Key Facts about the Amended Income Tax Bill

On May 1, 2020, the Parliament of Ghana approved the Income Tax (Amendment) Bill 2020 to waive taxes on withdrawals from personal pension schemes and third-tier provident funds. The amendment is to provide some relief to citizens whose business have collapsed or employees who have lost their jobs due to the Covid-19 pandemic.

The following are some facts about the Amendment of the Income Tax (Amendment) Bill 2020.

Income Tax

• Withdrawals from the third-tier provident funds and from personal pension schemes will not be subjected to a fifteen (15) per cent income tax charge.
• What this means is that, employees who have lost their permanent employment or those self-employed and have lost their business capital due to COVID-19 will not be taxed when making withdrawals from their statutory third -tier provident funds or their personal pension schemes. This is because before the amendment, withdrawing money from these sources before retirement are subject to 15% income tax if withdrawn before 10 years by contributors in the formal sector and before five years in case of contributors in the informal sector.

• In order to provide compensation for additional risk being faced by health workers, who are subject to their income being taxed by the government, the employment income of these workers is exempt from income tax for the months April to June 2020.

• June 30, 2020 and not April 30, 2020 has been determined as the new deadline for the filling of income tax returns because the amendment has extended the deadline by two (2) months. This deadline is meant for 2019 income tax returns for individuals and partnerships and the 2019 Annual P.A.Y.E (Pay As You Earn).
• Companies and Trusts have a six (6) months instead of four (4) months after the end of their financial year to file their income tax returns.
• All donations made toward COVID-19 will be taken into account as an expense which is deductible for income tax purposes, this will result in the reduction of the amount of income on which the taxpayer’s income liability will be calculated. However, these donations will not be considered as reductions against income when trying to determine how much of income should be taxed.

Value Added Tax (VAT) specific measures;

• In order to aid in the smooth and risk-free payment of Value Added Tax (VAT) the Ghana Revenue Authority has circulated information meant to help members of the public pay their taxes by bank transfer and filing their tax returns by email.
• The norm has been when that goods supplied by VAT- registered businesses they are subject to the imposition of VAT and other levies such the National Health Insurance Levy (NHIL), however, goods that are donated for the purpose of charity may attract a VAT liability for the donor. However, goods donated in support of the fight against COVID-19 will not be charged because Parliament has approved such taxable donations as emergency relief items under the VAT laws.

General Tax Measures

• Penalties accrued on principal debts will be cancelled once all outstanding debts due the GRA up to June 30, 2020.

These are some of the measures put in place by the government to mitigate the effects of COVID-19 on Ghanaian taxpayers.