Employees are required to file annual income tax returns (GRAs).

Employees in Ghana are required to file annual income tax returns with the Ghana Revenue Authority (GRA) by April 30, 2024, according to Eric Anthony, Principal, Chief Revenue Officer, for the petroleum exploration and production audit of the GRA Large Taxpayers Authority (GRA). ) Inland Revenue Department.

Under Section 125 of Act 896, employees were not required to file their own returns, but as a result of Amendment 924, they are now required to do so four months after the end of the base period, which is December 31 for all employees.

Under Regulation 12 LI 2244, the employer must instead provide the Commissioner General with a schedule of annual employer tax deductions that sets out the amount of monthly pay-as-you-earn (PAYE) tax payments it has made for each employee, their names and taxpayer identification information . The number, as well as the salaries and other benefits they were paid, among other things.

PAYE tax is a tax paid by an employer on behalf of an employee after deduction from the employee’s total employment income. All income of an employed person is subject to taxation, regardless of whether it is paid for previous, current or potential (future) work, whether it is received in cash or in kind, and whether it is received directly by the employee. or indirectly on his behalf.

No later than the fifteenth day of the month following the month in which the deduction was made, employers are required to complete monthly PAYE statements and pay the applicable PAYE taxes for all their employees, regardless of whether they are temporary, part-time or permanent. .

During a webinar hosted by the UK Ghana Chamber of Commerce and PwC Ghana on “Navigating Payroll Tax Compliance in Ghana: A Comprehensive Guide for Businesses”, Mr Anthony explained that while the employer is responsible for filing monthly PAYE tax return, The employee is responsible for filing an annual personal income tax return.

Employers are responsible for paying pension benefits to their employees on the fourteenth day of every month, according to Nii Amu Otoo, another webinar participant and Head of Standards and Enforcement at the National Pension Regulatory Authority (NPRA) of Ghana.

If you fail to pay these fees, an additional fee of 3% of the monthly fee that was due will be charged and will continue to accrue until paid. If the NPRA is unable to obtain these funds from you, you will be charged and taken to court to pay the fee plus surcharge, as well as any fine required by law. Each month you fail to comply, you could be fined up to 2,000 penalty units, the equivalent of £24,000, Mr Otoo said.

Employment Income Tax in Ghana

Mr. Anthony argues that one of the three sources of income subject to tax in Ghana is employment income.

Under Regulation 3 of the Income Tax Regulations 2016 (LI 2244) and the Income Tax Act 2015 (Act 896), the GRA requires employers to withhold relevant taxes from qualifying cash payments made to employees during the tax year (1 January – 31 December) to satisfy the employee’s employment tax liability for that year. Wages, vacation pay, honorariums, commissions and tips are considered eligible cash payments.

There are other types of employment income that should not be taken into account when calculating PAYE taxes, even if they are also taxable, such as overtime, bonuses, company housing and company car allowances (for personal use). This includes any payments made to an individual on behalf of his employer for expenses necessary for the legitimate business needs of the employer. Redundancy payments such as redundancy payments, payment or reimbursement of expenses or health, dental and health insurance benefits on equal terms, and employment income subject to final withholding are also excluded from the calculation of employment income for PAYE taxes.

The benefit, which is also tax-free, is the sum of the first, second and third level contributions, which cannot exceed 35% of the employee’s basic salary. If an employee withdraws money from a personal retirement fund investment before reaching statutory retirement age because they lost their full-time job due to COVID-19, this is also considered employment tax-exempt income.

Compliance with Ghana Payroll Tax Laws

While I recognize that taxes are a complex issue, Mr. Anthony acknowledged that they are a necessary cost of living in a civilized society. Therefore, it is imperative that we take our tax issues seriously.

He encouraged all taxpayers who are facing difficulties in complying with tax laws to contact the GRA online or in person at their offices. “It is very important to remember that you will avoid all possible penalties and interest if you are compliant with your taxes, and in the unlikely event that you are not held liable.”

To ensure that the tax rates applied by the organizations are in compliance with the tax laws of Ghana, Franklin Mensah, Chief Financial Officer (Ag) of G4S Security Services (Gh) LTD. and webinar participant, also advised companies to seek expert advice.

Businesses can review their payroll tax status once a year in consultation with their tax experts. This allows you to identify problem areas in advance and focus on them. Tax experts can also offer suggestions on how to improve your procedures to reduce your tax liability. Please be aware that wasting time may result in fines and penalties. We must act quickly,” Mr Mensah said.

Gifty Matei Trebi, Associate Director at PwC Ghana, moderated the webinar, which also discussed income tax rates, Ghana’s three-tier pension plan and the taxation of alternative sources of income from work, including the use of domestic help.