Tax Law Amendments, Applicable from 1st August 2018
Presenting to the Ghanaian Parliament, the Finance Minister put forward proposals for the review and introduction of the following taxes and levies:
- Income Tax rates for resident and non-resident individuals
- Value Added Tax
- Luxury Vehicle Levy
Parliament has passed the amendments and approved the introduction of the new Luxury Vehicle Levy, all of which have become operational with effect from 1st August 2018.
The new laws are:
- Income Tax (Amendment) Act, 2018 (Act 973). This amended the First Schedule of the Income Tax Act, 2015 (Act 896).
- Value Added Tax (Amendment) Act 2018 (Act 970). This amended Section 3 of the Value Added Tax Act, 2013 (Act 870).
- National Health Insurance (Amendment) Act, 2018 (Act 971). This amended sections 47 and 51 of the National Health Act, 2012 (Act 852).
- Ghana Education Trust Fund (Amendment) Act, 2018 (Act 972. This amended sections 3 and 25 of the Ghana Education Trust Fund Act, 2000 (Act 581)
- Driver and Vehicle Licensing Act, 1999 (Act 569). This amendment came with the introduction of a new Luxury Vehicle Levy.
What are the changes?
1. Individual Income Tax – Residents
An income tax band of 35% has been introduced. Up to 31st July 2018 the highest marginal rate of 25% applied to annual incomes exceeding GHC39,892.00.
The tax bands have been adjusted so that the 25% rate now applies to annual incomes from GHC38,892 to GHC120,000.
The table below compares tax rates before and after 1st August 2018:
|
ANNUAL INCOMES (GHS) |
||||
| BEFORE 1ST AUGUST 2018 | FROM 1ST AUGUST 2018 | |||
| CHARGEABLE INCOME | RATE OF TAX
(%) |
CHARGEABLE INCOME | RATE OF TAX
(%) |
|
| First | 3,132 | 0 | 3,132 | 0 |
| Next | 840 | 5 | 840 | 5 |
| Next | 1,200 | 10 | 1,200 | 10 |
| Next | 33,720 | 17.5 | 33,720 | 17.5 |
| Exceeding/ Next | 38,892 | 25 | 81,108 | 25 |
| Exceeding | n/a | n/a | 120,000 | 35 |
|
MONTHLY INCOME (GHS) |
||||
| BEFORE 1ST AUGUST 2018 | FROM 1ST AUGUST 2018 | |||
| CHARGEABLE INCOME | RATE OF TAX
(%) |
CHARGEABLE INCOME | RATE OF TAX
(%) |
|
| First | 261 | 0 | 261 | 0 |
| Next | 70 | 5 | 70 | 5 |
| Next | 100 | 10 | 100 | 10 |
| Next | 2,810 | 17.5 | 2,810 | 17.5 |
| Exceeding/Next | 3,241 | 25 | 6,759 | 25 |
| Exceeding | n/a | n/a | 10,000 | 35 |
2. Non- Resident Individual Tax Rate
The income tax rate applicable to income of a non-resident has changed, as shown in the table below:
| BEFORE 1ST AUGUST 2018 | FROM 1ST AUGUST 2018 |
| RATE | RATE OF TAX |
| 20% | 25% |
3. Value Added Tax Changes
The table below shows the changes to the VAT rates:
| BEFORE 1ST AUGUST 2018 | FROM 1ST AUGUST 2018 | |||
| RATE | RECOVERABLE? | RATE | RECOVERABLE? | |
| VAT | 15% | YES | 12.5% | YES |
| National Health Insurance Levy (NHIL) | 2.5% | YES | 2.5% | NO |
| Ghana Education Trust Fund Levy | N/A | N/A | 2.5% | NO |
The rules on recoverability have also changed.
Before 1st August 2018, VAT and NHIL of 17.5% of the cost of taxable supply was recoverable. After 1st August 2018 only VAT of 12.5% of the cost of taxable supply is recoverable. The levy is not recoverable and becomes part of your cost.
To understand the impact of these changes on your business, read our blog: The effect of the proposed changes to VAT in Ghana.
4. Luxury Vehicle Levy
A. What is this levy?
This is a new levy imposed on motor vehicles with engine capacity of 2,950 cc and above. The annual levy is payable by owners of motor vehicles with specified engine capacity, as follows:
- On the date of first registration of the vehicle; and
- On each annual renewal of road worthy certificates.
B. Which vehicles are affected by the levy?
The levies are based on engine capacity, as shown in the table below:
| ENGINE CAPACITY OF VEHICLE (CC) | LEVY (GHS) |
| 2,950 cc—3,549 cc | 1,000 |
| 3,550 cc—4,049 cc | 1,500 |
| 4,050 cc and above | 2,000 |
The Act exempts the following vehicle owners from payment of the levy:
- Tractors;
- Ambulances;
- Commercial vehicles with a capacity to transport more than 10 passengers;
- Commercial vehicles for transporting goods; and
- Any other motor vehicles exempted by legislative instrument.
C. Which Institution Collects The Levy?
The Driver and Vehicle Licensing Authority (DVLA) is authorized to collect this levy.
D. When is the levy applicable?
This levy is applicable 1st August 2018.
If you have any questions about these changes and how they might affect you or your business, please contact us.
