Service Tax
The Communication Service Tax (Amendment) Act, 2019 (Act 998) amended the principal Act, Act 754 to increase the tax from 6% to 9%.
Act 1007, which was passed in 2019 and takes effect in 2020 increased the amount of deductible personal reliefs under the Fifth Schedule to the income Tax Act 2015, (Act 896).
- An individual who has a dependent spouse or at least two dependent children is now entitled to a personal relief of GHS1200. (Initially GHS200).
- A person who is 60 years or above is entitled to a personal relief of GHS1,500. (Initially GHS200).
- An individual sponsoring the education of their child or ward in an educational institution in Ghana is entitled to a personal relief of GHS600 per child up to a maximum of 3 children. (Initially 200 per child)
- An individual who has a dependent relative, who is 60 years or more is entitled to a personal relief of GHS1000 each in respect of two dependent relatives. (Initially GHS100)
- An individual who has undergone training to update their professional, technical or vocational skills or knowledge is entitled to a personal relief, which is equivalent to the cost of the training or a maximum of GHS2000. (initial maximum of GHS400)
Temporary Concession for Manufacturers and Assemblers of Automobile
Manufacturers and assemblers of automobile under the Ghana Automotive Manufacturing Development program have been granted a temporary concession under the Sixth Schedule of Act 1007. Income of a manufacturer or assembler is exempt from tax for a period of 3 years from the date of commencement of business in the case of semi-knocked down vehicles. For complete-knocked down vehicles, the concession period is 10 years from the date of commencement of the business.
Special Import Levy
The special import levy, has been extended to apply until 2024 under the Special Import Levy (Amendment) Act 2019 (Act 1004). The levy is imposed on imported goods at the point of entry and is calculated on the CIF value of the goods.
National Fiscal Stabilization Levy:
The NFSL, which is a 5% levy imposed on profit before tax of specified companies and institutions has been extended to apply until 2024 under the National Fiscal Stabilization Levy (Amendment) Act 2019 (Act 1011). The companies and institutions liable to pay the levy are:
- Banks (excluding rural and community banks)
- Non-Bank Financial Institutions
- Insurance Companies
- Telecommunications companies liable to collect and pay the communications service tax
- Inspection and valuation companies.
- Companies providing mining support services.
- Shipping lines, maritime and airport terminals.
Excise Tax Stamp
The tax stamp policy which emanated from the Excise Stamp Act, 2013 (Act 873) and took effect in March, 2018 was amended by the Excise Stamp Act, 2018 (Act 981) to include textiles in the list of items on which the tax stamp is required to be affixed. The tax stamp is therefore required to be affixed on the following items:
- cigarettes and other tobacco products;
- alcoholic beverages whether bottled, canned, contained in kegs for sale or packaged in any other form;
- non-alcoholic carbonated beverages whether bottled, canned or packaged in any other form;
- bottled water;
- textiles and
- any other excisable product prescribed by the Minister.
2019 saw the implementation of the excise tax stamp policy and this implementation is expected to continue.