on point final sept 09 with contacts - pwc...pricewaterhousecoopers (ghana) limited 1 september 2009...
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PricewaterhouseCoopers (Ghana) Limited September 20091
Welcome to this maiden edition ofOn point, an abridged version of ournewsletter “The Lead” which aims togive you Ghana Tax News in asnapshot. This edition focusessolely on two new tax initiativespassed in Ghana in connection withNational Fiscal Stabilisation andPensions.
Legislative updates & Impacton businesses
National Fiscal StabilisationLevy Act, 2009 (NFSL)
The NFSL Act was passed byParliament and received presidentialassent on the 20 July 2009 and hasbecome operational. The Act imposesan additional 5% levy on profits beforetax for years 2009 and 2010 on certainspecified industries. The levy is similarto the National Reconstruction Levyintroduced by the previous Governmentin 2001 and withdrawn in 2007.
Affected industries
These include banks (excluding ruraland community banks), non-bankfinancial institutions, insurancecompanies, and communicationscompanies liable to collect and pay thecommunication service tax, miningcompanies, and breweries.
Why the NSFL Act
The Government seeks to raise revenuefor fiscal stabilisation of the economyand to provide for related matters.
Scope
The levy applies to entities in theindustries specified above whether suchentities may be enjoying a tax holiday orexemption from direct or indirect taxunder the provision of any otherenactment.
Tax deductibility
The levy payable is not an allowableexpense in ascertaining the income ofthe person under the Internal RevenueService Act, 2000 (Act 592) (IRA).
Assessment
The levy is imposed under theprovisional assessment system wherebythe Commissioner computes andassesses the taxpayer based on hisbest judgement at the commencementof the year.
In determining the levy payable theCommissioner shall consider the profitsbefore tax on the affected entities for thetwo preceding years of assessmentbefore the 2009 tax year.
On Point*
Ghana Tax News in a snapshotSeptember 2009
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PricewaterhouseCoopers (Ghana) Limited September 20092
However, where the entity has not beenassessed to tax for the two precedingtax years (i.e. 2007 and 2008 dependingon the accounting period),or has notfurnished a return or estimate to theInternal Revenue Service (IRS) asrequired under section 72 and 78 of theIRA, the Commissioner may use hisjudgement to make the provisionalassessment.
Time of payment
The levy is payable on quarterly basisfrom end of September 2009 up untilDecember 2010. IRS is mandated tocollect the levy.
Penalties & recovery of the levy
Provisions of the IRA for collection,enforcement, refunds and penalties alsoapply to the collection of the levy as if itis collected under the IRA.
The National Pensions Act(NPA), 2008 (Act 766)
The President of Ghana formallylaunched the National Pensions Act,2008 (Act 766) on 16 September 2009.The NPA is expected to be implementedfrom 1 January 2010.
The National Pension Reform Bill waspassed by Parliament and receivedPresidential assent in December 2008.The new Pensions Law caters for theestablishment of a contributory three-tierpension scheme.
Prior to the introduction of the NPA,contributions made by employers onbehalf of employees into provident fundswere taxable on the employees. Fundmanagers were also assessed to tax ontheir taxable incomes.
Under the new Pensions Act,investment income including capitalgains from the investment of schemefunds shall for the purpose of incometax be treated as deductible income.
What has been introduced?
The contributory three-tier pensionscheme works broadly as follows:
Tier 1: A mandatory basic nationalsocial security scheme which willincorporate an improved system of (theexisting) Social Security and NationalInsurance Trust (SSNIT) benefits andshall be mandatory for all employees inboth private and public sectors(payment of only monthly pensions andrelated benefits such as survivors'benefits) - will be managed by arestructured SSNIT.
PricewaterhouseCoopers (Ghana) Limited September 20093
Tier 2: A mandatory, fully funded butprivately managed occupational (or workbased) pension scheme. This isdesigned primarily to give contributorshigher lump-sum benefits than presentlyavailable under the existing SSNITpension scheme or Cap 30 pensionschemes; and
Tier 3: A voluntary provident fund andpersonal pension scheme which will beprivately managed by approvedTrustees.
Change in contributions
The new three-tier pension schemerequires an additional contribution rateof 1% to be shared equally betweenemployers and employees. Employerswill pay 13% (instead of the current rateof 12.5%) and employees pay 5.5%(instead of 5%) making a totalcontribution of 18.5% (instead of thecurrent 17.5%).
Out of the total contribution of 18.5%,employers will remit 13.5% to arestructured SSNIT towards the first tierpension scheme. The remaining 5% willbe remitted to the privately managedsecond tier for.
Tax implications:
Contributions of up to 35% will be tax-exempt. The first and second tiermandatory schemes will be eligible for afull tax exemption i.e. up to the totalcontribution of 18.5% of income.
In addition, the third tier voluntaryscheme will have a maximum taxexemption of 16.5%.
Those in the Informal sector whocontribute to the third tier but do notcontribute to the compulsory schemewill also be allowed the full 35% taxexemption.
PricewaterhouseCoopers (Ghana) Limited September 20094
Contact us if you would like to receive a copy of our newsletter in full or todiscuss any aspects of this snapshot.
Tax Partner
Darcy White+233 (21) 761576+233 (243) [email protected]
Tax Director
George Kwatia+233 (21) 761500+233 (244) [email protected]
Tax Managers
Isaac Nyame+233 (21) 761500+233 (244) [email protected]
Ayesha Bedwei+233 (21) 761500+233 (244) [email protected]
Lydia Pwadura+233 (21) 761500+233 (244) [email protected]
Nana Afua Okoh+233 (21) 761500+233 (207) [email protected]
Company Secretarial Services
Francis Adiasani (Senior Manager)+233 (21) 761500+233 (244) [email protected]
Michael Klobodu (Manager)+233 (21) 761500+233 (208) [email protected]
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