The Ministry of Finance has submitted proposals to Parliament to reverse the one per cent withholding tax imposed on curiosity earned with the aid of members on any investments.
The tax imposition on pursuits is a component of provisions within the new sales Tax Act, 2015 (Act 896) which got here into drive on January 1, this 12 months.
Nonetheless, the implementation sent shock waves across the nation, principally among the many formal sector staff, as banks and economic institutions started sending SMS indicators to their shoppers in regards to the provision and how it would influence them.
Sections of the public also raised concerns about the revised withholding tax regime, which accelerated some of the rates and thresholds.
For instance, the cost for withholding tax on offerings for residents used to be expanded from 7.5 per cent to fifteen per cent. This intended that for any service rendered by way of any individual, 15 per cent of the fee could be deducted at source and identical paid to the government.
However a announcement issued by the Minister of Finance, Mr Seth Terkper, defined that the federal government had taken observe of the worries of taxpayers and the general public on some provisions of the Act, specifically these in relation to withholding tax on the supply of offerings and the cost of tax on pursuits paid to contributors.
“The essence of the withholding tax regime on services is to support tax compliance. It isn’t a final tax but a payment on account. As a result, the develop in withholding tax on services to fifteen per cent is to encourage taxpayers to file their returns, after which they will be entitled to a credit score for the amount withheld,” the assertion mentioned.
In outcomes, whenever members or corporations are deducted the 15 per cent, it’ll be held as credit score to their tax legal responsibility, except their final taxes are determined. If the sum of all the 15 per cent they had been paying from the establishing of the year is greater than their whole tax liabilities in a targeted tax yr, they are going to receive refunds.
The withholding tax threshold has additionally been revised from GHC500 to GHC2,000. This means for offerings valued at below GHC2,000, withholding tax might not be utilized. The purpose is to take account of inflation and exclude small price transactions from the withholding tax mechanism.
Apart from this measure, the Act 896 allows the Commissioner-normal of the Ghana sales Authority to supply withholding tax exemptions to compliant taxpayers.
“The Ministry of Finance has, thus, directed the Ghana sales Authority to put into effect these provisions. Proposals have also been submitted to Parliament to review the cost,” the assertion mentioned.
Targets and consolidation
The assertion extra defined that the brand new income Tax regulation used to be to revise and consolidate the legal guidelines with regards to sales tax after 15 years of imposing the internal earnings Act, 2000 (Act 592).
The brand new Act didn’t best revise the inner sales Act but overhauled the overall fiscal regime (revenue sources for the nation), together with the Minerals and Mining sales Tax, Petroleum Operations Tax, and the taxation of entities akin to public, mutual, and non-profit causes.
Act 896 additionally seeks to simplify the tax provisions to make it extra user-friendly, enhance effectivity and facilitate compliance.
It retained provisions considered best apply in income tax administration global. This integrated the withholding tax and tax payable by using instalment provisions. For instance, underneath the new regulation, all taxpayers at the moment are allowed to check and pay taxes founded on their own estimates.
“It further broadens the tax base and eliminates the slender and distorted tax base of the inner sales Act, 2000 (Act 592); rationalises, streamlines and restricts tax concessions; tackles erosion of the tax base and aligns home tax rules with current worldwide tax ideas.