There are many taxes in Ghana, but but one of the taxes most Ghanaians, may not have heard of, is the ‘Gift Tax’.
In this latest release, we bring you some details about the controversial ‘Gift Tax’.
In definition, a Tax is a compulsory contribution to state revenue, levied by the government on worker’s income; and business profits, or added to the cost of some goods, services, and transactions.
In a simple term according to google, a tax is defined as “an amount of money, that a government requires people to pay according to their income, the value of their property, etc.; and that which is used to pay for the things done by the government”.
Back to the controversial Gift Tax; Gift Tax in economics, is a type of tax, that is paid on money or property, that one living person or corporate entity gives to another. It is a type of transfer tax, that is imposed when someone gives something of value to someone else, without receiving something of similar value in return.
In Ghana, “The tax payable on gift, from investment is 25% for a resident Ghanaian, and 30% for a non-resident Ghanaian.
The Gift tax according to the country’s Income Tax Act, 2015 Act 896 of the Constitution, “is when a person receives a gift in respect of their employment, business, investment other than under a will, upon intestacy or by way of transfer to the spouse, child or parent of that person. Any such gift is taxable under the income tax law”.
Again; in Ghana, Employment Gift (Gift from Employment-Under section 4(2vii), of Act 896, 2015), is a gift a person may receive in respect of employment. Such gifts may arise out of one’s employment relationship, donated by the employer, an associate of the employer or a third party under an arrangement, with the employer or an associate of the employer”.
We also have Gift from Business; which, Under section 5(2vi), of Act 896, 2015, also is defined as a gift that an individual may receive in respect of business he or she owns either fully or partially.
The Investment Gift Under section 6(2v) as amended, is a gift received by a person, other than a gift received in respect of business or employment.
The question is; when is tax applied on Gifts?
According to the laws of Ghana, “Any of the following assets situated in Ghana: building of a permanent or temporary nature, land, shares, bonds and other securities, money, foreign currency, business and business assets, and any means of transportation (land, air or sea), goods or chattels not included in the above or part of, or any right or interest in/ to/ over any of the assets referred to above.”.
The Gift Tax is also applied on, “an asset or a benefit, whether situated in Ghana or outside Ghana, received by a resident person as a gift, by or for the benefit of that person. A resident person is one who has stayed in Ghana for cumulative 183 days within the year of assessment.
Again according to the laws of the land, the Gift Tax is applicable on. “An asset, whether situated in Ghana or outside Ghana, received by or for the benefit of a resident person as a gift where the asset has been or is credited in an account or has been or is invested, accumulated, capitalized or otherwise dealt with in the name of or on behalf of or at the direction of that person”.
Last but not the least, a Gift Tax is also applied on “A favor in money or money’s worth; or a consideration for an act or omission or the forbearance of an act or omission that ensures for or to the benefit of a resident person”.
Some items that are exempted from the Gift Tax in Ghana includes; “A taxable gift received by a person under a will, or upon intestacy, by person from that person’s spouse, child, parent, brother, sister, aunt (means parent’s sister), uncle (means parent’s brother), nephew or niece (means child of a parent’s sister or brother), by a religious body which uses the gift for the benefit of the public or a section of the public and for charitable purpose are exempted from the tax.
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