Employee ought to file annual income tax returns – GRA

Supervisor and Chief Revenue Officer for Upstream Petroleum Audit at the large taxpayers' office within the Ghana Revenue Authority’s (GRA) Domestic Tax Revenue Division, Eric Anthony, has highlighted the requirement that Ghanaian employees submit their annual income tax returns to the GRA by April 30 each year.

Under the previous Section 125 of Act 896, employees were not mandated to file their own returns. However, the introduction of Amendment 924 now requires employees to submit their income tax returns within four months of the end of the basis period, which concludes on December 31 annually.

During a recent webinar hosted by the UK-Ghana Chamber of Commerce and PwC Ghana, Mr. Anthony clarified that while employers handle monthly PAYE filings, it is the responsibility of employees to file their annual personal income tax returns.

Employer Responsibilities under L.I. 2244

Regulation 12 of L.I. 2244 stipulates that employers must file an Employer’s Annual Tax Deduction Schedule. This document provides a detailed account of the monthly Pay As You Earn (PAYE) tax deductions made for each employee. It must include the Taxpayer Identification Numbers, employee names, and the amounts paid as salaries and benefits.

PAYE tax is a deduction from an employee's total employment income, covering cash or in-kind payments received directly or indirectly. Employers are required to file monthly PAYE returns and remit the corresponding taxes on or before the 15th day of the month following the deduction.

Pensions Compliance and Penalties

Nii Amu Otoo, Head of the Standards & Enforcement Unit at the National Pensions Regulatory Authority (NPRA), emphasized the employer’s obligation to remit pension contributions by the 14th of each month. Employers failing to comply face a 3% monthly surcharge on the outstanding contributions, compounding until full payment is made. 

Persistent defaults can lead to legal action, with penalties reaching up to GH24,000 for every month of non-compliance.

Taxation of Employment Income in Ghana

Employment income is one of Ghana's three main taxable income sources. According to the Income Tax Act, 2015 (Act 896) and Regulation 3 of L.I. 2244, employers must withhold taxes from qualifying cash payments such as salaries, wages, and commissions to meet employees’ tax obligations. Non-cash benefits like official accommodation and private use of company vehicles are taxable, while reimbursements for business expenses and certain retirement benefits are exempt.

Additionally, Tier 1, Tier 2, and Tier 3 pension contributions, up to 35% of an employee’s basic salary, are tax-exempt. Withdrawals from personal pension funds before retirement may also be tax-free if caused by permanent job loss due to COVID-19.

Ensuring Payroll Tax Compliance

Mr. Anthony stressed the importance of compliance, describing tax as "the price we pay to live in a civilized society." He encouraged taxpayers to seek assistance from the GRA to address compliance challenges, noting that adherence to tax laws helps avoid penalties, interest, and potential prosecution.

Franklyn Mensah, Acting Finance Director at G4S Security Services (Ghana) Ltd., advised businesses to periodically engage tax professionals for payroll tax reviews. He explained that proactive assessments can help identify potential issues early and improve systems to avoid liabilities. “Acting promptly can save time, money, and reputational risk,” he said.

Comprehensive Tax Guidance

Moderated by Gifty Matey Trebi, Associate Director at PwC Ghana, the webinar provided insights into payroll tax compliance, pensions, and the broader taxation of employment income. Topics also included domestic servant use, income tax rates, and Ghana’s three-tier pension scheme, equipping businesses with the essential knowledge to navigate Ghana’s tax landscape effectively.