Regulations are made after laws (Acts) are passed mainly to provide clarity to these Acts.

Recently, three Regulations were made to provide clarity to three different tax laws. These Regulations are the Income Tax Regulations, 2016 (L.I. 2244), Value Added Tax Regulations, 2016 (L.I. 2243), and Excise Duty Regulations, 2016 (L.I. 2242).

The first part of this article discusses the Income Tax Regulations, 2016 (L.I. 2244).

In brief

The Income Tax Regulations, 2016 (L.I. 2244) (“ITR”), which came into force on 3rd August 2016, revokes the Internal Revenue Regulations, 2000 (L.I. 1675). The ITR is made by the Minister responsible for Finance under the authority of the Income Tax Act, 2015 (Act 896) (“ITA”) and is largely for providing clarity for the better carrying into effect of the provisions if the ITA. Below are the main changes the ITR introduces that affect businesses and employers in Ghana.

Overtime

The concessionary overtime tax rates of five per cent and 10 per cent are only applicable if the staff who earns the overtime pay is a “qualifying junior employee” – defined using the annual gross salary threshold. The ITR has increased the annual threshold to GH¢18,000 (from GH¢9,600).

Casual workers

All payments to casual workers are subject to a final withholding tax of five per cent. Casual worker means a worker engaged in work which is seasonal or intermittent and not for a continuous period of more than six months and whose remuneration is calculated on a daily basis.

Temporary employee

Payment to temporary workers is treated as income from employment and subject to tax according to the graduated tax table.

Loan benefit

The following apply when quantifying loan benefit to an employee:

• the rate to apply shall be the applicable statutory rate at the time the loan was taken; and

• the loan benefit shall be determined monthly.

Provident fund

Withdrawal of funds from contributions to the provident fund is subject to a final withholding tax of 15 per cent depending on certain conditions.

Employer’s Annual Tax Deduction Schedule

An employer is required to file employer annual tax deduction schedule within four months after the end of the calendar year.

Treatment of Instalment Sale

An instalment sale transaction is recognised as a sale of an asset. In respect of the seller, interest receivable for each year will be recognised as income and the cost of the asset is treated as cost of trading cost. For the buyer, the interest portion becomes an expense and the cost will be capitalised.

Finance Lease

A lessee under a finance lease is not allowed to deduct repayment of the capital from income but entitled to capital allowance deduction under certain conditions.

The lessor under a finance lease shall include the whole amount of interest and repayment of capital for that year as income in respect of leased asset but not entitled to capital allowance.

Carry over losses

Businesses specified as Priority sector for the five-year loss carryover provision in the ITA are now:

• Mining;

• Petroleum;

• Energy & power;

• Manufacturing;

• Farming;

• Agro processing

• Tourism; and

• Information and Communication Technology.

Petroleum Operations

Payments from a contractor to a sub-contractor under a petroleum agreement is subject to a withholding tax at 15 per cent.

Payments by a subcontractor to any sub-sub-contractor is also subject to withholding tax.

Payments by a contractor to a syndicate of sub-contractors, under a petroleum agreement, attracts withholding tax on the aggregate amount only and is payable by the leader of the syndicate.

A subcontractor who contracts with a non- resident person to provide works or services must notify the C-G within 30 days after entering into the contract.

Minerals & Mining Operations

Clarity provided in respect of the capitalisation of waste removal, overburden stripping and shaft sinking cost is as follows:

• Capitalise if cost was incurred to get improved access to ore bodies, regardless of stage of mining

• Expense if incurred during production  or the extraction of ore in the current period

Capital Allowance

Taxpayers are required to maintain fixed asset register, as prescribed under Generally Accepted Accounting Principles, for the purpose of capital allowances.

Transitional provisions require that written down values from prior periods will be used as the written down values at the beginning of the new basis period.

Withholding Certificate

A sample certificate provided as per the Fourth Schedule. No further guidance is provided.

Determining Chargeable Income and Capital Allowance

The approach to calculating the above is provided in the First and Fifth Schedules.