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Tax and Company Law Compliance for Startups

After business registration, most companies are not aware of their duty to comply with tax and company law requirements and end up with problems of non-compliance.

I deal with:

  • Clients who want to register businesses but have little or no knowledge about compliance requirements.
  • Clients who have registered businesses and do not know the compliance requirements to fulfill after business registration.
  • Clients who have registered businesses, registered for taxes but do not know the next steps after tax registration.

I am concerned about this because many startups and growing business fail to comply with the laws and get fines and penalties that affect their cash flow. To avoid this, it is important you read on to know and understand your compliance obligations.

Get a Business Operating Permit

Go to the Local Government Authority of the area in which your business is situated to get a Business Operating Permit (BOP). You can also go to their rep. office at the Registrar-General’s Department to get your business permit. Businesses that operate without a BOP can have their offices sealed off by the Local Government Authority.

Register for Pensions

After you register your business with the Registrar, you must register your businesses under the first and second tier pension schemes. These schemes are mandatory. The Social Security and National Insurance Trust (SSNIT) manages the Tier 1 schemes while trustee companies such as PETRA, Enterprise Insurance, et cetera administer the Tier 2 schemes. There is also third tier (Tier 3) scheme which is voluntary.

Businesses that do not register with the pensions authorities will be liable to a fine not exceeding the unpaid contributions and penalty, or to imprisonment for a term not exceeding five years or both.

Register for Taxes

Businesses must register for direct and indirect taxes with the Ghana Revenue Authority (GRA). Direct taxes include company income tax, withholding tax, and PAYE. Indirect taxes include Value Added Tax (VAT), National Health Insurance, and GET-Fund levies.

Other indirect taxes include customs duties for importers, and communications service tax (CST) for those in the telecommunications industry. If your business makes an annual income of GHC 200,000 or more, or GHC 50,000 after the first quarter of the year, you must register for VAT.

The laws regulating direct and indirect taxes have sanctions for failing to register for the respective tax types. With failure to register for VAT, you will be liable to a penalty of up to two times the amount of unpaid VAT on the sales. GRA will calculate unpaid VAT and penalties from when you should have registered till the time you apply for registration.

To register, go to nearest tax office in your vicinity.

File Tax and Pension Returns

After you register, the Ghana Revenue Authority (GRA) will activate the applicable tax types in their system. The filing cycles are monthly, quarterly, and annually depending on the type of tax. You must file you taxes by the due dates. The filing due dates are:

  • SSNIT and Tier 2 filings – by the 14thof each month.
  • Withholding tax and PAYE returns – by the 15thof the following month.
  • VAT, NHIL, GETFUND and CST returns – on or before the last working day of each month.
  • Corporate income tax returns filing is due four months after your financial year-end.
  • Personal income tax return and employers’ annual return are due four months after the calendar year.
  • For those who must file annual estimates, they are due within three months into your new financial year.

The penalty for failing to file a tax return is GHC 500.00 plus GHC 10.00 for each day the failure continues.

File your Annual Returns with the Registrar General’s Department

The company and business laws require you to file annual returns with the Registrar General’s Department by year end. For companies, an audited financial statement must accompany your annual return at the time of filing. For information about annual returns filing, click here.

Startups and small business risk piling up taxes and penalties because they are ignorant of the law. Ignorance is not an excuse. By following this guide, you can avoid trouble with the tax and pensions authorities.

Laws regulating businesses are quite complex and keep changing, we recommend youconsult experts and ask questions before proceeding to register any business.

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