Early preparation is the best way to avoid tax trouble and reduce your taxes. This blog discusses the issues you must address as 2019 ends.
So, what must you consider? Here’s a snapshot of the issues to ponder:
- Obtain Taxpayer Identification Number (TIN) for all your employees
- Withhold the appropriate taxes from all payments made to your suppliers
- Obtain all tax credit certificates for taxes withheld from payments made to you.
- File all your Value Added Tax Returns
- File all employee-related returns
- File Self-Assessment Estimates
- Check if all tax returns were filed and payments made by the due dates
- Put together all returns and payment receipts if you’ll need a tax clearance certificate
- Pre-audit all your filings and receipts for accuracy. This will be very relevant if there is a tax audit.
Now, let’s delve into these:
1) Taxpayer Identification Number for Employees
- Did your company recruit employees/staff this year? If yes, you must complete and file the “Newly Engaged Employees Schedule (DT 107 B)” for each new employee.
- Did you file the “Disengaged Employees Schedule (DT 107 C)” for the employees who left? If no, complete and file this return.
- Do all your employees have a Tax Identification Number (TIN)? Ensure you rectify this if there are any without TIN. Your returns on employees are incomplete without their TIN.
2) Withholding Taxes
Taxes you withheld
- Did you withhold taxes from payments made to your suppliers throughout the year?
- Did you apply the correct rates?
- Are returns filed for all the months in which you withheld taxes?
- Have you paid the taxes to the Ghana Revenue Authority?
- Did you collect the withholding tax credit certificates for the payments you made?
- Have you given the suppliers their copy of the certificates?
Tax audits reveal withholding taxes as a problem area. It is a focal point for tax auditors, so ensure you are compliant.
Taxes withheld from you
Did you collect all withholding tax credit certificates for taxes withheld by your customers? If you no, please chase them. You’ll need them to offset against your income tax.
3) Value Added Tax
- Did you prepare and file all Standard Rate, VAT Flat Rate, NHIL, and GET Fund Levy returns?
- Have you filed NIL returns for the months in which there were no transactions?
Take note of the following:
- Up to July 31, 2018 you had to prepare and file only one VAT & NHIL Return if you run the 17.5% standard rate VAT/ NHIL system.
- The amended VAT law took effect from 1st August,2018. You must now file two returns every month–the 12.5% VAT return and the 5% NHIL & GETFUND Levy return.
- For businesses using the 3% Flat Rate VAT scheme, there is no change.
4)Employee Related Returns Due After the Year End
As we come to the end of 2019, please note the due dates of the following returns:
|RETURN||DUE DATE||SANCTIONS FOR NON-COMPLIANCE|
|Filing of Annual Employer Deduction Schedule||30th April 2020||Penalty of GHS 500 in case of default and GHS 10 for each day of default|
|Filing of Annual Personal Income tax returns for Directors, Managers, Expatriate employees, etc.||30th April 2020||Penalty of GHS 500 in case of default and GHS 10 for each day of default.|
If you are a medium or large taxpayer, you must prepare and file an estimate of taxes payable for 2020.
You must file the estimate three months after the end of your accounting year. For example:
- If your accounting year ends on 31st December, file the estimates by 31st March of the following year.
- If your accounting year ends on 30th June, file the estimates by 30th September of the same year.
To help you file a meaningful tax estimate, you must prepare a budget for 2020. Prepare the budget with care—do it first for the management of your business, and then for taxes. The budget must include the following:
- Profit and loss.
- Balance sheet.
- Cash flow (highly recommended).
- Fixed assets additions.
- Details of expense.
Using the above, prepare the quarterly tax estimate. Will there be enough cash to pay the quarterly taxes? Carefully assess your cash flow. If your projection shows that you will be short of cash, make plans to raise cash to meet the taxes.
Review your tax estimates throughout the year. If there are significant changes, revise the estimates you filed with GRA.
We recommend that you seek the help of a tax advisor to prepare the estimates as well as file revised estimates.
6)File your returns and pay all taxes by due dates
- A) Have you filed the following tax returns?
- Monthly withholding tax returns.
- Monthly VAT returns.
- PAYE returns.
- Company income tax return.
- Revised corporate tax estimate, if applicable.
- B) Were all taxes paid by the due date?
- Did you pay all taxes based on the various returns you prepared?
- Did you object to any tax assessment raised by GRA?
- Was the objection resolved, and the tax agreed paid?
- Did you pay the quarterly estimated taxes to GRA?
7) Tax clearance certificates
If you will need a tax clearance certificate for reasons such as bids and renewal, you must plan for it. You must also make sure you are up to date with tax filings and payments and you must have receipts for all payments made to the GRA.
To avoid delays, make sure you send your application ahead of the time you will need it. The process can be obscure, with tax officers raising issues that can cause processing delays.
Read our blog How to get a tax clearance certificate without any hassle.
8) Tax audits
In recent months, GRA has intensified tax audits, and it is covering a wide range of entities.
The tax auditors are uncompromising. The risk you will be selected for an audit is high and can be costly if you are not compliant. Make sure that you are always compliant. The steps outlined above will help to keep you compliant. Read our blog on how to survive a tax audit.
In summary, the tax system is tightening.
This year, the GRA has been aggressive about taxes. They have also expanded the use of tax audits and are quick to penalize delays in filing returns. We expect that the system will continue to get tighter.
The lax days are over, and you cannot be careless about taxes. A “do it yourself” approach to tax is risky, as many taxpayers have found to their cost! We strongly recommend that you seek the help of a tax adviser.
If you need help with taxes, please contact SCG Chartered Accountants.