Senior law lecturer at the University of Ghana, Dr. Abdallah Ali Nakyea has observed that the current tax structure in Ghana recognizes the impact of COVID-19 and offers tax incentives to micro SMEs in the country.
He explained that small-scale businesses pay their taxes through the tax stamp system. These include businesses that operate in kiosks and small shops among others. Owing to the economic challenges that have arisen, following the coronavirus pandemic, Dr. Nakyea noted that subsequent budget statements allowed tax incentives for these businesses.
“If you take the budget that was read and the laws that were passed after that, because of COVID there has been an incentive for them, that from the second, third, and fourth quarter they are not supposed to pay any tax. Businesses like hairdressers, beauticians, tailors, fall in that category. And we also have those engaged in transport, like trotros, taxis… they also enjoy that incentive,” Dr. Ali Nakyea explained.
He was speaking at the Citi Business Festival organized by Accra-based Citi FM/TV, on the theme, “Doing Business in Ghana as an MSME.”
“When you look at the provisions for reliefs, if you are 35 and below, there is an incentive for you. If you are into ICT, manufacturing, you have five years tax holiday. You are not liable to pay tax. It is helping them to stand and be able to make it,” he added.
Businesses in specific categories also enjoy certain incentives, Dr. Nakyea explained.
“Depending on the sector, the activity you engage in; if you are in the hospitality sector for example, under the budget and law that came, they have been given 30% rebate from their taxes. In the hospitality sector there [is] already 22%. So 30% rebate shows that you have a lower tax gain.”
Under the tax regime, agro-processing companies pay a concessionary tax rate of 1% for the first 5 years before commercial production. Waste processing companies have up to 7 years in which they can pay the 1%. For agricultural workers, Dr. Nakyea intimated that tree crop producers have ten years to pay 1% and cash crop producers have 5 years to enjoy this incentive.
He mentioned however that there is no such defined tax incentive for businesses engaged in commerce.