Introduction
Have you or your business been unable to pay your taxes in the past year and beyond? You are far from alone. The spread of the global COVID 19 pandemic worsened challenges people faced and crippled financially successful businesses and people. A survey by the Statistical Service of Ghana in collaboration with the World Bank reports that in Ghana, 35.7% of business establishments had to close during the partial lockdown in 2020, with 16.1% continuing to be closed after the easing of the lockdown, with establishments in the hospitality being the most affected (24.0 percent had to close)[1]. Individuals have equally been affected, with a total number of 118,266 confirmed cases of the virus in Ghana, and 1,017 deaths as at the date of this article[2].
In spite of this, the obligation to pay taxes still remains, and people who fail to pay their taxes are subject to penalties and interest on taxes. This article aims to bring awareness of the Penalty and Interest Waiver Act 2021 (Act 1065), a law that was passed to help tax defaulters to make arrangements to pay their taxes without the usual penalties.
The Ghana Revenue Authority
The Ghana Revenue Authority (GRA) was founded in 2009 to administer various taxes and tax-related laws. Its function is also to assess, collect, administer, and account for Fiscal and Customs revenue collected by the Ghanaian government through the Ministry of Finance, in accordance with established laws and procedures.
GRA has the authority to prosecute tax evaders. This is because its mission is to guarantee that taxpayers properly comply with their tax duties and that money is correctly assessed and collected by enforcing compliance with the legislation it administers.
Individual And Corporate Taxation
Individuals who are Ghanaians are currently taxed on a graduated scale whereas non-residents are taxed at a flat rate of 25%. For employees, the tax payable on employment income must be withheld at the source (ie. by the employer), and remitted to the GRA by the 15th of the following month.
Individuals are required to keep detailed records of their income and expenses on a cash basis. As a result, when calculating their taxable income for each calendar year, individuals must include both income received and expenses paid for.
Companies and other corporate bodies, unlike individuals, are required to account for income and expenses on an accrual basis for each accounting year, rather than a calendar year. Most businesses in Ghana are taxed at a rate of 25%, while those in the extractive sector (Mining sector) are taxed at a rate of 35%. Companies can, however, take advantage of varying concessionary tax rates based on the nature of their business, industry, and location.
On 31st March 2021, in its 2021 Budget (the 2021 Budget), the Government of Ghana passed three new tax laws and amended two old ones, which are to take effect in 2021. These laws were passed as part of the government’s Budget Statement and Economic Policy, which included a variety of tax initiatives.
One of these laws passed by Parliament on March 31, 2021 was the Penalty and Interest Waiver Act 2021 (Act 1065).
The Penalty And Interest Waiver Act
The Penalty and Interest Waiver Act exempts people from fines and interest on accumulated tax arrears until December 2020.
This means that people and companies that have tax arrears or unfiled returns up to 31st December 2020 will not pay any interest or penalty on such arrears – as long as they pay these taxes on or before December 31, 2021.
Apart from all interest and penalties accrued in tax years up to December 31, 2020 being waived by the GRA, there will be no prosecution or enforcement action against any person who has been granted the waiver.
Scope of the Waiver
The Act applies to the following:
- Persons who have not previously registered with the GRA.
- Persons who have registered with GRA but:
- have not submitted their returns; or
- are in arrears for the submission of returns;or
iii. are in arrears for payment of tax payments.
The waiver does not apply to the following:
- Payments or returns due or after January 1, 2021.
- Persons who fail to comply with the provisions of an enactment administered by the Commissioner General that relates to the furnishing of a return or payment of a tax due from 1st January 2021.
How To Apply For The Waiver
- Submit a written application requesting for the waiver at GRA. In the application, you must include your company or individual taxpayer’s details, the time period during which the liability occurred, and outstanding taxes.
- Submit prior year’s returns until December 31, 2020.
All this must be done before September 30, 2021. The Commissioner-General shall serve a notice of his decision within thirty days of receipt of the application. Should the Commissioner-General decide to not grant the waiver, the Commissioner-General is required to specify in writing the reason for the refusal.
An applicant who is dissatisfied with the Commissioner General’s decision, may file a written complaint with the Commissioner General within 30 days of receiving the decision. the Commissioner-General will make a final decision within thirty days of receiving the complaint and notify the applicant. The applicant may pursue the matter in court if dissatisfied with the Commissioner General’s final decision.
Conclusion
It is hoped that many individuals and companies will take advantage of the law in order to meet their tax obligation.
Nartey Law Firm is a leading corporate and commercial law firm in Ghana providing legal services to individuals, domestic and international businesses. Ensuring the success of our clients’ objectives is at the core of what we do. Comprised of a dedicated team of lawyers with extensive experience in corporate, commercial and international law and litigation, we pride ourselves with the diligent execution of all client matters, whilst guaranteeing an uncompromising standard with respect to excellence in service delivery. Some of our focus areas are Real Estate, Trade and Commerce, Banking and Finance, Regulatory Advisory, Capital Markets and Mergers and Acquisitions.
Update:
Act 1065 has been amended by the Penalty and Interest Waiver (Amendment) Act 2021 (Act 1073). Act 1073, which was passed into law on 30th December 2021, has changed the deadline for applying for the waiver to 30th June 2022. It is hoped that this amendment will enable a greater number of people to take advantage of the waiver.
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Disclaimer: This publication is for information purposes only and is not intended to constitute legal advice. If you require information on any matter discussed in this article, kindly reach out to the firm directly.