Daniel Nuer of Ghana’s Ministry of Finance has intimated that the Ministry will consider the request for an upward review of the threshold of Withholding Tax (WHT) deductions on the supply of goods, services, and works during the review of the Income Tax Act.
The WHT rates are 3% for goods, 7.5% for services, and 5% for works on cumulative payments to a person exceeding a threshold of GHS 2,000.00 per annum.
Speaking during the UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana’s webinar on “Withholding Tax in Ghana: What Businesses Need to Know,” Nuer added that the Ministry, as part of the reviews of the tax laws, will also consider reviewing the rates for depreciation of vehicles together with several other nominal figures in the Act which have not been changed for a period of time.
Maymuna Haruna, Senior Manager at PwC Ghana and webinar moderator, welcomed the news.
I think that’s good news to most taxpayers. The general sentiment with some of my clients is that the threshold is too small, especially considering it’s an annual threshold that is being applied to several contracts.”
Dr. Charles Atuahene, Finance Director at Crocodile Matchets, a UKGCC member company and panellist on the webinar, however, urged the Ministry of Finance not to increase the threshold but rather consider the ease of its practical application.
Urging the Ministry of Finance to seriously consider this issue, Dr. Atuahene explained that “Companies do not keep individual ledgers for every supplier, making the application of this tax challenging and unfair to businesses.
According to him, “Businesses prefer the threshold to be maintained at GHS 2,000.00 but payment should be one-off no matter its multiplicity. This makes its application simple, enables GRA officers to know exactly how much Withholding Tax to deduct.”
Overview of Withholding Tax in Ghana
WHT is a key mechanism in Ghana’s tax system used by the government to ensure upfront revenue collection and improve tax compliance.
Withholding Tax in Ghana is deducted at source by an authorised agent and accounted later to the Commissioner General of the Ghana Revenue Authority (GRA).
WHT from supply of goods, services, and works requires a resident person to withhold tax on payments for a supply of goods, service fees, works, and contract payments which have a source in the country at specified rates. Other types of WHT include Withholding by Employees and Withholding from Investment Returns such as residential and commercial rent tax, taxes on interest and on dividend payments, tax on royalties, natural resource payments and consideration received from the realisation of capital assets from a resident and non-resident person.
Withholding Tax Exemptions
According to Lawrence Hotsonyame, ESQ, Assistant Commissioner – Training & Development Department at the GRA and webinar panellist, the law allows for some exclusions for WHT payments. For instance, premiums paid to a registered insurance company under insurance contract, and a contract for the sale of goods which constitute trading stock of both the vendor and the purchaser are exempt from Withholding Tax.
Furthermore, the Commissioner General of the GRA, for a good cause shown, may grant exemption to an institution or a specific contract entered into by an institution upon an application made by the institution. The Commissioner General may also grant an exemption to a person with a satisfactory tax record.
Complying with Withholding Tax
The webinar shared that WHT agents are required to file returns by the 15th day of the month following the transaction.
Hotsonyame disclosed that “The WHT agent becomes liable to pay to the Commissioner General, the amount of tax which has not been withheld if they fail to withhold the applicable taxes. They would pay the tax that should have been withheld in the same manner and at the same time as tax that is withheld.”
Where a withholding agent failed to file a withholding tax return on the due date, the Commissioner General shall impose a penalty. Penalties include the payment of 500 currency points, and a further penalty of 10 currency points for each day of failure.
Where an agent fails to pay the taxes on due date, the Commissioner General shall impose an interest of 125% of the Statutory Rate compounded monthly. Non-compliance can also trigger a tax audit report risk, tax tribunal arbitration processes, and litigation risk.
Hotsonyame, therefore, urged WHT agents to comply with the law and avoid the attendant ramifications.
He also disclosed that the GRA has developed a practice note on WHT. He urged all interested persons to visit the GRA’s website and download the practice note.
If there are any inquiries or questions, we are always available. You can contact any of the GRA offices or you can send your questions via our online questions portal and we will respond to you,” he said.
The webinar also discussed a wide range of related issues, such as the schedule of submission for annual tax returns, WHT under Double Taxation Agreements, overtime payment, and reoccurring expenses.
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