May 2016 Q5 d.

• All individuals are taxable persons whatever their age unless they are specifically exempt;
• Tax charged on the income of an office or employment;
• Persons resident in Ghana are normally liable only to the extent that they derive their income from Ghana.

• Affordability (ability to pay in proportion to income or wealth)
• Taxes should be certain, not arbitrary
• Taxes should be levied in a convenient way
• Cost of imposing and collecting taxes should be low
• Taxes on international trade should be convenient and competitive.

Domestic Taxes
Domestic taxes are administered by the Domestic Tax Revenue Division (DTRD) of the Ghana Revenue Authority. It is the merger of the operational wings of the erstwhile value Added Tax service and the Internal Revenue Service. Some of the domestic taxes being administered by the DTRD include:

Income Tax
*Corporate Tax: this is the tax paid by companies on their profits in the year
The tax rate is 25%
*Personal Income Tax: self-employed persons are required to pay income tax at graduated rates in four equal instalments. The current Personal Income Tax rates took effect from November 2011.
*Pay As You Earn (PAYE): the PAYE contributions are withholding from salaries of employees in order to satisfy their income tax responsibilities. The PAYE is computed with the Personal Income Tax rate.

Tax Stamp
This is a tax collected form small-scale self-employed persons in the informal sector on quarterly basis. Under the Tax Stamp System, business operators in the informal sector are grouped according to business type e.g. dressmakers, susu collectors, chop bar owners, butchers etc. The business types are further grouped by class/size to arrive at equitable rates to be paid according to both type and size.

Stamp Duty
Stamp duty is administered under the Stamp Duty Act, 2005 (Act 689). The Stamp Duty is not a tax on transactions, but on documents brought into being for the purposes of recording transactions. It is therefore a tax on documents or specific instruments which have legal effect.

Gift Tax
This is a tax payable by a recipient on the total value of taxable gifts received in a year of assessment. The total value of taxable gift(s) must exceed GH¢50.00 in a year of assessment. Assets on which tax is imposed include land, buildings, money (including foreign currency), shares, bonds and securities, business and business assets. The rate of tax is 5%.

Capital Gains Tax
This is a tax paid on the gains made from the realization or sale of a chargeable asset where the gain exceeds GH¢50.00. Assets on which tax is imposed include land, buildings, business assets including goodwill and shares of a resident company. The rate of tax is 15%.

Rent Tax
This is the tax paid by rent income earners on the gross amount earned in a year of assessment. The rate of tax is 8% on the gross rent income. It is a final tax.

Mineral Royalties
This is a tax imposed on persons for the extraction of natural resources on or under the surface of the earth. The rate is 5%

Communications Service Tax (CST)
The communication service tax (CST) is a tax levied on charges for the use of communication services that are approved by communications service operators. It is paid by consumers to the communications service providers, who in turn pay all CST collected on a monthly basis.

VAT
Value Added Tax (VAT) is abroad-based tax imposed on the expenditure of consumers when they purchase goods and services. It is collected by businesses which are registered to charge the tax in stages on the “value added” from the manufacturing to retail level. The businesses then account or the tax so collected at the end of every month. The current standard rate of tax is 12 ½ percent. A zero (a) rate is also applied to all exports.

National Health Insurance Levy (NHIL)
The National Health Insurance Levy (NHIL) is a levy imposed on goods and services supplied in or imported into the country. All goods and services are subject to the levy unless they are otherwise exempted. The levy is charged at a rate of 12 ½ on the VAT exclusive selling price of goods supplied or service rendered. The NHIL is a collected by registered businesses in the same way as VAT is collected.

VAT Flat Rate Scheme (VFRS)
This is a special method for collecting and accounting for VAT/NHIL. It is designed for traders operating in the retail sector. Under the VFRS, registered retailers of taxable goods shall charge VAT/NHIL at a marginal rate of 3% on the value of each taxable item sold.