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Tax on Foreign Income by Ghanaian Residents to Replace Abandoned Electricity Tax

The Commissioner General indicated that, the move to tax foreign incomes of Ghanaiain residents is borne out of the need to bridge the revenue gap, after abandoning the proposed VAT on electricty in January.

The Commissioner General of the Ghana Revenue Authority(GRA), Julie Essiam, has announced a proposed new tax on the foreign incomes of resident Ghanaians who have resided in the country for 183 days or more.

She announced this initiative during her recent engagements with the media upon assuming office as the Commissioner General of GRA. She indicated that the move is borne out of the need to bridge the revenue gap, after abandoning the proposed VAT on electricity in January.

The commissioner also hinted that, although a new measure, it’s been part of the law since its inception and has yet to be fully implemented.

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“So the measure that we put in place is a compliance measure on foreign income of resident unions. This measure is already in the law, so it is not a new measure. The difference is that its implementation and application have not been implemented effectively. We have gone through credible and sustainable processes and structures to ensure that when we implement this measure, the sustainability of this measure is going to go beyond 2024 in our revenue numbers,” she said.

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Essiam was also emphatic on how her outfit intends to achieve the process by courting the support of other organizations and institutions while ensuring measures are put in place to meet the revenue threshold of GH¢ 1.8 billion.

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“We are happy to announce that we have put strong and structural measures in place to ensure that this yields the revenue of GH¢1.8 billion and beyond, so for us to implement this measure, we have, with the aid and assistance of the OACD, gone through sustainable processes and structures to ensure that when we implement this measure, the sustainability of this measure is going to go beyond 2024 in our revenue numbers.
So this is the measure that, together with the Government of Ghana and our mother ministry, the Ministry of Finance, is going to take place or is going to replace the VAT on electricity,” she stated.

She also cited a voluntary disclosure of foreign accounts will attract free interest waivers for account holders who declare in time, ie, from May 1st.

“Its implementation has begun because the team is mobilising themselves and drafting the letters to be sent to individual account holders. So by the 2nd of May, those letters might have gone out. If individuals come forward within three months and say that, this is the amount in this account, the interest on the account will be waived and that is the voluntary disclosure aspect of this measure,” she added.

The Commissioner and her boss at the finance ministry, Amin Adam, are heavily confident in the new processes and have urged Ghanaians to support the government realize its revenue targets.

But which income is being referred to? Is it my Upwork earnings, my world remit income, skrill etc? and how does the new income tax make sense of this? Sourced from Ceditalk, this session aims to draw some form of clarity on the nitty-gritty of the new measure.

The New Income Tax

The new Income Tax Act 2015 (Act 896), in which the Commissioner General hinted that the new measure is enshrined, stipulates several conditions on what and who this tax affects.

A person is said to be a resident for tax purposes if he/she is a Ghanaian who lives in Ghana or any other person whether Ghanaian or not who has lived in Ghana for a cumulative 183-day period or a Ghanaian who has been sent abroad as government employee or a Ghanaian who is temporarily not available in Ghana for not more 365 days but has a permanent home in Ghana.

Source of Income

Under the old tax act, income for a resident person is taxable if it is accrued in, brought into, derived from or received in Ghana. A non-resident person is only expected to pay tax on income derived from or brought into Ghana.

Under the new act, a resident person is liable to pay tax on all income no matter the source. And you have to pay for what you have already received if the source has ceased. For a non-resident person, you still have to pay if the income accrues in or is derived from Ghana. But if you have a permanent establishment (see examples in the comments), you have to pay tax no matter which country the establishment earns its income in.

When the Ghana government opted to place a 15% tax on domestic electricity consumption, it met heavy public outbursts and agitation. Shortly after labour unions proposed a nationwide strike in protest of the then electricity levy, the finance minister, directed the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), to suspend the introduction of the new levy.

Rescinding the decision to implement the 15% levy earlier in the year caused a shortfall in revenue mobilization, which has subsequently necessitated the move to tax the foreign income of Ghanaian residents.

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