Tax Guide for US Expats Living and Working in Ghana
Who Is Liable For Income Taxes In Ghana
Residents are subject to tax on chargeable income accruing in, derived from, brought into or received in Ghana. Nonresidents are subject to tax only on chargeable income accruing in or derived from Ghana.
Individuals are considered resident in Ghana if they meet any of the following conditions:
- A citizen of Ghana other than a citizen who has a permanent home outside Ghana for the whole tax year
- An individual who is present in Ghana for an aggregate of at least 183 days in a 12-month period that begins or ends during the year of assessment
- An employee or official of the government of Ghana posted abroad during the year of assessment
- A citizen with a permanent home in Ghana who is temporarily absent from Ghana for no longer than 365 successive days
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. Employees, including directors of companies, are subject to tax on gains or profits from any employment, including allowances or benefits paid in cash or in kind to or on behalf of an employee.
Taxable income of employees consists of total income, excluding the following amounts:
- Reimbursement of medical, dental or health insurance expenses if all full-time employees are entitled to the same benefit
- Passage to and from Ghana for a nonresident individual appointed outside Ghana whose presence in Ghana is solely for the purpose of serving the employer
- Employer-provided accommodation at the field site of timber, mining, building, construction or farming operations
- Reimbursement for expenditure incurred by the employee that serves the proper business purposes of the employer
- Severance pay
- Night-duty allowances paid to a night-shift employee if the amount involved does not exceed 50% of the employee’s monthly basic salary
Self-employment and business income. Self-employed persons include traders, businesspersons, professionals or individuals carrying on any vocation, partners in partnerships and sole proprietors. Taxable business income consists of net profit plus expenses that are not deductible for tax purposes, less capital (depreciation) allowances and personal reliefs.
Investment income. Investment income includes dividends paid by resident and nonresident corporate entities, interest income, annuities, royalties and rents.
The dividend tax rate is 8%.
Interest paid to individuals by resident financial institutions or the government is exempt from tax.
Capital gains. Capital gains are taxed at a rate of 15%.
Capital gains tax is generally assessed on gains realized on the disposal of the following chargeable assets:
- Buildings in Ghana
- Businesses and business assets, including goodwill but excluding trading stock and certain classes of depreciable assets located in Ghana
- Land, other than agricultural land in Ghana
- Shares of a resident company other than securities traded on the Ghana Stock Exchange
Capital gains are computed by deducting from the amount realized the cost base of the chargeable asset.
Capital gains are exempt from tax if either of the following conditions is satisfied:
- The sum realized on the disposal of a chargeable asset is used to acquire a similar asset within one year of realization.
- The gain amounts to less than GH¢50.
Capital gains are exempt from tax if they accrue to a company from a merger, amalgamation or reorganization with continuity of ownership of at least 25%.
Deductions. Expenses wholly, exclusively and necessarily incurred in the production of income from employment, business or investments are deductible.
Rates. The following table presents the progressive rates of income tax applicable to resident individuals, effective from 9 June 2010. Nonresidents are subject to income tax at a flat rate of 15%.
Withholding tax. Management and technical service fees paid to nonresidents are subject to a 15% final withholding tax.
Relief for losses. Entities carrying on an agroprocessing, tourism, information and communication technology, mining, farming or manufacturing business may carry forward losses for five years. For this purpose, “manufacturing business” is defined as a business that manufactures mainly for export, “tourism business” means an operator of a tourism business registered with the Ghana Tourist Board, and an “information technology business” means a business that is engaged in software development. Similarly, losses incurred by venture capital financing companies on the disposal of shares in venture investments under Act 680 during the period of tax exemption may be carried forward for five years.
B. Other taxes
Net worth tax. Ghana does not impose a net worth tax.
Estate and gift taxes. Ghana does not impose estate or inheritance tax.
Gifts that exceed GH¢500 in value are taxed at a rate of 15% unless they are received in one of the following ways:
- Under a will or through intestacy
- From a spouse, child, parent, brother, sister, aunt, uncle, nephew or niece
- By a religious body for the public benefit
- For charitable or educational purposes
Gifts of the following assets are subject to gift tax:
- Land
- Buildings
- Stocks, shares, bonds and other securities
- Money, including foreign currency
- Businesses and business assets
- Any means of transport
- Goods or chattels not included in the categories listed above
C. Social security
Ghana imposes social security tax at a rate of 18.5%. Employers must pay social security tax at a rate of 13% of the employees’ salary, and must withhold an additional 5.5% from each employee’s salary. Employers remit the employer and employee contributions to the Social Security and National Insurance Trust. Self-employed persons may contribute up to 35% of their monthly income to the trust.
To learn more about the history, culture, economy and other information about the Ghana
We have been preparing US income tax returns for US Citizens and permanent residents living in Ghana for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Ghana and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Ghana.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email