Ghana payroll and tax overview.

Ghana is a West African country that shares land borders with the Ivory Coast to the west, Burkina Faso to the north, and Togo to the east, while its southern shores meet the Atlantic Ocean and the Gulf of Guinea. Prior to the 20th century, Ghana’s economy was primarily reliant on agriculture with coffee and cacao becoming major contributors to its financial profile. In the 20th century, Ghana began to exploit rich natural resources such as minerals, hydrocarbons, and precious metals including diamonds, manganese, and gold. Modern Ghana has industrialised and diversified its economy and important industrial sectors include agriculture, mining and lumber, energy production, telecommunications, and tourism. Ghana is Africa’s second largest exporter of cocoa and gold but major exports also include oil, precious metals, and timber - while major imports include refined petroleum and foodstuffs. A developing country, Ghana is working to accelerate its economic growth with initiatives such as Ghana: Vision 2020 which aims to stimulate business, reduce poverty, and raise living standards across the country through rapid industrialisation and private investment. Those efforts have had a positive effect: in 2019 Ghana reached an estimated GDP of $67 billion with 6.1% growth. Ghana is a member of the African Union, the Non-Aligned Movement, G24 and the Commonwealth of Nations and was ranked 118 on the World Bank’s Ease of Doing Business Survey 2019.

Why Invest in Ghana?

Ghana has attracted the attention of international businesses investing in all sectors of the economy. The main sectors of investment within Ghana include agricultural and agro-processing sectors. The financial services and telecommunications sectors are growing rapidly. Further opportunities exist in manufacturing, ICT, tourism, gold, diamonds, and oil and gas.

Registering a Company and Establishing an Entity in Ghana

A company is not required to have a legal entity established in Ghana in order to process payroll.

However, should you want to establish a legal entity in the country, the following steps must be taken:

• The availability of the company name should be checked and the appropriate documents should be submitted to obtain an incorporation certificate. Form A should be completed - this document requires the name of the company, nature of the business, names of subscribers and shareholders, their addresses, occupation, directorships in any other company, full names of directors, full name and address of the company secretary and auditors, the number of shares and the stated capital. After the forms are filed, necessary fees paid and certificate issued by the Registrar-General Department, the Ghana Revenue Authority will issue a tax identification number for both the company and the employees of the company.
• The company must obtain a Tax Identification Number (TIN) from the Registrar- General Department or Ghana Revenue Authority before proceeding to company registration.
• A Commissioner of Oaths authenticates the forms required for the certificate to commence business. (1 day); Form 4 must be completed to issue the certificate.
• Obtain the certificate to commence business from the Registrar-General’s Department. (2 days)
• The following documents must be presented to deposit paid-in capital in a bank account: copy of company regulations, certificate of incorporation, certificate to commence business, and signatures of the authorized company representatives. (1 day)
• A business license should be obtained from the Metropolitan Authority. (7 days)
• The Metropolitan Authority shall inspect the work premises. (1 day)
• The company must apply for social security (1 day). To apply for social security, the company must attach a list of employees, their respective salaries and social security numbers, the company’s certificate of incorporation and certificate to commence business, company regulations, Tax Identification Number, Profile of Directors or Local Managers, copies of Directors or Local Manager valid ID.
• Obtain an environmental certificate the Environmental Protection Agency (EPA). (25 days)
• To apply for social security, the company must attach the list of employees, their respective salary, social security number, the company certificate of incorporation and certificate to commence business.

To process companies’ payroll, the firm will need formal registration of business at Registrar-General’s department and thereafter at the Ghana Revenue Authority.

The documents required for registration with the tax authority are:

• Certificate of Incorporation
• Certificate to commence business
• Company’s Regulation

A unique computer generated Tax Identification Number (TIN) is given to tax payers for all official transactions.

Business Banking in Ghana

It is not mandatory to make payments to employees or the authorities from an in-country bank account.

Generally, banks are open to the public from 8.30AM to 4.00PM Monday to Friday. Some banks are open on a Saturday from 8:00AM to 1:00PM.

Working Week and Working Hours in Ghana

The working week in Ghana is Monday to Friday.

The working day for commercial offices is usually 8:00AM to 5:00PM. Lunch breaks are usually one hour. Some offices and shops will be open from 8.00AM to 1.00PM on Saturdays. Government offices will not be operational before 9.00AM.

Basic Facts about Ghana

Full Name: Republic of Ghana

Population: 29.77 million (World Bank, 2018)

Capital: Accra

Major Languages: English, African languages including Akan, Ewe

Major Religions: Christianity, indigenous beliefs, Islam

Monetary Unit: Ghana cedi (GH₵) (GHS)

Main Exports: Gold, crude petroleum, cocoa, manganese ore and palm oil

GNI per Capita: US $4,650 (World Bank, 2018)

Internet Domain: .gh

International Dialling Code: +233

In Ghana, the tax year runs from 1 January to 31 December.

Domestic taxes are administered by the Domestic Tax Revenue Division (DTRD) of the Ghana Revenue Authority. Some of the domestic taxes being administered by the DTRD include:

• Corporate Tax: This is the tax paid by companies on their profits in the year. The tax rate is 25%. Mining and upstream petroleum companies pay corporate tax at a rate of 35%, while companies principally engaged in the hotel industry pay a reduced rate of 22%. The CIT rate for companies engaged in non-traditional export is 8%, while bank lending to the agricultural and leasing sectors pay a CIT rate of 20% on income from those business.
• Capital gains are included as part of business income and taxed at a rate of 15%. Capital gains tax is assessed on gains realised on the disposal of chargeable assets such as: buildings, businesses, business assets, land and shares.
• Other Taxes:

Value Added Tax (VAT)

Apart from the exempt goods and services, VAT of 12.5% is charged on goods and services made in Ghana and every imported good. A VAT rate of 5% on the supply of immovable property by an estate developer has now been introduced.

National Health Insurance Levy (NHIL)

Apart from the exempt goods and services, VAT of 2.5% is charged on goods and services made in Ghana and every imported good.

Special Petroleum Tax

Licensed oil marketing companies have imposed a special petroleum tax of 17.5% on the supply of specified petroleum products.

Income Tax in Ghana

Residents are subject to tax on chargeable income accruing in, derived from, brought into or received in Ghana. Non-residents are subject to tax only on chargeable income accruing in or derived from Ghana.

Individuals are considered a resident in Ghana if they;

• Have been in Ghana for at least 183 days in a 12-month period that begins/ends during the year of assessment.
• An employee or official of the government of Ghana posted abroad during the year of assessment
• A citizen with a permanent home in Ghana who is temporarily absent from Ghana for no longer than 365 successive days

Non-resident individuals pay taxes at the flat rate of 25%.

Employees in Ghana pay income tax using the Pay As You Earn system. PAYE contributions are withholdings from salaries of employees to satisfy their income tax responsibilities. PAYE is computed with the personal income tax rates.

Tax withheld must be filed and payment made by the 15th of the month following the month in which the tax is withheld.

At the end of each financial year, employers must, no later than 30th April following a financial year, file a return for each employee stating the salary paid to each employee, income exempted from tax, tax reliefs, chargeable income, tax due and tax paid.

The penalties for the failure to pay tax on due dates are:

• Up to three months - 10% of the unpaid tax
• Exceeding three months - 30% of the unpaid amount

A further penalty of 5% of the tax and penalty shall be imposed if the total amount remains unpaid.

Taxation of Bonuses

All bonus payments made by the employers to their employees in a year of assessment are taxed at 5% if the payment does not exceed 15% of the annual basic salary of the employee. Where the bonus payment exceeds 15% of the annual basic salary of the employee, the excess will be added to the employment income of the employee and taxed at the graduated tax rate.

Newly Engaged Employees

For newly engaged employees, the company must complete and file form DT107B for each employee.

Disengaged Employees Schedule

For disengaged employees, the company must complete and file form DT107C for each employee.

Social Security in Ghana

The Social Security and National Insurance Trust (SSNIT) is a statutory public trust charged with the administration of Ghana’s National Pension Scheme.

The Pension Scheme administered by SSNIT has a registered active membership of over one million and over 100,000 pensioners who collect their monthly pension from SSNIT. This is regulated by the National Pension Act 2008, which is administered by the Social Security and national Insurance Trust (SSNIT).

Employers are expected to ensure that employees in their employment are registered and that contributions are paid on their behalf.

Employees may elect to make additional contributions. There is also voluntary coverage for self-employed persons.

Social security contributions in Ghana are mandatory. Those exempted are:

• Officers and men of the Armed Forces and persons exempted by law
• The Justices of the Superior Court as exempted under the constitution
• All diplomatic agents

Payments to the Social Security and National Insurance Trust must be made within 14 days from the beginning of the following month.

An employer who fails to register the company and/or employees will be required to pay all the contribution which should have been deducted from the employees and penalty (3% per month) due from the day they qualified to register.

Reporting in Ghana

The employer has a responsibility to file monthly tax returns on behalf of the employee.

Employers are required to file employer’s annual tax returns on behalf of their employees not later than 30th April following the end of every year of assessment specifying the employee income, tax deduction, exempt income, reliefs and chargeable income.

New Employees in Ghana

The deadline for a new employee to be registered with the authorities is their start date.

Upon employment, new hires are required to submit the following to their current employer:

• Social Security (SSNIT No.)
• Taxpayer Identification No. (TIN)

To secure these numbers, new employees need to register with SSNIT and GRA prior to their employment. This is to ensure that the employer can process the respective statutory contribution of the employees.

Registration with the Bureau of Internal Revenue (BIR) to secure TIN will follow a different process. The employee has to fill out the Application for Registration (BIR Form 1902) and attach a copy of the birth certificate. The employer will submit the form to the Revenue District Office (RDO) where the company is registered.

Leavers in Ghana

There is no specific time-scale for paying leavers their final salary payment. The local authorities must be notified of the leaver.

It is not mandatory that payments be made from an in-country bank account.

Payroll reports must be kept for at least 6 years.