TAX
INCENTIVES
THIS IS INTENDED TO SERVE AS AN INFORMATION
GUIDE TO ANY INVESTOR IN THE GHANAIAN ECONOMY
What are Tax Incentives?
Tax incentives are concessions, provisions
and conditions made available to taxpayers to serve as:
a. means of reducing the tax liability and lessening the tax burden
on taxpayers;
b. motivation and encouragement
c. they are also meant to boost and sustain investment in the
economy;
d. Others are also designed to encourage investments in rural
areas to stem the tide of migration to the cities and towns.
In what sectors does the Internal Revenue Act,
2000 (Act 592) provide incentives?
The Act provides incentives in various sectors of the economy.
These include agriculture, real estate, rural banking and the
Ghana Stock Exchange.
TAX INCENTIVES BY INDUSTRY
1. AGRICULTURE
So, what are the tax incentives granted in
the Agricultural Sector?
Tax Holiday
There are attractive tax holidays to serve as incentives
for enterprises engaged in farming or processing of agricultural
produce. The tax holidays are designed to suit different types
of farming activities e.g. cash crops, tree crops, fish farming,
and crop, fish and livestock processing.
a. Tree Crops -( e.g. coffee, oil palm, sheanut
,rubber and coconut-) These have tax holiday of 10yrs from date
of first harvest
b. Cash Crops- (Cassava, yam, rice, pineapple, maize) These have
a tax holiday of 5 years from date of commencement of farming
enterprise
c. Livestock - (including poultry and fish farming) A tax holiday
of 5 years from commencement of business
d. Cattle- 10 years from commencement of business
2. AGRO-PROCESSING
Is there any special treatment for companies engaged in agro-processing?
The business of converting crops, fish or livestock produced
in Ghana into edible canned or other packaged products other than
in their raw state enjoy a tax holiday of 3 years from commencement
of commercial production.
Where a company is engaged in farming and processing it may choose
which of the applicable holidays it will wish to enjoy.
2b.
i. Agro-Processing businesses established in Ghana
after 1st January 2004 enjoy 5(five) years tax holidays from date
of commencement.
ii. Companies producing cocoa by-products from cocoa waste also
enjoy 5 years tax holiday from date of commercial products.
* iii Companies engaged in the processing of
waste enjoy seven(7) years tax holiday from date of commercial
production.
3. COCOA FARMING
Are there special tax incentives for the cocoa farmer?
The income from cocoa of a cocoa farmer is exempt from income
tax.
4. CARRY OVER OF LOSSES
a. Am I liable to tax on my farming activity on declaring
a loss?
The law permits farming losses to be carried forward for 5 years
of assessment.
b. What benefits are derived by exporters of agricultural
products?
Companies engaged in the export of non-traditional products enjoy
a concessionary tax rate of 8%. The tax rate applies to income
from non-traditional exports only.
Non-traditional goods means
i. horticultural products
ii. processed and raw agricultural products grown in Ghana, other
than cocoa beans
iii. wood products, other than lumber and logs
iv. handicrafts and
v. Locally manufactured goods
5. REAL ESTATE INDUSTRY
Are there any exemptions for real estate developers?
The income of a real estate company engaged in the construction
for sale or letting of residential premises is exempt from tax
for 5 years from date of commencement.
6. RURAL BANKING
The income of a rural bank from a business of banking is exempt
from tax for 10 years from date of commencement. Thereafter, tax
is paid at the rate of 8%.
7. GHANA STOCK EXCHANGE
The income of the Ghana Stock Exchange is exempt from tax for
15 years from commencement
8. CAPITAL ALLOWANCES
a. What incentives do I get on my capital investment?
To help investors recover their capital expenditure, the law grants
incentives in the form of Capital Allowances
The rates vary according to classification of the asset.
Class Rate
1. 40%
2. 30%
3. 80%
of the cost base of assets added to the pool during the basis
period and 50%
of the balance of the pool, if any
4. 20%
5. 10%
of cost base(buildings, structures and works of permanent nature)
6. Intangible
assets, Goodwill, Copyright, Trade mark (useful life)
b. What happens to unutilised capital allowances?
Unutilised capital allowances are allowed to be carried forward.
9. CARRY OVER LOSSES - GENERAL
Apart from farming, can losses be carried forward?
Yes, investors in manufacturing and mining business can also carry
forward their losses incurred the next five years of assessment.
10. FOREIGN CURRENCY EXCHANGE LOSSES
What happens in case of foreign currency exchange losses?
The law permits the deduction of any foreign currency exchange
loss other than a loss which is capital in nature incurred in
the production of income in respect of any debt claim, debt obligation
or foreign currency holding of that person. The Commissioner should
first be informed about entering into the transaction involving
the debt claim, debt obligation or foreign currency holiday by
the date of filing of returns.
11. TAX RELIEFS - INDIVIDUALS
Are there any tax reliefs for individuals?
Tax reliefs are granted to individuals to lessen their tax burdens.
A tax relief is an approved deductible allowance intended to reduce
your taxable income and thereby lessen your tax burden. Some reliefs
are now granted upfront. See IRS 05 'A Guide To Tax Reliefs' for
details
12. OTHER TAX EXEMPTIONS - RENT ELEMENT
Employees living in accommodation provided by their employers
carrying on a timber, mining, building, construction or farming
business at any place or site where the field operation of the
business is carried on are exempt from payment of income tax on
the provision of such accommodation.
13. RESEARCH AND DEVELOPMENT EXPENDITURE
A research and development expenditure by a Manufacturing Company
is fully deductible.
14. LOCATION INCENTIVES
Is there any incentive for locating businesses in rural
areas?
Manufacturing businesses located outside Accra/Tema enjoy tax
rebate as follows
Location Rebate
Rate
Income Tax
Regional Capitals 25%
75%
Elsewhere in Ghana 50%
50%
Corporate income tax of agro-processing industries established
on or after 1st January, 2004 enjoy location tax incentive as
follows:
Location Rebate
Rate
of Income Tax
* Accra and Tema 80%
20%
* Other Regional Capitals
(except Upper West, Upper
East & Northern) 90%
10%
* Outside other Regional
Capitals including all of 100%
Nil
Upper East, Upper West &
Northern)
15. TAX RATES
The general corporate tax rate has been progressively reduced
to 32.5%. However, concessionary rates are enjoyed by some businesses.
The income tax rate applicable to a company engaged in the hotel
industry is 25%.
Companies listed on the Ghana Stock Exchange are taxed at 30%.
Concessionary rate of 20% is enjoyed by Financial Institutions
that derive their incomes from loans granted to farming enterprises
and leasing companies.
These notes are for guidance only. For more information on tax
matters, please visit the nearest Income Tax District Office.
Their addresses are in the CONTACT
section of this website
IRS - YOUR PARTNER IN NATIONAL DEVELOPMENT
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