Casual, temporary workers to pay 5% tax

A new legal instrument (LI) under the country’s Income Tax Act, 2015, Act 896 (as amended) and the Value Added Tax Act, 2013, Act 870 (as amended), has paved way for the taxation of casual and temporary workers.

By the foregoing, all payment from employers to casual and temporal workers in Ghana for any work done is to be taxed by 5 percent, Edward A. Gyamerah, Deputy Commissioner in-charge of Policy and Programmes at the Ghana Revenue Authority (GRA), has said.

Speaking at the 4th Ernst & Young Breakfast Series with GRA yesterday in Accra, Mr Gyamerah said: “The new LI has established that for a casual worker defined under the Labour Act, the tax rate that should be applied to the payment of the casual worker is 5 percent. So this issue of I have hired a mason to come and do my job and therefore it’s just a by-day is gone.”

“Casual work comes under section 78 of the Labour Act, so when paying that you will have to uphold 5 percent and pay same to GRA. If the person is a temporary worker which means his salary is determined for a certain period which normally is paid at the end of the month, they should be taxed in line with the standard provision i.e. you go to Section 1 and you use the individual rates to tax them.”

Upfront reliefs

Explaining further, he said the LI had clarified that five of the reliefs could now be granted upfront and these include marriage and responsibility relief, child relief, old age relief, aged dependent relative relief and disability relief.

Tax relief card

“Unlike 5 months ago where workers applied for the tax relief card every year and gave it to their employers, this time around you apply for the relief and once it is granted you, you continue to enjoy what has been given to you unless your circumstance has changed.

“What it means is that at the time you applied for the relief you had only one child, and the next year, your wife has given you twins, so three or four years time, they start school. You now have three children. It means that your circumstance has changed. So you have to come back to GRA, give us your new position and the new relief that has been granted you.

“This is good and will help because the application of the old one was very cumbersome.

Finance lease

The deputy commissioner said the operating lease had also been addressed in the amendment.

Touching on the finance lease of vehicles, he said people intentionally misapplied that, knowing that the capital allowance granted to motor vehicle was restricted.

“It’s $75,000, they go in for a finance lease for two years and go and buy a vehicle costing $300,000. For some of them $100,000 and claim, because it’s the finance lease, they claim the whole finance lease as deduction. The new LI is saying that if it is asset that is restricted from capital allowance, the deduction that you can get for that asset, even though it is finance lease, it should be restricted to $75,000. Nobody should take advantage of the loopholes in the law.”

Priority sectors

He also announced that certain sectors had been classified as priority, which gives players the opportunity to carry forward losses for five years.

“If you are not, you can carry forward losses for three years. So the LI has come out with the list of priority sectors and these are mining, the petroleum, energy and power, especially for those who would want to go into energy production and the generation of power, all manner of manufacturing, farming, agro-processing, tourism and providers of ICT.”