Are legal entities aware of their obligation as withholding tax agent for government?

The withholding tax series ….

General obligation

Resident entities (companies, partnerships etc. established in Ghana) are required to withhold tax at various rates on payments made to local suppliers of goods, works and services and to foreign persons receiving payments with a source in Ghana. Resident entities therefore are tax withholding agents on behalf of the tax authority- the Ghana Revenue Authority (GRA).

 Payments to resident persons

Payments to local entities for various supplies are generally subject to withholding tax (WHT) at the following rates depending on the nature of the supply:

In the case of supply of goods       – 3%

In the case of supply of works       – 5%

In the case of supply of services    – 7.5%

The above rates of WHT apply on the gross invoice value of the supply made. That is, the invoice amount before VAT/NHIL charge. The tax withheld serves as a credit in favour of the supplier against its corporate income tax obligation in Ghana.

Given the different rates that apply to different supply types, it is imperative to understand the classification of the various supplies in other to apply the correct WHT rate.  

Further, rent paid to an entity for the use of, or right to use property is subject to WHT at either 8% or 15% depending on the nature of property being rented.

Failure to comply  as a withholding agent has some grievous penalty implications!  You may contact me for assistance should need be.

Author: Gloria Boye – Doku (ACCA, CAG)

Tax Manager at Deloitte & Touche