Ghana To Withdraw New Tax On Interest

by Lorys Charalambous, Tax-News.com, Cyprus

05 January 2016

Ghana's Ministry of Finance has indicated that a one percent withholding tax on interest paid to individuals, which was meant to be imposed from January 1, 2016, will be cancelled.

The withholding tax on interest was introduced as a final tax in the new Income Tax Act (No. 896 of 2015). It was immediately the subject of criticism as it was seen to discourage savings and investment, and the Ministry has now disclosed that the previous tax exemption on interest received will be reinstated, after parliamentary approval of the change.

Criticism has also been directed at the Act's increase to the withholding tax rate on services from 7.5 percent to 15 percent.

However, the Ministry defended that increase, which has been introduced as a way of improving tax compliance in the service sector. It has pointed out that, in this case, the withholding tax is not a final tax, but a payment on account. Taxpayers will able to use the certificate of tax paid provided by the withholding agent as a credit when they complete their annual tax returns.

The Ministry also noted that the threshold of withholding tax on services has been increased to GHS2,000 (USD523) from GHS500. In that way, small value service transactions are excluded.

TAGS: individuals | compliance | tax | business | tax compliance | interest | banking | tax rates | withholding tax | tax breaks | individual income tax | Ghana | services | Tax

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