Conditions. The learned judge also referred to the South African case of Chancellor, Master and Scholars of the University of Oxfordv. Commissioner for Inland Revenue, Republic of South Africa to support his position. All companies liable for tax in Ghana are required to pay provisional tax quarterly. An NGO will receive Government Funding, only if registered under section 12A & 80G. An entity of public character is required to have its membership open to the general public or an identifiable group of persons, to operate without profit motive, not to distribute profits generated from its charitable business and to have its profits ploughed back and used solely for the original charitable function. Well, essentially there is a two step process in terms of (i) recognition as a charitable organisation and (ii) minimum annual expenditure on the organisations activities. Ms Chisanga was commenting on government's decision to issue statutory instrument 103 suspending tax exemption facility for NGOs. Businesses exempted from corporate tax are still required to register their business with the GRA to pay income tax. Such pernicious inequities in the tax burden have in the past contributed to smuggling in no small measure of exports. Resident persons are taxed on their worldwide income while non-resident persons are taxed on income which has a source in Ghana. The normal response will be Of course!. Lets take a hypothetical illustration below to ascertain how the income of a religious leader (such as a pastor) should be taxed. a. f.Establishment of Charity Commission, The Corporate governance in the Charity industry in Ghana appears not to be robust enough to build trust that assures all and sundry that assets of these organisations are safeguarded. Calculating taxes can be tedious, even more so if you are not sure about the rates and percentages. The church is, therefore, required to withhold tax of US$300 on payments to the School and pay same to the Ghana Revenue Authority. But this is a general mis-conception that we tend to have because of the truth of it being a non-profit organisation. c.Provision of services such as training, or consultancy. WHAT HAPPENS TO THE PROFIT EARNED BY THE NGO? As well as paying tax in Namibia, you might also still be eligible to pay some . Who procured it and for what? See you there. Who or that has been issued with a written ruling by the CG currently in force stating that it is an exempt organisation; and, c.None of whose income or assets confer, or may confer, a private benefit, other than in pursuit of the organisations functions. Speaking in the same interview, the CEO of KankoAssociates, Mary Tobbin Osei supported Mr Nkaws position, as a donor, adding that NGOs are unbending when it comes to accountability. Uganda's Income Tax Act provides that an organization is exempt from paying income tax if it falls within the definition of "exempt organization" under Section 2 (bb) of the Income Tax Act and has been issued a formal . What is the withholding tax obligation of the Church? Tax Policy Issues. Hence, you should know the various taxes to pay and the rates. All data are based on 700 salary surveys. The survey sought to find out from the respondents about their profession, where they work, for whom they work, and whether taxes were deducted from their pay in the course of the survey period. The surplus can either be carried forward to the succeeding years without any kind of limitation or accumulated for a specific purpose. Careers The accounts of religious organisations must, among others, capture all receipts and payments for each year, and a statement of financial position of the company or trust, as the case may be. No. Such a reaction would be natural bearing in mind that they normally set out to support good causes for particular groups of persons - in most cases the poor, women, elderly and children, and with the main focus areas including health, education, environment, social and political welfare - and without a profit motive. ii. Accordingly whoever is found guilty under the Act, shall be punishable with an imprisonment for a term that shall not be less than three years but may extend to seven years and fine which may extend upto five lakh rupees. Therefore, the applicable withholding tax rate is 3%. These are: a. Individual Donors for Education 2023/2024; 3000+ Grants, Donors and Foundations Providing Support and Individual Support for Education. - 2023 PwC. NGO (A non-governmental organization) is an association normally citizen-based that independently carries out its functions without government interference usually to serve some social or political purpose. But that is an entirely different matter. This will not only improve upon the revenue generation of the government, but will also ensure equity in the tax system. operation of a bookshop; and. Non-Governmental Organizations (NGOs) play a vital role in the process of social and economic development of the economy. When expanded it provides a list of search options that will switch the search inputs to match the current selection. As a result, for tax purposes, any profit generated by Trusts which have ultimate beneficiaries as individuals, exposes their business income to tax. At a glance, it may appear a lot of our religious organisations whose activities fall within the above-mentioned conditions for VAT registration may not have registered with the Ghana Revenue Authority. So far as income tax is concerned, in many cases the law will at a practical level normally result in an NGO not having an income tax liability. Ghana Life Savers Organization is situated in Tema, Ghana. [Emphasis mine] Exempt organisation was defined in Section 94 to mean a person. spiritual consultation fee. The 1947 Ordinance outlined the first provision of exemption from tax by charitable organisations including religious organisations. The highest rate is presently 35%. This can be done where the operating vehicle is through the establishment of Trusts, for example. Companies limited by guarantee including NGOs are exempted from paying corporate taxes. The intention of the tax law is to tax the business income of a charitable organisation. "However, before you are exempted from paying certain taxes, the individual must go to GRA with a. Disclaimer of Warranty, About Us Tennis legend Roger Federer is the number five highest-earning athlete in 2015. Taxes in Ghana If you are an established business operating in Ghana, one of your key obligations is to pay your taxes. Many have argued that NGOs are not to pay any form of taxes at all since they are engaged in humanitarian services which earns no taxable income. 2. Admittedly these numbers only point to the extent of enforcement of payroll taxes. She could neither sue in tort nor in contract. The activities of IOM Ghana focus mainly on assisted migration and development, migration health services, voluntary return and reintegration, cultural orientation, counter-trafficking, emergency assistance, and resettlement. Incidentally, even if there is no taxable income this does not negate the requirement to file an income tax return. Following from the foregoing, it is my humble opinion that the business income of a religious organisation is not subject to tax insofar as the income does not confer private benefit to individuals. the objective of the organization is to bring assistance to humanity by supporting the material, sports, education, and well-being of the poor physically challenged and the less privileged in Ghana. Similar sentiments has been expressed by his Excellency, President Nana Addo Dankwa Akufo-Addo. Taxable supplies include sale of anointing oil, bottled water, consultancy services, rental of premises, training, sale of magazines, diaries, calendars, stationery, Bible, and Quran. Company is working in Associations business activities. It is actually the opposite. Income Tax Exemptions are the amounts that are reduced or removed from Income amounts because they are exempt from taxation. Any other excisable product prescribed by the Finance Minister. Fifth, while there is a constant push to raise taxes from the informal sector, policy-makers must weigh the cost of the enforcement and the equity-efficiency concerns in order to determine how and where best to allocate the tax collection effort. Hence my question: who pays taxes in Ghana? As highlighted, taxation of the NGO sector is much more complicated than many initially assume. A number of goods and services are exempt from VAT under the VAT Act, 2013 (Act 870) law (S. 15 Section 35/ Schedule 1). A tax auditor must assess whether the annual income of the pastor is enough to fund the investments he made during the year after allowing for consumption expenditure, other capital expenditure incurred and savings he might have made in the course of the year. Some tax laws are complex, not easily understood. And this accumulated income can be used within the next five years and if not used then shall be considered as the income of the eleventh year. The net amount due to the supplier is US$970. b. 21ST CENTURY INITIATIVES A local NGO which uses Drama as its mode of Education a non for profit for poverty reduction,health and education assistance for Ghanaian communities. That said, for tax purposes, the taxman may be unconcerned with how the income is generated. We should, therefore, consider having similar Charity Commission established by an Act of Parliament in Ghana and tweak it to meet our needs. The survey appears to suggest that the scope of personal taxation within the formal private sector may be greater than seems to be commonly recognized. Employees of . The second question that needs answering is, whether or not the business income of a religious organisation generated incidental to its purpose of a public character without private benefit to some individuals be subject to tax? In the case of Attorney of Hong-Kong v Reid, [1993] the court said a principal ought to have the right to trace and to follow a bribe or secret commission It can therefore be construed that, however an income is earned, once it is taxable, the Ghana Revenue Authority can tax same. A deduction shall be disallowed for an expense that is of a capital nature. Articles designed exclusively for use by the disabled. The least tax compliant were those who worked in occupations that involved service delivery, sales, transport and construction tradesmen. Save my name, email, and website in this browser for the next time I comment. Income of an approved Real Estate Investment Trust. Supply of goods such as books, anointing oil, etc. They are typically nonprofit entities, and many of them are active in humanitarianism or the social sciences; they can also include clubs and associations that provide services to their members and others. SSBI's are not required to pay gift or inheritance taxes, as long as they apply for exemptions thereof by filing their gift taxes. The Federal Inland Revenue Service (FIRS) recently issued Information Circular No. Kasoa, Down-Town, KD 195/9, Accra, Ghana View map. Helping Street Children And Empower Local Womem. Third, there is a fundamental issue of whether we are sharing the tax burden fairly? Federal and state tax laws and policies govern many of the operations of charitable nonprofits. As was said by Ms Sophia Akuffo, JSC (as she then was), in the case of Atta Barfour v Tema Development Corporation, it is a basic principle that equity aids the vigilant and not the indolent. Therefore, where the Ghana Revenue Authority continues to sit and watch, and fail to enforce the law, it cannot put blame on the religious fraternity. By industry, the percentage of employees who had taxes deducted from their pay at source ranged from 92% of those in the mining sector to 25%t of those in the construction industry. The implication of the above definition was that, for any religious organisation to qualify for exemption, it should not only be described on paper as such, it must also act pari passu. After you are registered as an NGO, you can apply for tax exemption through your country's revenue agency. Nice Article. Obviously, the employment income of the pastor of US$100,000 and gift of US$50,000 couldnt have been enough to enable him make the kind of expenditure he made during the year. All businesses registering with the GRA, must do so at the nearest GRA district office closest to the project location. v.From the facts, the aggregate cost incurred by the pastor in buying the vehicle, house and shares is US$600,000 [500k+100k]. The NGO also functions in some areas of West Africa as follows: Benin, Burkina Faso, Liberia, Nigeria, and Sierra Leone. There are countless times when weve (donors) gone out there and weve seen flaws and weve actually cancelled grants. Redempta Maira is a Senior Manager, Tax Services at PwC. David Cameron has hosted "an all-out assault" on corruption . From the historical analysis above, there are key underlying themes running through all the various tax dispensations. 2 Only certain types of nonprofit organisations are exempt from income tax. Accordingly, it is not surprising that it does create a fuss! Submit filled forms at the Company Registration Counter for Verification and Capturing or via Online. Subsequent to the above, the current practice is that the Church will have to procure Tax Credit Certificate (TCC) from the Ghana Revenue Authority to serve as evidence of payment of provisional taxes by the suppliers or service providers. Section 10(2) of Act 179 goes on to provide for sanction for officers, members of the company and the company itself should it carry out activities for the purpose of making profit. Allowable deductions include the following: Interest incurred by a person in borrowing money or in the production of income; Digital Services Registration for Non-Resident, Integrated Customs Management System (ICUMS). Notwithstanding the above, there are avenues or vehicles through which religious organisations can engage in profit-making activities without contravening any law. It is, therefore, important for the Ghana Revenue Authority to develop training programme to educate all charitable organisations including religious organisations to ensure full compliance with the tax laws. This article is written by Amrita Basu, a student of New Law College, Bharati Vidyapeeth (Deemed) University, Pune. An Non-Government Organisation,as we understand, is engaged with socio-economic activities catering to the needs of the general public at large and do not come under the ambit of the Income Tax Act, 1961. Africa Health Research Organization is situated in PO Box AN6731, Ghana. In particular, whilst for an individual there is no filing obligation if there is no taxable income, for an entity (i.e. Where the Commissioner has established that the company or NGO is exempt, then the NGO is exempted from paying corporate taxes. To fund development, especially public infrastructure, with any stamp of country ownership and unburdened by donor conditionalities, requires that Ghana strengthens its ability to raise domestic tax revenue; however small. This appears not to be the case now. An expense is deductible if it is wholly, exclusively and necessarily incurred by the person in the production of the business or investment income for the year. Tax and duty can be waived on goods imported for a charitable purpose, or for use in a not-for-profit enterprise. First and foremost, the type of organisation should be religious in nature. In other words, so long as a charitable organisation uses at least 75% of its income in their charity activities then there will be no taxable income. In particular, the religious organisations and their associated stakeholders who are required to pay the applicable taxes and/or comply with the law are unaware of the responsibilities they have as operating persons in Ghana. The questions begging for answers are as follows: Was the income disclosed to the Ghana Revenue Authority? When the revenue exceeds the expenses of the NGO, it is then that such organization earns profit. This combination undermines the growth of domestic revenues. This will help the efforts in bringing sanity in terms of the objects of religious organisations, how they operate, among others. NHIL is at a flat rate of 2.5%; GETFund is at a flat rate of 2.5%. Brochure or publication about your organization. I summarize below the information from the survey carried out from August 1998 to March 1999. NGOs are required to charge VAT on all taxable goods and services supplied and remit same to the FIRS as at when due. An honorarium, alongside other related expenses, is reported as taxable income using Form 1040 of IRS Schedule C. Related expenses may, for example, range from an air ticket to the . Corporate tax is the tax imposed on the net income of the company, in other words, it is a levy placed on the profit of a firm to raise taxes. In the said case, the court held that the person whose liability to tax was being assessed was thus Oxford University, which the court held to be indubitably an educational institution of a public character. First, personal income tax compliance is unevenly enforced across different sectors of the economy and by occupations. Considering the enormous powers of the CG, if he fails to enforce the law, who should we blame? This was in recognition of the contribution these organisations made in society as they prioritised the helping of the poor and needy whilst lifting the spiritual welfare of the people. e.The photography services constitutes services. they are socially, politically, economically educationally and even morally helpful to the country. gifts from church members in the United Kingdom, etc. File Annual Returns at Fifty Ghanaian Cedi (GHS 50) together with Audited Account. NGO's use part of the funds they raise to pay staff salaries. Second, the tax collection drive has revealed that tax delinquent businesses include church run businesses, stevedoring companies, foreign exchange bureaus, restaurants, hotels, and shipping yard companies, all of which are service providers in one form or the other, and, most likely, owned by people with distinguished lifestyles. That is to say, wherever the income is earned, however the monies/benefits are paid, it is subject to tax in Ghana insofar as the person earning the income is resident in Ghana unless exempt. i. Flowing from the foregoing, it is imperative that there should be a paradigm shift in our deliberation on the position of the law with regards to taxation of religious organisations. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Value Added Tax (VAT), National Health Insurance Levy (NHIL), and Ghana Education Trust Fund Levy (GETFund). From the foregoing, the objects of a religious organisation may include, but not limited to provision of services to, or conferring of benefits on an identifiable community or body or a section thereof with equal access to all intended beneficiaries without any particular individual(s) being the ultimate beneficiary(ies). E Plaza 2 Building, Accra, Ghana, P.O.BOX AN 16859, Accra North Ghana, Accra. Form 3A must be witnessed by Commissioner for Oaths/Notary Public/Self-Declared. Most NGOs are not within the tax net of the central government (if at all they pay tax it may on some commodities) and in fact governments all over the world offer assistance in whichever way they can. Section 5(1) of Act 896 provides that the income of a person from a business for a year of assessment is the gains and profits of that person from the business for the year or part of the year. Income derived by religious organisation from engagement in business activities may include: i.sale of anointing oil, water, and similar goods, ii. All acquisitions of new assets must be evidenced by appropriate receipts and the asset register, and shown in the balance sheet as well. So why the fuss about taxation of NGOs? From the foregoing, the total amount payable to the Ghana Revenue Authority is US$610. All rights reserved. GA South Municipal Assembly P. O. Most Not-for-profits / NGOs are not within the tax net of the central government. They equally have a license Certificate to Operate their Headquarters from Accra Metropolitan Assembly of Jurisdiction with Reg. Roger Federer. The withheld tax must be paid to the Ghana Revenue Authority within 15 days following the month to which the payment relates. Some NGOs in Ghana generally work through volunteers and they are funded through free-will donations from people. The World Bank grouped NGOs into two. The granting, assignment or surrender of an interest in land or buildings intended to be used for the purpose of dwelling; the right to occupy land or buildings excluding hotel accommodation, warehousing, storage and similar occupancy incidental to the provision of the related services. Africa Health Research Organization Ghana is situated in Accra, Ghana. 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