14 October, 2024

PAYE, Tax Bands, and Tax Filings in Ghana: Best Guide

Introduction

Understanding the PAYE system is cardinal to individuals and businesses in Ghana since this is mainly the avenue through which income is subjected to tax. This makes it a critical component of the country's tax structure, reaching not only the salaried employee but also his or her employer.

With the coming into effect of these new changes in tax rates, income bands, and the filing process in 2024, it is, therefore, going to require careful understanding for one to emerge compliant with the Ghana Revenue Authority.

This comprehensive guide will take you through all you need to know about PAYE taxes in Ghana: how to calculate them, the different income tax bands, and how to file PAYE taxes. It will take you through the PAYE system, whether you are an employee, employer, or expatriate.

How to Calculate PAYE Tax in Ghana for the Year 2024

Calculation of PAYE taxes for salaried workers in Ghana seems to be a juggernaut because articulation simplifies it into manageable steps. In the PAYE system, the source of income taxes is deducted from the amount that employees receive in the form of salaries. It follows deductions defined by income tax bands imposed by the government.

Calculate Gross Income:

This includes your Basic Pay, allowances, and every other income subject to taxation.

Apply Tax Reliefs and Exemptions:

Certain reliefs and deductions are available in the computation for deduction of taxable income and include personal relief, marriage relief, and child education relief.

Apply income tax bands:

Income obtained is further levied based on income tax bands applied. Various bands have different levels of tax rates corresponding to parts of your income.

Total PAYE Deducted:

The total amount emerging from applying the relevant rates of tax, as apportioned on each slice of your income, gives the total PAYE payable for the month, according to the band applied.

A Step-by-step Guide to Filing PAYE Taxes in Ghana

Filing of PAYE taxes is very important, considering compliance and evasion of penalties. The GRA requires that employers file PAYE on behalf of employees monthly. Here is how you can file your PAYE taxes in Ghana:

  • Register your business with the GRA: As a new employer, this means getting your business registered with the GRA in order to obtain a TIN.
  • Calculate PAYE Deductions Monthly: An employer is to calculate PAYE deductions for every employee from his or her gross income and tax reliefs. Use the PAYE tax tables provided by the GRA.
  • File Returns Online or In-Person: PAYE returns can be filed through the GRA’s online portal or at GRA offices. You'll need to submit a monthly PAYE tax return form, specifying the particulars of employees and the taxes deducted.
  • Make Payments: PAYE taxes are payable to the GRA on or before the 15th of the following month.
  • Submit Annual Returns: The requirement at the end of the year is to make an annual PAYE return summarizing all the monthly submissions and payments.
What are the Income Tax Bands for Salaried Employees in Ghana?

These income bands determine how much each person is obliged to pay termed income earned. The bands are progressive, hence the lower the income, the less the rate of tax charged, and the higher the income, the higher the rate of tax levied.

Accordingly, the income bands are estimated for 2024 in respect of salaried employees in Ghana:

  • Income of up to GHS 504 annually is exempt from taxation.
  • Amount falling between GHS 505 to GHS 3,828 are taxed at 5%.
  • Income falling between GHS 3,829 to GHS 5,748 attracts 10% in tax.
  • Income between GHS 5,749 and GHS 38,352 attracts a rate of 17.5%.
  • The applicable tax rate above GHS 38,352 is 25%.

These are levies on different portions of your income, which implies that just the amount in each bracket is taxable at the relevant rate.

How to Determine Your PAYE Tax Deductions in Ghana

Your PAYE in Ghana is determined by the amount of your income that falls within each tax band. Here's an example to illustrate:

Assume that your monthly salary is GHS 5,000 per month. In calculating PAYE deductions:

  • Tax-Free Allowance: The first GHS 504 of your annual salary is not liable for tax.
  • The next GHS 3,324 on income between GHS 505 to GHS 3,828 attracts a tax rate of 5%, that is, GHS 166.20.
  • 10% on Income Between GHS 3,829 - GHS 5,748: The following GHS 1,920 will attract 10%, that is, GHS 192.
  • 17.5% of the Remainder Income: A third of your salary, GHS 172, will be liable for a tax of 17.5%, which is GHS 30.10.

That therefore puts the PAYE tax deduction in a nutshell at GHS 388.30.

A Complete Guide to Tax Bands and PAYE Calculations in Ghana

A system has, therefore, been devised called PAYE for the paying workforce to pay income tax with respect to their earnings. It requires minute details to be known about the tax bands and the rates so as to correctly estimate one’s tax liability. The whole trick basically lies in ascertaining the different thresholds and applying the appropriate rate on different chunks of your income.

Consequently, employers have to highlight any changes in tax rates and bands for the individual to make the appropriate payroll deduction in good time to avoid any penalties. Since tax legislation can change every year, annual updates have to be checked from the GRA.

Best PAYE Tax Filing Services in Ghana for Small Business

Small businesses in Ghana may find it challenging to manage PAYE taxes, especially if they lack in-house tax experts. Fortunately, several professional services can assist with PAYE tax filings:

  • Tax Consultancies: This firm offers preparation of pay-as-earn income declarations, compliance issues, and consulting on any other tax obligations. They ensure that businesses meet all GRA requirements and avoid penalties.
  • Payroll Service Providers: Numerous payroll service companies manage tax deductions, filings, and payments for businesses, guaranteeing a smooth administration of PAYE.
  • Local accounting firms: Offer a wide array of tax services, from PAYE management, mainly for small businesses, to help them with annual returns and audits.
What is the Process for Filing Annual PAYE Tax Returns in Ghana?

Therefore, an employer in Ghana should file the annual PAYE returns with a summary of such deductions. In this regard, the filling entails:

  • Employee Information Collection: Accurate records of each employee's earnings and PAYE deducted should be made.
  • Submit Annual Return Form: GRA provides an annual return form which is to be filled and lodged by the employer.
  • PAYE Payments and Monthly Reconciliation: The total amount deducted during the year has to be reconciled against the monthly payments.
  • Filing of annual returns: Shall be done online through the GRA portal or physically at the GRA offices.
How to File PAYE taxes online with the Ghana Revenue Authority

The best way for immediate submissions is by filing PAYE taxes online. This Integrated Tax Application and Preparation System of GRA for filing taxes enables a business to file returns and also make the due payment from any location that is convenient.

  • Log in through the GRA Portal: Companies that are not hitherto registered through the GRA Portal are to sign up.
  • Fill up the PAYE Filing Form: With the income and tax deduction details of employees.
  • Pay online: Having submitted, you can make PAYE payments within the portal through the options provided.
  • Keep Records: Keep on file the proof of your filing and payment for further reference.
Understanding PAYE Exemptions and Reliefs in Ghana

The GRA allows various exemptions and tax reliefs that reduce your overall liability of PAYE. Common reliefs that are available include:

  • Personal Reliefs: Some of the personal reliefs obtainable by all taxpayers include marriage relief, child education relief, and disability relief among others.
  • Exempt Incomes: These refer to income categories, including pensions that are not liable for PAYE.
  • Special Deductions: Contributions to certain pension schemes and insurance, too, can deduct your taxable income.
Changes in PAYE tax rates and income tax bands in Ghana, 2024

The Ghana Revenue Authority readjusts tax rates and income tax bands annually, largely because of some changes in the economy. In 2024, minimal changes have been made in adjusting to inflation and economic growth. While the general structure has remained similar, awareness of these changes by individuals and businesses is very important for proper calculations of taxes and compliance with their obligations.

How to Avoid Some Common Mistakes When Filing PAYE Taxes in Ghana

PAYE filing is quite complex; the errors involved are costly. To avoid some of the common errors:

  • Employee's Information Verification: All information, personal and income, should be checked for correctness before filing.
  • Apply the right tax bands: Always apply the current tax bands and rates in computing PAYE deductions.
  • Deadlines: PAYE is filed on or before the 15th of every month to avoid any fines.
  • Good Recordkeeping: Good payroll records will support your filings.
Guide to PAYE Tax Returns and Compliance for Employers in Ghana

Employers are required to comply wholly with the PAYE. This they do by:

  • Calculating Deductions Correctly: The deductions effectuated correct ones according to the tax tables affected by the GRA.
  • Filing of returns: Ensure that both the monthly and annual returns are filed on time, and PAYE payments are affected monthly.
  • Record Keeping: The employers shall maintain payroll records for a minimum period of six years, as the GRA would audit the same.
What are the Penalties for Late PAYE Filings in Ghana?

Failure to pay in time could attract considerable penalties in the form of PAYE:

  • Late Filing Penalty: A person shall be liable for a penalty of GHS 500 for each late filing.
  • Interest on Unpaid Tax: Interest at 125% of the prevailing rate offered by the Bank of Ghana for PAYE taxes shall accrue on the interest due.

Employers will evade these penalties if they ensure that they file and pay the PAYE on time.

How to Calculate PAYE Contributions for Part-time Workers in Ghana

PAYE treats part-time workers no different from full-time workers. In arriving at the PAYE for a part-time worker:

  • Determine the Gross Income: Including all allowances and bonuses.
  • Apply the Income Tax Bands: The income is to be taxed according to the prevailing tax bands.
  • Make deductions each month: Recover and deduct the due amount of PAYE on his part-time salary.
How does Ghana's PAYE System Work for Expatriates and Foreigners?

This classification of expatriates and foreign workers in Ghana comes about with income derived in the country. In application, with the PAYE system, whether they are residents or not will decide whether they should pay or not. Whereas residents are liable for tax, income obtained from anywhere around the world; non-resident individuals pay income obtained in Ghana.

Conclusion

The PAYE system in Ghana has great relevance both to the employee and to the employer. Mastering PAYE calculations, return filing, and the application of tax reliefs will facilitate compliance with taxation. Awareness of each variation in tax rates and their filing procedure ensures a smooth and no-penalty tax filing experience, at least in this period approaching 2024. File on time, double-check your deductions, and consult experts when needed, especially if you are maintaining a business or foreign staff.