The Chartered Institute of Taxation Ghana (CITG) is mandated under the Chartered Institute of Taxation Act, 2016 (Act 916) to promote the study of taxation and regulate the practice of taxation in Ghana.
As part of its mandate, it recently educated members of the major professional accounting bodies in Ghana on issues of withholding taxes and the theme was ‘Navigating the Nuances of Withholding Taxes in Ghana.’
The event, the first of such a collaborative programme brought together professionals from the CITG, the Institute of Chartered Accountants Ghana (ICAG), the Association of Chartered Certified Accountants (ACCA), and the Chartered Institute of Management Accountants (CIMA).
The participation of the 1,195 professionals was part of CITG’s commitment to tax education and knowledge sharing to promote professional development and inform taxpayers and the public towards improved voluntary tax compliance, where collaboration, particularly in the area of withholding taxes was emphasized
Education
Dr. Isa
ac Nyame, Managing Partner of Ikern and Associates, who was the lead presenter for the webinar, explained withholding tax as a form of tax imposed on income at source.
He provided changes in withholding taxes and other related obligations, including changes in the Income Tax Amendment Act 2023 (Act 1094) whose purpose was to add an additional tax bracket of 35% for persons earning income exceeding GHC 600,000 per annum, impose a tax of 25% for non-resident persons, impose a withholding tax on the realisation of assets at 3% and 10% for residents and non-residents, respectively, and introduce a requirement to file returns on the realisation of assets and liabilities.
Other changes, Dr. Nyame listed included the increase in the withholding tax on bet winnings from 5% to 10%, imposition of 20% on the gross revenue of betting or gaming companies, increase in the income tax rate from concessions from 1% to 5%, increase in the elective tax rate of gifts and gains from from 15% to 20% and changes in the treatmen
t of unbeliever losses for period of 5 years.
He also talked about the imposition of income tax on persons declaring losses for five consecutive years (which tax calculated on 5% of the person’s turnover), changes in the treatment of exchange losses and changes in determining control in relation to related parties, and the reduction in the withholding tax on unprocessed minerals from 3% to 1.5%.
Challenges
Dr. Nyame highlighted certain challenges withholding agents encounter in performing their obligations, including withholding tax as a resident entity for goods, services, or works supplied by a non-resident entity, the impracticality of withholding tax from individuals and entities in the informal sector, and the bulking of transactions beyond the maximum threshold of GHC 2,000 during a tax audit.
In addition, he observed that the net fee requirements for resident or non-resident persons as opposed to the grossing up of the same and the obtaining of TCC from the tax payer portal, where outstanding issue
s were not considered during migration could be other potent challenges.
On per diems, Dr. Nyame advised tax payers to satisfy themselves about whether the per diems paid were strictly for the purposes of conducting the business of the taxpayer and could be accounted for. Besides that, he revealed, they were to be treated as allowances with the relevant taxes applied.
Excessive Liabilities
Dr. Martin Kolbil Yamborigya, Head of Audit at the Ghana Revenue Authority, advised withholding tax agents to arrange the tax affairs of their businesses properly in order not to incur excessive liabilities arising from tax audits, adding that withholding taxes were one of the most important revenue sources for the government, hence the need for taxpayers to comply.
‘Once the law says that you must withhold, you should be able to arrange your tax affairs in a way that you can pay. It is important that withholding agents do not put themselves in positions where they avoid tax only for them to be penalised during tax audi
ts,’ he said.
Dr. Yambomgyari explained that direct payments via online channels to non-residents for certain services, e.g., software licences, the withholding agent may need to gross up the actual amount paid to the vendor and bear the withholding tax expenses.
However, he said that may pose another challenge by reducing the chargeable income of the withholding agent.
He said taxpayers must inform their non-resident vendors that the contract they were entering into demanded an amount deducted as withholding tax to be paid to local revenue authorities.
For transactions with the informal sector, Dr. Yamborigya stated that although there was a limitation in how the GRA was resolving this issue, he encouraged withholding agents not to abuse the system by conducting business only with those in the informal sector.
He said those in the informal sector will be roped into the tax bracket using their TIN, and there will be little room for tax avoidance.
Mr. George Ohene Kwatia, President, CITG, noted that desp
ite the significant influence withholding taxes had on the revenue of the government, it was one of the trickiest yet overlooked areas by taxpayers, adding that it had a considerable impact on cash flows and profitability for taxpayers, which ultimately affects the net or disposable incomes of entities and individuals.
‘Today we convene not only to acknowledge the complexities associated with withholding taxes but also to investigate them together. Failing to withhold taxes carries weighty consequences, such as penalties and interest charges by the GRA,’ Mr Kwatia said.
Madam Sena Dake, President of ICAG, stated that the webinar fit into ICAG’s financial literacy programmes, which sought to enrich more professionals with learning and create more opportunities to share insights and exchange ideas.
In urging taxpayers to keep accurate records as the first step in navigating the withholding tax landscape, she said ‘our records are sometimes the problem we have. Records for income expenses and deductions are t
hose that, when we are not doing them well, can bring us the penalties and sanctions that come along with taxation.
Mary Kwarteng Darko, Associate Director of Tax Services at PwC Ghana, called on organisations including NGOs, to prepare themselves for tax audits and ensure that all adequate documentations were organised prior to the audit.
‘Ensure there are sufficient explanations and resolutions for all issues raised during the draft stage of the tax audit and not wait after the audit when an assessment is given. Once an assessment is issued, there are strict rules to be followed before a resolution can even start,’ she said.
Source: Ghana News Agency