Understanding and complying with Ghana’s tax laws not only ensures legal and financial security but also provides businesses and individuals with various tax reliefs designed to reduce their tax burden.
What Are Tax Reliefs?
Tax reliefs are allowances granted to resident individuals and corporate entities to lower their taxable income, ultimately reducing the amount of tax payable. In Ghana, the tax system applies graduated tax rates to the chargeable income of resident individuals (such as sole proprietors, employees, and partners in a partnership), while corporate entities are taxed at a standard corporate tax rate. These reliefs are deducted when calculating chargeable income from business, employment, or investment sources.
Types of Tax Reliefs
1. Personal Reliefs
According to Section 51 of the Income Tax Act, 2015 (Act 896), personal reliefs are available to resident individuals and are deducted when determining chargeable income. These reliefs, outlined in the Fifth Schedule of the Act, include:
- Marriage Relief
- Child Education Relief
- Dependent Spouse or Relative Relief
- Old Age Relief
- Aged Dependent Relative Relief
- Disability Relief
- Educational Relief
To claim these reliefs, individuals must submit a prescribed form to the Ghana Revenue Authority (GRA) each year. Once approved, the reliefs are factored into payroll calculations, reducing the individual’s taxable income and increasing their net salary. These are commonly referred to as “Upfront Tax Reliefs.”
2. Statutory Reliefs (Pension Contributions)
Employee and employer contributions to Ghana’s pension schemes also provide tax relief:
- First-Tier & Second-Tier Pension Scheme (Mandatory & Occupational Pensions):
- The 5.5% employee contribution is deductible for tax purposes.
- The 13% employer contribution is also treated as a deductible expense for the employer.
- Third-Tier Pension Scheme (Provident Fund – Voluntary Pension):
- Contributions from both the employer and employee (not exceeding 16.5%) qualify as tax-deductible.
- Informal Sector Contributions:
- Individuals in the informal sector who do not contribute to the mandatory pension schemes can deduct 35% of their declared income as tax relief.
3. Capital Allowances
Businesses that invest in depreciable assets are eligible for capital allowances, which serve as tax relief for businesses using such assets.
4. Deductible Business Expenses
All expenses that are wholly, exclusively, and necessarily incurred in generating business income are deductible for tax purposes.
The Role of Accountants in Maximizing Tax Benefits
As accountants, we play a critical role in ensuring businesses take full advantage of available tax reliefs. Proper tax planning helps reduce financial, operational, and legal risks while enhancing the overall value of an organization.
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