Key Features:

Scope and Applicability:
Act 930 applies to all banks and specialised deposit-taking institutions operating in Ghana. Its provisions cover a wide range of financial activities to ensure the stability and integrity of the financial system.

Licensing and Regulation:
The Act outlines the criteria for licensing and regulates the establishment, operations, and conduct of banks and SDIs. The Bank of Ghana, the country’s central bank, is responsible for overseeing and enforcing compliance with the provisions of Act 930.

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The tremendous effort of the government to increase the tax net and promote voluntarily tax compliance, there has been a new tax amendment passed by parliament and assented to by the president which are as follows;

• Revenue Administration (Amendment) Act, 2022 (Act 1086),
• The Electronic Transfer Levy (Amendment) Act 2022 (Act 1089), and
• The Value Added Tax, (Amendment) No. 2 Act, 2022 (Act 1087). In this alert, we highlight tax provisions that have been amended and draw the attention of the general public on its compliance for the year 2023. January 2023 #01.2023 Regulatory Alert

1. REVENUE ADMINISTRATION

The Revenue Administration (Amendment) Act, 2022 (Act1086), has been passed by Parliament and assented to by the president of the Republic of Ghana. The reason of this new amendment is to provide for the Commissioner-General to establish a monitoring mechanism to determine or verify the actual revenue collected by a taxpayer, to introduce the requirement for a tax clearance certificate, to provide for returns in respect of the realization of an asset or liability and for related matters

Highlight of the key areas of this amendment are below:

Access to physical network node

The new Revenue Administration (Amendment) Act, 2022 gives the Commissioner-General the authority to establish a monitoring mechanism for the purpose of verifying the actual revenue of a taxpayer. This Act requires a person to give the Commissioner-General physical access to the physical network node or infrastructure or system of that person at an equivalent point in the network or infrastructure or system where the system of the taxpayer is connected. Additional penalty has been introduced for refusal by a taxpayer to provide the CommissionerGeneral or the authorised tax officer access to the physical network node. Thus a penalty of 5% of the annual gross revenue of the person in addition to the penalty prescribed in section 78 of the Act.

1. ELECTRONIC TRANSFER LEVY (E-Levy)

The Electronic Transfer Levy Act, 2022 (Act 1075) has been amended by the government of Ghana. The object of this amendment is to reduce the levy on electronic transfer to one percent, to provide for the filing of returns and provide for the time for payment, and emphasis on other related matters.

1. Reduce the levy on electronic transfer to one percent. The Electronic Transfer Levy Act,2022 (Act 1075) imposes an electronic transfer levy of 1% on electronic transfers, as against the 1.5% formally imposed. Electronic money transfer and digital bank transfer daily threshold of GHS 100 and GHS 20,000 respectively haven’t seen any changes. The daily threshold of the principal enactment remains in force.
2. To provide for the filing of returns and provide for the time for payment. A charging entity shall file a return in respect of the levy with the Commissioner-General in matter and at the time and place determined by the Commissioner-General. A charging entity shall pay to the Commissioner-General the Levy that has been charged on electronic transfer within twenty-four hours after charging the amount.
3. VALUE ADDED TAX (VAT)

The Value Added Tax Act,2013 (Act 870) has been amended by the government of Ghana. The purpose of this amendment is to adjust the Value Added Tax (VAT) rate, adjust the VAT threshold, review the transitional provisions for the implementation of the electronic Value Added Tax(e-VAT) system, revise the administrative penalties for non-compliance in relation to the electronic Value added Tax and remove the VAT on betting, gambling and other game of chance.

Key highlights in this amendment are;

12. Change in VAT standard rate from 12.5% to 15%. The VAT rate which was previously 12.5% is now going to be 15%. This 15% is charged on the value of the taxable supply of goods and services and the value of import. The taxable amount is an inclusion of the 2.5% National Health Insurance Levy, 2.5% of the Ghana Education Trust Fund Levy and the 1% Covid-19 Health Recovery Levy. The increase in the VAT rate from 12.5% to 15% will increase the effective tax and levy rate from 19.25% to 21.9%. Retailers of goods who make taxable supplies above GHS 200,000 but below GHS 500,000 shall pay the Value Added Tax at the flat rate of 3% on the value of the taxable supply.
13. Revision of VAT Taxable supplies. The acceptance of a wager or stake in any form of betting or gaming, including lotteries and gaming machines has been removed from the list of activities that constituent taxable supplies for VAT application. The new amendment has also removed betting as supply of services by a business operating a game of chance. There is no more VAT on betting services provided by persons to its customers. There has also been an inclusion of imported textbooks, imported newspapers, architectural plans and similar plans, drawings, scientific and technical works, periodicals, magazines, trade catalogues, price lists, greeting cards, almanacs, calendars, diaries and stationery and other printed matter to the list of taxable activity for VAT application. These supplies do not fall in the VAT exemption bracket as it previously did.

• Failure to comply with the new Certified Invoicing System (E-VAT). Value Added Tax (amendment) Act 2022 (Act 1082) requires a taxable person to issue a tax invoice through a certified invoicing system and ensure that the Certified Invoicing System is integrated into the invoicing system of the C-G. The purpose of the new amendment (Act 1087) is to strengthen the compliance with Act 1082 by providing penalties for non-compliance with the Certified Invoicing System. The Act 1087 has prescribed penalty for VAT registered persons that don’t adhere to the new provisions of Act 1082. Persons who issue a falsified tax invoice or sales receipt or manipulate the proper functioning of the Certified Invoicing System or fail to integrate the Certified Invoicing System into the invoicing system of the Commissioner-General will, in addition to penalty prescribed for failure to issue a tax invoice under the VAT Act, be liable to a penalty of the higher of GHS50,000 or three times the amount of tax involved. The new amendment, Act 1087, has also repealed the provision for sections 13 and 14 of Act 1082 which allowed persons who fail to comply with the Certified Invoicing System to apply for extension. Also, Betting, Gaming (including other games of chance) have been removed from the scope of VAT application. Thus, exempted from VAT. Finally, VAT on imported Text books, newspapers, architectural plans and similar plans, drawings, scientific and technical works, periodicals, magazines, trade catalogue, price lists, greeting cards, almanacs, calendars, diaries and stationer and other printed materials have been reintroduced. VAT is now applicable on importation of books and printed materials.

We summarize the key takeaway on these new provisions below;

Revenue Administration

1. This new amendment would protect the Commissioner-General or tax authority against grudges by persons who may prevent tax official from access to information.
2. This unrestricted access will yield information needed for the Commissioner-General’s tax assessment.

• Government expects to increase Tax-to-GDP from around 13% to 20% in the year 2023. These amendments have set the tone for a strict and aggressive tax compliance strategies to be adopted by Government to meet this target and generate maximum tax revenue.

      E-Levy

1. The reduction in the rate from 1.5% to 1% will benefit persons as new income save and invest in other areas.
2. Filing of returns by charging entities will help them to pay the correct amount of tax to the Ghana Revenue Authority and authenticate evidence of tax collected and paid back.

VAT

1. The increase in the VAT rate may result in a general escalation in of goods and services.

1. The increase in price on an invoice is 2%. Where Government is unable to educate taxpayers of this expected effect, traders may rationalize the concept of increase in VAT rate and escalate the prices disproportionally as experienced in the past.

• Integrating the Certified Invoicing System into the Invoicing System of CommissionerGeneral may promote information sharing between taxpayer and the Commissioner

1. The Commissioner-General as indicated in the amendment should as a matter of urgency issue directives and guidelines to assist taxpayer comply with the requirement under the E-VAT system.
2. The provisions of penalties regarding the E-VAT system is a strong insulation of the system to ensure maximum compliance by taxpayers.

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 Q1. What is the Growth and Sustainability Levy?

 The Growth and Sustainability Levy (the “Levy”) is an imposition of a the profit and gross production of Companies. The levy is imposed based on the category of industry that a company operates in. For some industries, the levy is imposed on profit before tax whilst for others, it is imposed on the gross production during the year of assessment.

 Q2. Are all persons liable to pay the Levy?

 Yes, the Levy applies to the specified companies and institutions are required to pay the Levy. However, specific stabilisation clauses in an agreement with Government and exemptions granted to a company may exclude the company from paying the levy.

 Q3. Are there any specific regulations to guide a tax payer?

There is regulations currently. However, the Minister (of Finance) is empowered to, by a Legislative Instrument, make Regulations to amend the schedule to revise:

1. The categories of companies and institutions liable to pay the Levy;
2. The companies and institutions liable to pay the Levy; and
3. The rate of the Levy.

Q4. How does the Levy affect my profits or production?

The Levy is payable as a percentage of profits before tax or production for 2023, 2024, and 2025 years of assessment. Companies in Category A will be required to pay a Levy of 5% of their profits before tax. Category B companies will pay a Levy of 1% of their gross production. All other entities that do not fall within Category A and B will be required to pay a Levy of 2.5% of their profit before tax.

Q5. What Category of companies are affected by this Levy and at what rate?

Companies subject to this Levy are categorized as follows;

Basically, every company is affected by the Levy. The only difference is that the applicable rates vary amongst the various categories of industries.

Q6. Is it possible for a person to deduct the Levy from his taxable income?

No, the Levy paid or payable is not an allowable deduction when a person is ascertaining chargeable income for a year assessment under the Income Tax Act, 2015(Act 896) as amended.

Q7. When is the due date to file an assessment and pay the Levy?

• A person who is subject to the Levy for a year of assessment shall file with the Commissioner-General, an estimate of the Levy payable for the year of assessment by the date of payment of the first tax installment.
• Subject to any directives of the Commissioner-General to the contrary;
• An estimate of the Levy shall be in the prescribed form and provide any other information that the Commissioner-General may require.
• The Levy assessed for a year of assessment is payable quarterly and due on the 31st of March, 30th of June, 30th of September, and 31st of December of the year.

Q8. What is the difference between the Growth and Sustainability Levy (GSL) and the repealed National Fiscal Stability Levy (NFSL)?

The GSL is different from the NFSL by the widening of persons liable to pay the GSL. The repealed NFSL applied to only companies and institutions now specified in Category A of the GSL.

Q9. Is Levy returns required to be filed?

 Yes, the specified companies and institutions shall file a return in respect of the Levy with the Commissioner-General in the manner and at the time and place as determined by the Commissioner-General.

Q10. Can one deduct the levy paid as an expense for the purposes of calculating Corporate Income Tax?

 No. The levy is not an allowable deduction. The amount paid should be added back to the profit before tax prior to applying the Corporate Income Tax rate.

Q11. Are there any sanctions for non-compliance?

 Yes, the provisions of the Revenue Administration Act, 2016 (Act 915) relating to collection, enforcement, refund, penalties, and offenses shall apply to the collection of the Levy as if the Levy is collected under Act 915.

Q12. Which authority administers the Growth and Sustainability Levy?

 The Levy shall be collected by the Ghana Revenue Authority, who shall then repay all amounts collected into the Consolidated Fund.

Q13. Is the Levy applicable to Companies who have Stability Clauses in their contracts with the Government of Ghana?

The general purpose of stability clauses in a contract is to exempt a company from the effect of changes in tax laws that could affect the parties involved. Stability clauses with respect to tax, exclude companies who are parties in an agreement with the Government of Ghana from the Levy. The Levy will therefore not be applicable to such companies or entities. It is however advisable to consider the wording of a stability clause in the contract with the Government of Ghana to be able to determine whether the Levy is applicable or not.

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The Parliament of Ghana has passed the Income Tax (Amendment) Act 2023, Act 1094. The object of this amendment is to revise the rates of income tax for individuals and introduce an additional income tax bracket; introduce a withholding tax rate on the realization of assets and liabilities; unify the loss carried forward provisions regarding winnings from lottery; revise the treatment of foreign exchange losses; revise the taxable value for motor vehicle benefit; and increase the concessional income tax rates.

The Income Tax (Amendment) 2023, Act 1094 was assented to by the President and gazetted on 3rd April, 2023. The Commissioner-General issued a notice dated 27 April 2023 to the effect that the effective date of implementation of the amendment is 1 May 2023

In this alert, we highlight the key areas of the law below:

Minimum chargeable income

• The inclusion of the minimum tax rate of 5% of turnover for persons declaring losses for the previous 5 years.
• A person may be required to compute and pay tax on a minimum chargeable income of 5% of turnover where the person has been declaring losses for the previous 5 years of assessment total income.
• The minimum chargeable income, however, does not apply to a person within the first five years of the commencement of operations or a person engaged in farming.

Addition of winnings from lottery to income from investment

• The law now requires a person who is ascertaining the profits and gains of that person or of another person from an investment for a year of assessment to include in the calculations, winnings from lottery.
• A 10% withholding tax on gross game winnings must be withheld by lottery operators and paid to the Commissioner-General. The withholding tax is per each game winning and at the end of each game.

Unification of deduction of unrelieved loss

• The current amendment allows a person who is ascertaining the income of that person or of another person from a business for a year of assessment, to deduct an unrelieved loss of the person for any of the previous five years of assessment from the business. All unrelieved loss may be deducted for a period of 5 years.
• The five years deduction of unrelieved losses is applicable to all companies irrespective of the industry or section of operation.

Tax treatment of foreign exchange gains or loss

• When a person is ascertaining the income of a person for a basis period from any business, there shall be a deduction of any foreign currency loss other than a loss that is capital in nature incurred in the production of income during the period in respect of debt claim, debt obligation or foreign currency holding of that person.
• Any foreign exchange loss arising out of transactions that are capital in nature is now not allowed as a deduction, but rather capitalized and capital allowance may be granted accordingly.
• There is also a restriction on the deduction of foreign exchange loss associated with revenue transactions to only realized foreign exchange loss.
• A foreign exchange loss arising from a transaction between two resident persons shall not be allowed as a deduction.

Submission of return for gains on the realization of assets and liabilities

• Submission of tax returns in relation to realization of assets or liabilities is now required.
• A person who realizes an asset or a liability shall, within 30 days after the realization of the asset or liability, submit to the Commissioner-General a return in the form determined by the Commissioner-General.

Taxation of retirement fund

• A withdrawal from a provident fund or personal pension scheme before the statutory retirement age by

1. An employee due to loss of permanent employment or
2. A self-employed person from the personal savings account under the National Pensions Act, 2008 (Act 766)

due to the Novel Coronavirus pandemic or the current economic hardship is exempt from income tax for 2023.

Taxation of Lottery Operations.

• The income of a person from lottery operations is subjected to 20% corporate income tax
• The chargeable income of a person from a lottery operation has been defined to mean the gross gaming revenue.
• The gross gaming revenue of a person engaged in a lottery operation has been defined as the total amount staked or wagered less prizes or winnings paid or payable.
• Gross gaming revenue is the total amount staked or wagered less prizes or winnings paid or payable.
• When a person has chargeable income other than income from a lottery operation, the person shall be charged separately.

Withholding in relation to the realization of asset or liability

• Section 115 of the Income Tax Act 896, Act 2015 has been amended by the substitution for subsection 1.
• A resident person shall withhold tax at the specified rate where that person pays;

1. Any dividend
2. Winnings from lottery
3. Interest
4. Natural resource payment
5. Rent or royalty to another person.
6. Consideration to another person in respect of the realization of an asset or a liability and the payment has a source in the country.

• The new amendment has added withholding of tax for any consideration made to another person in relation to the realization of an asset or a liability.
• Also, to address assets or liabilities not covered by the aforementioned section, the amendment has inserted section 116A, which mandates the withholding of taxes from the consideration upon the realization of any other assets or liabilities.
• Now, withholding tax is applicable on realization (sale) of assets or liabilities. The rate applied on the consideration received is;

1. 3% in case of a resident person; and
2. 10% in case of a non-resident person

Free Zone Companies

• The chargeable income of free zone companies in the supply of goods and services to the local market after the end of the concessionary period will be taxed at the rate of 25%. Companies engaged in hotel business are excluded from this.

Rates of income tax for individuals.

• The highest tax rate for individuals has been increased from 30% to 35%.
• Again, the first tax band of an individual has been increased from GHS4,380.00 to GHS4,824.00.
• The chargeable annual income of a resident individual for a year of assessment is now taxed at the following rates;

From the annual tax rates, the monthly instalment rates are set out below:

• The chargeable income of a non-resident individual for a year of assessment is taxed at the rate of 25%
• Where an individual receives gains from realization of asset (investment), the individual may elect that the gain from the investment is taxed at the rate of 25%.
• Where an individual receives a gift from employment or business, the individual may elect that the gift is taxed at the rate of 25%

Rate of tax on persons entitled to concessions in the sixth schedule.

• The income of a person entitled to a concession in the sixth schedule is subject to tax at the rate of 5% of chargeable income.
• Persons engaged in agriculture, rural banking, providing residential premises, waste processing, unit trust scheme and mutual fund, and venture capital financing are on the list of the sixth schedule.

Motor vehicle benefits.

• The tax threshold for use of a motor vehicle provided by an employer to an employee has now been capped at the following rate.

1. Driver and vehicle with fuel benefit is 12.5% of the person’s total cash emoluments, with a maximum limit of GHS 1,500.00 per month. This represents an increase from the previous tax threshold of GHS 600.00.
2. Vehicle with fuel benefit is 10% of the person’s total cash emoluments, with a maximum limit of GHS 1,250.00. This represents an increase from the previous tax threshold of GHS 500.00.
3. For vehicle only, the benefit is 5% of the person’s total cash emoluments, with a maximum tax limit of GHS 625.00 This represents an increase from the previous tax threshold of GHS 250.00.
4. Fuel only, benefit is 5% of the individual’s total cash emoluments, with a maximum limit of GHS 625.00. This represents an increase from the previous tax threshold of GHS 250.00.

Takeaway

• The amendment was signed by the President and gazetted on 3 April 2023. This implies that the effective date of application of the amendment ought to be 3 April, 2023. However, the Commissioner-General issued a directive for the implementation of the Amendment to be effective on 1 May 2023. In our opinion, taxpayers who applied the new payroll rates in April 2023 will not suffer any penalty despite the directive given by the Commissioner-General for the law to start on 1 May 2023
• The introduction of the minimum chargeable income will ensure that companies who have been making losses for the past five years pay tax at the rate of 5% on their revenue. The minimum chargeable income is not applicable to companies in the farming business, as well as, all companies in their first five (5) years of operation.
• With regard to the minimum chargeable income, there is uncertainty about when to start counting the five years of losses. A valid question will be whether it starts from now (when the amendment came into force) or it should include years before the enactment of this amendment. It would be helpful if the Commissioner-General would issue a guideline through a practice note to bring clarity to this.
• The minimum chargeable income principle is an anti-avoidance measure and will serve as a disincentive to reporting losses. It will also create a situation where companies would create artificial profit to avoid higher tax liabilities as revenue normally tends to be a higher tax base. This may create economic distortions for struggling companies.
• Income from lottery operations and game of betting is now subject to withholding tax of 10%. It is also subject to Corporate Income Tax at a rate of 20%.
• The corporate income tax on lottery operations will therefore be applied as 20% of total amount staked or wagered minus winnings paid or payable.
• Unrealized exchange losses are now not allowable as a deductible tax expense. It is advisable to keep separate books/ledgers for a clear distinction between realized and unrealized exchange differences. This is because, where they are lumped up in one account, GRA may end up disallowing all with the least uncertainty as to what relates to realized and unrealized exchange loss.
• Now the expansion of persons in controlled relation will expand transfer pricing consideration for companies. Transactions that would not have triggered transfer pricing considerations may now be considered with this expanded definition.
• The introduction of 35% on employment income above GHS50,000.00 may in the long run lead to an increase in cost to the employers. This is because the affected employees who would be in management positions may of business of business as employee associations may require the employer to absorb the increase in taxes.
• With these amendments, the tax net is expected to increase. Tax revenue is also expected to increase. That said, measures to improve the efficient collection of tax revenue should be critically considered by GRA to achieve this expected increase in tax revenue, as the changes in tax rates may necessarily not lead to increase in tax revenue.

On 7 April 2022, the Court of Appeal dismissed an appeal brought against a judgment of the High Court, Commercial Division by Fan Milk Ghana Limited vs. Ghana Revenue Authority in respect of a tax dispute. This case is an appeal against the decision of the High Court, Commercial Division which affirmed the tax decision of the Ghana Revenue Authority (GRA) imposing a withholding tax liability of GHS 7,655,676.22 on Fan Milk Ghana Limited (Fan Milk).

Factual Background

The accounting books of Fan Milk were audited for the period of 2014, 2015 and 2016 for tax purposes by the GRA, the statutory body for tax administration in Ghana. The GRA, based on the tax audit report imposed a tax liability of GHC 7,655,676.22 on Fan Milk for failure to withhold taxes on payments it made to independent purchasers/contractors from 2014 to 2016. According to the GRA these payments where indeed commissions and not discounts (as claim, thus Fan Milk was enjoined, as provided by the Income Tax Act, 2015 (Act 896), to withhold tax on the various sums paid to the independent purchasers/contractors and pay same to the GRA. Fan Milk Ghana Limited, dissatisfied with the decision of GRA objected to it and in accordance with law paid 30% of the imposed tax liability. However, the objection was dismissed by the GRA. Fan Milk dissatisfied with the decision of the GRA, appealed to the High Court, Accra for a reversal of the decision but was not successful. The High Court, Accra affirmed the decision of the Ghana Revenue Authority. Still dissatisfied, Fan Milk further appealed against the decision of the High Court, Accra.

Issues

Despite the many grounds stated by Fan Milk in its appeal, the Court of Appeal resolved that the fundamental issue was whether the GRA was justified in its tax decision against Fan Milk, resulting from Fan Milk’s failure to withhold tax on payments it made to its independent purchasers/distributors from 2014 to 2016. The determination of this issue was dependent on how the Court would classify the payments Fan Milk made its independent purchasers/contractor, either as commissions or discounts.

The Case of Fan Milk

Fan Milk argues that the business model between Fan Milk and the Independent purchasers or distributors was not one of principal and agent relationship but one where discounts were apportioned to the independent purchasers or distributors at the end of the month based on purchases made by them. Fan Milk further argued that discounts and not service fees were paid to the purchasers or distributors and therefore were not subject to withholding tax. Thus, the decision by the GRA to impose a withholding tax liability on Fan Milk for its failure to withhold tax at the point of making the said payments to it independent purchasers/contractors was wrong in law.

The Case of GRA

GRA characterized the relationship between Fan Milk and its distributors as that of a principal and agent relationship. The GRA was of the view that the business model operated between Fan Milk and its agents did not provide for discounts but rather commissions. Fan Milk was therefore under a duty to impose withholding tax on those commissions. GRA audited the accounting books of Fan Milk and imposed a tax liability for their failure to withhold tax on commissions granted to its agents

DECISION OF THE COURT

The Court of Appeal affirmed the decision of the High Court and held that:

1. The model operated by Fan Milk cannot be regarded as cash discounts. This is because a revision of the agreement shows that what an agent receives as discount is not based on an incentive to pay for the products promptly to Fan Milk as per the meaning of cash discount but rather it is an incentive for the distributor for being able to sell off volumes of products of Fan Milk. It is for this reasonthat the cash paid to the distributor is only made at the end of the month to determine the volume of sales made by a distributor.
2. There was no evidence that clearly indicated that Fan Milk had made the necessary entries in its books regarding the cash discounts per standard accounting practice. The Court of Appeal held that the payments by Fan Milk to its distributors were commissions but not discounts.
3. Per the agreement, Fan Milk dealt with the other party as agents and not as ordinary independent purchasers of the products of Fan Milk. An examination of the agreement suggested that, Fan Milk intended for these payments to motivate its agents to achieve their set targets.
4. Fan Milk did not lead sufficient evidence to establish that the meaning of the word ‘agent” as used in the agreement was not the legal meaning. Although, these agents deal with the outside world in their own names, they have particular obligations to Fan Milk.
5. The tax laws in Ghana permit a person paying commissions to sales agents to withhold tax on those payments pursuantto Section 116(1)(a)(v) of the Income Tax Act, 2015 (Act 896), as amended.
6. Fan Milk was by law required to withhold tax on the payments to its distributors since those payments were commissions. Therefore, Fan Milk did not discharge its responsibility under the Revenue Administration Act, 2016 (ACT 915).
7. The Respondent was justified in its tax decision to impose a withholding tax liability on Fan Milk for failing to pay withholding tax on payments which were commissions but not discounts to its distributor for the years 2014, 2015 and 2016.

IMPLICATION AND KEY TAKEAWAYS OF THE COURT OF APPEAL’S DECISION

1. The tax laws of Ghana expressly provide that a resident person shall withhold tax where that person pays service fee with a source in the country to a resident individual as a commission to a sale agent.
2. Owing to the fact that the payments made to the distributors of Fan Milk had been characterized as commissions, the assessed tax of GHS7,655,676.22 represented the withholding taxes which Fan Milk ought to have withheld from the commissions it paid to its distributors but failed to do so because it classified them as discounts.
3. The import of the decision of the Court of Appeal is to the effect that where an entity wants to give its customerscash discount on their services, they must make the relevant entries in their accounting books. This will make it obvious to anyone and for auditing purposes that the entity is providing cash discounts and not merely an incentive for their customers to reach certain set targets. It is important to note that cash discounts are recorded at the debit side of the cash book.
4. Also, the term “agents” when used in any agreement take its legal meaning unless there is evidence to prove otherwise.

CONCLUSION

The Court of Appeal affirmed the decision of the High Court that the respondents were not wrong to impose a withholding tax liability on the Appellant for its failure to withhold tax on commissions it paid to its distributors.

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The GRA opposed the application on grounds that:
1. the payment to AAVL was validly withheld because it was subject to Capital Gains Tax.
2. AAVL was unable to show that the GRA was under an existing and unquestioned obligatory duty under statute or otherwise to refund the amount in dispute.
3. the existence of a refund account under Section 69 of the Act 915 did not mean that AAVL had sufficiently demonstrated to either GRA or the High Court that it was deserving of a refund of the tax paid.

The GRA also maintained in its arguments to the court that per section 41 of the Act 915, the decision to withhold the sum in dispute as capital gains tax is a tax decision and therefore if AAVL had reason to challenge the decision, it ought to have done so through the dispute resolution mechanism provided under the Act 915 (as amended) and not by an application for an order of mandamus hence the High Court lacked jurisdiction to entertain the matter.

TAX DECISION
A “tax decision” is defined Revenue Administration Act, 2016 (Act 915) section 41(1) as a decision by the Commissioner – General under a tax law, including an assessment or omission, but does not include
a. a practice note, class ruling, or private ruling,
b. a decision or omission to issue, refuse or revoke a practice note, class ruling or private ruling;
c. a decision or omission that affects a person only as a tax officer or employee or agent of the

Authority;
d. a decision or omission of the Commissioner-General including an objection decision under section 43 of Act 915; or
e. a decision to compound an office under a tax law.

DECISION OF THE HIGH COURT
The High court dismissed the application for mandamus based on the following reasons:

a. That AAVL was unable to show that GRA had an existing and unquestioned obligatory duty under statute or otherwise to refund the amount in dispute which it has failed to do.
b. That the procedure adopted by AAVL in invoking the jurisdiction of the High Court was improper
It is based on this ruling of the court that AAVL brought an application to the Supreme Court for an
order for certiorari, essentially to quash the decision of the High Court.

APPLICATION TO THE SUPREME COURT
AAVL in an application to the Supreme Court sought to invoke the supervisory powers of the Supreme Court to quash the decision of the High Court. The issue complained of by AAVL was that the High Court Judge on the face of the record erred in law when she held that GRA did not have an existing and obligatory duty under statute or otherwise to refund amounts wrongfully paid to it as tax

DECISION OF THE SUPREME COURT
The Supreme Court unanimously affirmed the decision of the High Court and dismissed the application for certiorari. It held that the AAVL’s case hinged on Section 69 (1) of Act 915 (as amended), which section created an account into which a maximum of six percent of total revenue was paid and administered by the Commissioner- General for refunds under the Act and under any other tax law. AAVL simply pointed to this provision to support its claim that GRA was under an obligation to refund the monies withheld.

The Court disagreed and stated that simply referring to this section was not sufficient ground for the applicant to succeed, on an order of mandamus. Moreover, AAVL having earned an income or gained from the compensation paid to it was required to pay capital gains tax under Section 5 of the Income Tax Act, 2015 (Act 896). Hence, GRA was legally justified in withholding the tax on the balance of the compensation paid. The Court also agreed with the interested party that under Section 42 and 44 of Act 915 (as amended), the decision to withhold the amount deducted was a tax decision and AAVL being dissatisfied with the decision should have lodged an objection with the Commissioner-General in line with the dispute resolution provisions of the Act. However, AAVL did not follow those provisions and instead mounted an action for an order of mandamus for GRA to refund the deducted amount Therefore, since the High Court’s jurisdiction under Act 915 had not been properly invoked, it was right in dismissing the application. As a result, the application to invoke the Supreme Court’s supervisory jurisdiction to quash the decision of the High Court had no merit and was dismissed.

CONCLUSION
The Supreme Court maintained, as it has done in so many other cases, that where a statute has provided a right with remedies and also prescribed the procedure for redress, it is that prescribed procedure which must be followed. Thus, in this case, AAVL used the wrong approach in seeking for redress. Since the action complained of by AAVL against GRA was primarily a tax decision, the procedure prescribed in Act 915 (as amended) ought to have been followed before AAVL invoked the jurisdiction of the High Court.

Take aways

1. Any decision taking by the Ghana Revenue Authority to exact tax on monies gained by an entity or individual is a tax decision.
2. An objection to a tax decision should be made to the Commissioner-General of the Ghana Revenue Authority in accordance with the provisions provided for in the Revenue Administration Act 2016 (Act 915) (as amended)
3. The Courts do not have jurisdiction to entertain, at first instance, disputes arising out of a tax decision taken by the Ghana Revenue Authority.
4. In accordance with the provisions of the Income Tax Act, 2015 (Act 896) a person is required to pay tax on monies received as compensation.

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In this alert, we highlight the key Tax initiatives of the 2023 budget review below:

On 24th November 2022, Mr. Ken Ofori-Atta, the Minister in Charge of Finance and Economic Planning presented to the Parliament of Ghana a draft budget for the fiscal year of 2023. The Budget was themed “Restoring and Sustaining Macroeconomic Stability and Resilience through Inclusive Growth and Value Addition”.

Introduce an additional income tax bracket of 35% and a review of the upper limit of vehicle benefits
Key among the fiscal measures is Government’s intention to introduce an additional tax bracket of 35% in the taxation of employment income. Government also has proposed a review of the upper limit of vehicle benefits in the Income Tax Act.

Increase the concessionary rate from 1% to 5%
The Government has proposed to increase the concessionary tax rate from 1% to 5% in those sector specific industries.

Excise tax regime to be reviewed
The excise tax rate would be reviewed for spirits above that of beers. There will also be additions to the excise tax regime such as electronic smoking devices and liquids that are not currently taxed.

VAT rate to be increased from 12.5% to 15%
The 2023 Budget also seeks to increase the Value Added Tax (VAT) rate from 12.5% to 15%.

Taxation of realisation of asset and liabilities
Government has proposed a return and withholding tax rate for gains on realization of assets and liabilities. There is also a proposal for review of the optional rate for individuals for realization of assets.

Carry over of losses
Government has proposed a unification of the loss carried forward provisions in the Income Tax Act. The current provision is three (3) years for general industry and five (5) years for special industries specified under the law. The
unification would ensure a single period for carry over of losses irrespective of the industry.

Electronic transfer levy to be reduced from 1.5% to 1% and the abolishment of the minimum threshold
The Government intends to reduce the Electronic Transfer Levy from 1.5% to 1% and also abolish the minimum threshold of GHS100.

Introduction of self-clearing of goods by importers and phasingout of Benchmark discount policy
“The benchmark discount policy will be fully phased out in 2023 while the Customs Regulations, 2016 (LI 2248) will be amended to allow for self-clearing of goods by importers at the ports of entry without recourse to a customs
house Agent”.

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Penalty and Interest Waiver

• The taxpayers will not suffer penalty and interest on outstanding tax liabilities in respect of the previous periods up to 31 December 2020 where the taxpayer meets the conditions for the waiver of interest and penalties.
• The taxpayer will also not suffer interest and penalties on outstanding tax returns in respect of the previous years up to 31 December 2020 upon meeting the conditions for the waiver for the relevant period.

Conditions for Waiver of Penalty and Interest

The waiver would be applicable where:

• The taxpayer, on or before 31 December 2022 (instead of 30 September 2021), submits the returns or amends the returns containing full disclosure of tax liabilities up to 31 December 2020 and;
• The taxpayer pays or makes arrangement to pay assessed and outstanding tax liabilities on or before 31 December 2022.

Application for the Waiver

A taxpayer who qualifies for the waiver shall from 1 July 2021 to 31 December 2022 (instead of 1 April 2021 to 30 June 2022) apply:

• To the Commissioner-General (CG) in written form and manner as determined by the CG and;
• Submit to the Commissioner-General, outstanding returns relating to the relevant years (previous years up to 31 December 2020).

Remission of tax
The Act does not derogate from the powers of the Commissioner General to remit tax under an enactment administered by the Commissioner General.

Reporting
The Commissioner-General is obliged to submit to the Minister:

• An end of year report indicating waivers granted as at 31 December 2022 and;
• A final report on total waivers granted as at 31 December 2022 (instead of 30 June 2022.

Takeaway

• The years under consideration for the waiver has not changed from the original Act and it is still up to the period 31 December 2020. This does not extend to interest and liabilities relating to periods from 1 January 2021.
• Taxpayers who could not meet their original arrangement for payment of outstanding tax liabilities should take advantage of the extension and notify the CG of a revised schedule with reference to the new deadline of 31 December 2022.
• Taxpayers must take advantage of the payment date extension from 31 December 2021 to 31 December 2022, in order to make appropriate plans to raise funds to make payments and utilize the waiver.
• Taxpayers must also take advantage of the existing relief of the waiver to voluntarily disclose and correct any errors noted in tax obligations to avoid future penalties and interest after 31 December 2020.

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The principal enactment has been amended to provide for the following: the upfront payment of VAT by unregistered importers, the taxation of electronic commerce, the electronic issuance of tax invoices, and the zero-rating of the supply of locally assembled vehicles. In this alert, we highlight the key areas of the amendment below:

Up-front payment by unregistered importer

• Importers of taxable goods who are not registered for tax are liable to upfront payment of 12.5% of the custom value of the taxable goods as penalty.
• The law has however provided that the upfront payment may be recovered after the person has registered for the tax and filed a
  return.

Unregistered Non-Resident Persons Providing Telecommunication and Ecommerce Service

• The law now requires an unregistered non-resident person who provides telecommunication services or electronic
  commerce to persons for use or enjoyment in the country, other than through a Value Added Tax registered agent to register, if that person makes a taxable supply.
• There is an imposition of restriction of access in the country by a person who fails to register for VAT as provided above until the person fulfills the obligation under the Act and Regulation.
• Digital Services which was hitherto not included in the Act, has now been included. Digital Service has been defined to include social networking, online gaming, cloud services, video or audio streaming, digital marketplace operations and online advertisement services.

Deductible input tax

• The initial provision which allowed for the deduction of output tax on amounts equal to the tax fraction of an amount paid during the tax period by the taxable person as a prize or winnings to the recipient of services under a betting agreement or participation in a game of chance has been repealed.
• A non-resident person who provides telecommunication services or electronic commerce to persons for use or enjoyment in the country, other than through a Value Added Tax registered agent are required to register
  for VAT shall not qualify for deductible input tax for the supply of a digital service.
• Additionally, the Commissioner-General may determine the procedure for the deduction of input tax by a resident person who uses or enjoys a digital service from a non-resident person.

Submission of tax return and date of payment of the tax

A non-resident person who provides telecommunication services or electronic commerce to persons for use or enjoyment in the country, other than through a Value Added Tax registered agent shall:

• submit a return to the Commissioner General, not later than the last day of the month immediately following the month to which the return relates, whether or not tax is payable for the period; and
• pay the tax due to the Commissioner General on the same day that the return is due

It is relevant to note that, both the days for filing and the payment of tax includes weekends and public holidays, for a nonresident person who provides telecommunication services or electronic commerce to persons for use or enjoyment in the country, other than through a Value Added Tax registered agent

Interpretation

The following “definitions now apply;

1. Certified Invoicing System: an electronic invoicing system certified by the Commissioner General in accordance
   with this Act;
2. A Tax invoice is now defined to include an electronic tax invoice issued through a Certified Invoicing System for a
   supply of goods or services by a taxable person in accordance with this Act and
   Regulations made under this Act;”.

Zero rated supply

Effective 1 September, 2022 to 31 December, 2023, supply of locally assembled vehicles under the Ghana Automotive Development Programme will be classified as zero rated supply

Takeaways

• The introduction of a centralized Certified invoicing system will help promote data sharing between persons engaged in the provision of taxable supply and the Commissioner General. The Certified Invoicing System will also facilitate the easy filing of tax returns and will ultimately positively impact the Administration of Value Added Tax in Ghana.
• It is evidenced that Ghana Revenue Authority is closing the gap with digitization. It is expected that, transactions that could earlier go under the radial of GRA may soon be discovered and expose taxpayers for non-compliance.
• The provision that allows suppliers of digital service and communication services to file and pay tax on weekend and public holidays is very consistent with development in tax administration in Ghana. In our opinion, the laws that restricted the statutory days for filing and payment of taxes considered the administrative challenges regarding weekends and public holidays. With the implementation of the current GRA taxpayer portal and Ghana.gov, this
  administrative challenge no more exists since one can file and pay taxes without physical presence at GRA or a bank. It is therefore time to reconsider this law and open the gate to other taxpayers to be able to file and pay tax returns on Saturdays, Sundays and Public holidays.
• Now businesses operating online (e-commerce) without physical location and presence in Ghana, who were previously not covered have now been brought into the net and are required to register for VAT.
• The E-VAT system is not an all-round solution for under reporting of taxable supply. The problem of cash transactions if allowed to continue to exist, will likely result in a similar challenge associated with the E-Levy, for which GRA could not meet the revenue targets. GRA needs to employ measures to encourage self-compliance,
  reportage of non-compliant suppliers and culture of compliance among both vendors and buyers.
• For GRA to achieve the desired result of the E-VAT system, there should be total enrollment of all taxpayers. Failure to do that may leave a significant portion of taxable activities which are currently either not or under reported, to
  continue the status quo and thereby denying GRA the opportunity to widen the tax net.
• The current E-VAT system appears to have been designed to collect the output data without the input. The assumption is that the output will be analysed to automatically report the input where the taxpayer does not need to manually report the input. If this is not done, and taxpayers are left to manually record the input tax, it could be
  manipulated to reduce the tax payable in defeat of the intent of the system.
• To resolve one of the issues of under declaration of import values at the port, the E-VAT system could be synched with the database at the port. Thus, where the value of goods are under declared at the port, the sale values will expose a higher profit margin for Corporate Income Tax (CIT).

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