Highlights of tax policy for the 2011 tax year in Ghana by Agy Ambala Group

1. Highlights of Tax Policy Initiatives for the 2011 Fiscal year

2. Domestic Tax Policy Initiatives: Withholding Tax (WHT): The threshold for the 5% WHT is to be increased from fifty Currency points (GHS 50.00) to five hundred currency points (GHS 500.00) The implication is that the 5% WHT shall only be applicable/deductible when the contract sum exceeds GHS 500.00. This is expected to ease the pressure of businesses especially small enterprises. Gift Tax: In line with conventions the gift tax rate has been increased from 5% to 15% to ensure alignment with the Capital gains tax rate. The current rate for Capital gains tax is 15%. National Fiscal Stabilisation Levy: The national stabilisation levy which became effective in June 2009 for an 18months period that expires in December 2010. However this is to be extended for another 12 months to cover the 2011 Fiscal year. The national stabilisation levy is at a rate of 5% of Accounting Profit after tax.

3. Personal Income Tax Rates: The Personal income Tax rates on Chargeable Income are to be revised as follows monthly. Note: Chargeable income in 2011 is computed after taking into consideration the new tier system for social security and pension.

4. Personal Reliefs: Personal reliefs have been made more attractive

5. Value Added Tax (VAT): VAT Threshold: The VAT threshold to be increased from GHS 10,000.00 to GHS 90,000.00 for both goods and services. Deferred Payments for VAT/NHIL: The practice of deferred payments for VAT/NHIL on imports is to be discontinued. Implication is that businesses will have to pay the VAT/NHIL immediately on all imports. This is likely to have a cash-flow consequences on businesses if not properly managed. Combination of assessment on lower threshold: To reduce the cost of compliance for lower threshold business a well as the cost of tax administration by the Ghana Revenue Authority (GRA), a proposal has been made to implement a combined assessment scheme for VAT and Income tax for businesses with a value threshold below GHS 90,000.00

6. Communication Services Tax (CST) The CST to be extended to cover all companies and persons who are engaged in the business of public communication. In substance the CST has been extended to cover TV and Radio stations. The consequence of this proposal is that advertising cost is likely to increase, deepening the pressure on media inflation. Media inflation over the past three years always outstrips the general inflation index. There is however a possibility, that public radio and television business may decide to fully/partially absorb the cost of CST so as to stay competitive as was the case of some telecommunication companies. CST unlike VAT is not claimable and hence if the Radio stations do decide to pass on the tax (as it is an end user tax), then the pressure on operational cost for most businesses is likely to go up.

7. Customs Duty: Bonded Warehouse: Bonded warehouse facilities are to be restricted to only raw materials for manufacturing. Implication is that businesses will no longer be able to defer the payment of duty on imported or locally manufactured finished products until they are needed for domestic consumption or export. Duties can only be deferred on raw materials require for manufacturing.

8. NOTE: These are proposals presented in the Budget Statement presented to parliament on the 18th of November and are yet to be passed into law.