As the year 2022 begins, I share some basic accounting and tax issues as a reminder to management of companies, Finance Managers, business owners etc. in order to avoid tax penalties, interests, loses and ensure the smooth running of businesses devoid of statutory burdens. This is necessitated by the fact that a number of businesses I came across in the 2021 accounting year fell short in some of these areas and incurred tax liabilities that could have been avoided. The issues are as follows;
- Quarterly corporate income tax payments
A company on self-assessment must file their estimated chargeable income and tax thereon with Ghana Revenue Authority (GRA) by the end of the 1st quarter i.e., 31st March, 2022 and make their 1st quarter tax payment. You may subsequently revise the estimate based on prevailing business conditions. Note that the estimated chargeable income should not be less than 90% of the actual chargeable income for the year, hence the need to make revisions when necessary.
For a company on provisional assessment, pay quarterly installments by the end of each quarter. You could negotiate for a favorable assessment based on certain conditions in order not to overpay tax which could lead to cash flow challenges or payment of tax with part of working capital.
These quarterly payments are provisional corporate taxes paid in advance to be set off against any future corporate tax liabilities and hence should be recognized as such in the company’s financial statement.
- Personal income tax of employees (PAYE)
The company should deduct income tax from the salaries of employees and pay same to GRA on behalf of the employee. The return must be filed on or before the 15th day of the month following the month for which the deduction was made. That is January 2022 deductions must be filed and paid by 15th February, 2022.
Be minded to apply the revised graduated rates which took effect from 1st January 2022. Companies should assist employees to apply for tax reliefs for which they qualify in order to reduce their income taxes.
Employers must pay Social Security Tiers 1 and 2 on or before the 14th day of the month following the month for which the payment relates.
- Withholding taxes
Tax should be withheld from suppliers when making payments for the supply of goods, works and services based on the relevant withholding tax rates (unless the supplier is exempted). Withholding tax returns must be filed within fifteen days after the end of the month in which the deduction was made. For example, taxes withheld in the month of January 2022 should be paid on or before 15th February 2022. File a Nil return if there was no deduction for the month.
Make sure to obtain withholding tax certificates from customers/clients who withhold tax from the business. Also confirm the right rates are applied. Use these certificates as tax credits to reduce the business’s corporate income taxes.
Withholding VAT
For companies that are authorized to withhold VAT from suppliers, withhold 7% of the taxable output value of standard rated supplies and remit same to GRA within fifteen (15) days after the end of the month in which the deduction was made.
- VAT, NHIL, GETFUND & COVID LEVY
Once the business is VAT registered, it ought to file return and pay VAT, NHIL, GETFUND & Covid levy by the last working day of the month immediately following the month to which the return relates. For example, taxable supplies made in January 2022 should be filed and paid by 28th February, 2022. File nil, in case there are no taxable supplies for the month.
Note that the standard VAT rate of 12.5% applies to service providers and manufacturers and those are the businesses mandated to charge NHIL (2.5%), GETFUND (2.5%) and Covid (1%) levies. The flat rate of 3% and additional 1% Covid levy (i.e., 4%) applies to wholesalers and retailers of goods.
- Annual financial statement
The company’s audited financial statement for year ended 2021 and the income tax return of directors should be filed with the GRA by 30th April 2022. Be reminded that auditors who have served for more than six (6) years must be changed in accordance with section 139 (11) of the Companies Act 2019 (Act 992).
The first step to prudent tax planning is compliance. Failure to adhere to each of the issues discussed will come with liabilities for your business. Complying will save the business from a lot of tax stress in 2022 so you focus more on core business activities. Have a fruitful business year.
About the writer:
Samuel is a Chartered Accountant and an Audit Practitioner, licensed to issue audit opinions on company financial statements. He is an entrepreneurship enthusiast who takes keen interest in the growth trajectory of businesses and provides consultancy services in that regard.
Contact: 0249129198
E-mail: [email protected]
