Opinions of Mon, 10 Sep 20182

Taxation of religious organisations: The position of the law and related matters

“There are two certainties in life: death and taxes. There is no escape from either of these variables. The inscription in the Internal Revenue Service (IRS) building in Washington reads: “Taxes are what we pay for a civilised society.”

These were the introductory remarks by Jennifer Dodoo, Justice of the High Court, in Taylor & Taylor Limited vs The Commissioner-General and the Attorney-General (2017, Unreported).

In Matthew 22:21, Jesus was asked by the Pharisees whether it was lawful to pay taxes to the emperor or not.

Jesus responded: “Render unto Caesar the things that are Caesar's, and unto God the things that are God's.” This reinforces the point that religious organisations have a responsibility to fulfil their tax obligations unless exempt.

Taxation of business profit of religious organisations

In 2009, the Supreme Court of Ghana ruled on the position of the law with regard to whether or not exempt organisations were subject to income tax in Ghana.

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Thus, in Chapel Hill School Limited vs the Attorney-General and the Commissioner, Internal Revenue Service, [2009, Unreported], Dr Date-Bah JSC (as he then was), said: “Our comment on this argument by the second respondent (Commissioner, Internal Revenue Service) would be that the mere fact that what the appellant does constitutes a business does not inevitably lead to the conclusion that the activity cannot be exempt from tax.

“If the business concerned is one that falls within the purview of the educational business carried out by an educational institution of a public character, then the income from that business will qualify for exemption from tax.”



In explaining what constitutes public character, the learned judge said, “… business was of public character … did not confer any private benefit to individuals.” He further said, “… for as long as the appellant was a Company limited by guarantee, there was a legal assurance that its business was not conferring any private benefit on individuals.”

The court concluded that an educational institution of a public character was not subject to income tax during the said period it remained as a company Limited by guarantee until such time that its converted into a company limited by shares. The learned judge also referred to the South African case of Chancellor, Master and Scholars of the University of Oxford vs Commissioner for Inland Revenue, Republic of South Africa to support his position.

It must be pointed out that educational institutions and religious institutions under tax enactments in Ghana prior to the year 2016 were both considered as exempt organisations.

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Although educational institution is excluded from tax-exempt organisations under the Income Tax Act, 2015 (Act 896), religious institution remains.

From the foregoing, it is my humble opinion that the business income of a religious organisation is exempt from income tax insofar as the income does not confer private benefit to individuals.

Any surplus remaining after all the expenditure of a religious organisation in any year has to be retained and applied in the future to the company’s purposes. The exemption is, however, limited to a religious organisation registered as either:

i. a Company Limited by Guarantee under Companies Act, 1963 (Act 179); or

ii. a Trust under Trustees (Incorporation) Act, 1962, Act 106 (with no individual beneficiaries).

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Taxation, religious leaders/employees

A religious organisation registered as such with the Registrar of Companies is separate from the founder(s), religious leaders or its employees.

As a result, the exemption from tax of the income of a religious organisation (where applicable) does not apply to the individuals. The religious leaders and employees must, therefore, fulfil their lawful obligation of payment of taxes.

Way forward

From the foregoing, I recommend the following:

(a) Education of taxpayers. It appears that the religious fraternity is unaware of the position of the law.

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It is, therefore, imperative that tax programmes be organised to educate them with regard to their tax responsibilities, including Withholding Tax, Pay-As-You-Earn, Value Added Tax (VAT), National Health Insurance Levy (NHIL) and Ghana Education Trust Fund (GETFund).

(b) Enforcement of the law: In the case of Atta Barfour vs Tema Development Corporation [2005, Unreported], Ms Sophia Akuffo, JSC (as she then was), said: “It is a basic principle that equity aids the vigilant and not the indolent.”

Although it is trite knowledge that ignorance of the law is no excuse, it is also for the Commissioner-General of the Ghana Revenue Authority (GRA) to ensure that all taxable persons are roped in in the enforcement of the tax laws of Ghana.

The writer is a Chartered Tax Practitioner, a Chartered Accountant, a Postgraduate of University of East London, a Graduate of University of Ghana (Business School) and a Student of Law.

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