Tax planning strategies for employees and self-employed


In the wake of this great shaky economic meltdown, more giants will emerge – especially those who are able to rise above this crunch. The eagle is said to love the storm because it propels it to rise higher in the skies.

Effective tax planning is a great gain for both businesses and employees, especially when done in accordance with the tax laws. The blatant abusing of these provisions is what most tax experts refer to as tax avoidance, which the Commissioner-General of Ghana Revenue Authority (GRA) has the discretionary power to recharacterise.

In this article, I will elaborate some provisions in the Income Tax Act, 2015 (Act 896) which will help in reducing tax payable for employees and self-employed persons. Section 8 clearly states that for deductions to be allowed, they must be enshrined in the tax laws.

Retirement funds:

Section 94 of the Act permits payments made to retirement funds that are established and regulated under the National Pension Act, 2008 (Act 766) to be an allowable deduction. In the pension act, the maximum rate an employee can be allowed as deduction for the purpose of determining tax payable is 16.5 percent of basic salary. That is 5.5 percent mandatory and 11 percent voluntary provident fund payment.

However, for the self-employed, they are allowed to deduct the maximum 35 percent of their income as retirement payment. As most investors advise, the period to invest is when people are making panic-withdrawals. Therefore, as an employee or self-employed person it is good to take advantage of this provision to leverage your pension portfolio. Next time you receive your pay-slip, check if your provident deduction is up to the 11 percent then write your employer to increase your deduction to that rate.

Mortgage facility:

The sixth schedule of Act 896 makes provisions for deductions to be allowed for interest payment made in respect of a mortgage facility for an individual’s first or only housing accommodation. Mortgage interest was not allowed as monthly upfront deduction by GRA until the year 2020, when a High Court ruling ordered GRA to allow it as monthly deduction while ascertaining tax payable. This provision is intended to bridge the country’s housing deficit. In this regard, it is highly advisable for employees to take advantage of this provision and subscribe to a mortgage facility in this period.

Personal Reliefs:

The fifth schedule of the Act, as amended by Act 1007, has revised reliefs for year of assessment. These annual reliefs are deducted on a monthly basis before arriving at the chargeable income, as stated in section 51 of the Act. Below are the personal reliefs:

  Per year


Per month


Individuals who have a dependent spouse or at least two dependent children 1,200 100
An individual who has a dependent relative other than a child or spouse who is sixty years or more. 1,000 83.33
An individual who is sponsoring the education of their child or ward in a recognised registered educational institution in Ghana, for a maximum three children or wards 600 per child 50 per child
An individual who is sixty years of age and above 1,500 125
An individual who has undergone training to update the professional, technical or vocational skills or knowledge of that individual 2,000 166.67
Individual who has a disability 25% of annual assessable income 25% of monthly assessable income

It is highly advisable for persons who are enjoying these reliefs to have documentary evidence that backs their claim. In this period, it is recommended that persons who are yet to subscribe take advantage of these reliefs to reduce their tax payable.

Investment pack

In choosing which investment package to choose in these times, one has to consider a number of multifaceted factors, including one that reduces tax risk. Section 7 of the Act makes provision for individuals who receive interest from investment in a resident financial institution of Ghana to be exempt from tax; including subscription to a bond issued by the Government of Ghana. In addition, when an individual invests in a unit trust or mutual fund, as well as approved real-estate investment trust, both the principal and interest or dividend paid or credited to a holder or member are exempt from tax.

In the same vein, gains from the realization of GSE-listed securities are also exempt from tax. This does not include dividend payments made by companies to their shareholders. However, dividends paid are subject to a final withholding tax at a rate of 8 percent.

In conclusion, tax planning is an effective way of reducing tax payable in order to increase one’s disposable income. Understanding and applying these measures will enhance one’s financial stability and independence amid these present economic difficulties.

>>>the writer has an MSc Economic Policy, member of CITG, Big Data Analyst with specialty in Predictive Analytics, CISA trained and a staff of GRA

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