Very soon the year will come to an end, companies individuals will prepare presents like hampers and parcels, animals ranging from cattle, goat, sheep, chicken, turkey, assets like phones, tickets for movies or events, paid trips or vacations for families and friends etc. We happily receive these gifts and at times even go to church to declare the value of items in testimonies we share. Friends and family and others related to us more often than not boast of gifts their relatives receive. But do we declare these gifts to the government and pay the appropriate taxes for the government if any.
A gift is defined as a thing given willingly to someone without payment. A gift is also defined to mean a receipt without consideration or for inadequate consideration. In Ghana the laws governing the gift tax is the Internal Revenue ACT, ACT 592, 2000 section 105 as amended.
According to Ali-Nakyea in his book Taxation in Ghana, There are two distinctions of gifts under the Internal Revenue Act, Act 592 section 8(3) and under section 105 of the same Act.
Gift under section 8(3) 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, whereas gifts under section 105 are taxable gifts as provided by the law.
The tax payable on gifts under section 8(3) is at a graduated rate that is added to the employee’s income and taxed appropriate like PAYE, whereas that under section 105 is taxed at 15%.
Under section 8(3), the whole amount of the gift is taxable whereas that of section 105 is not taxable where it does not exceed GHS 50.00. It is only the excess amount that is taxable.
Imposition of gift Tax
Gift tax is paid at the rate specified in the Fourth Schedule of ACT 592, 2000 as amended and is payable by a person on the total value of taxable gifts received by that person by way of gift within a year of assessment. The total value referred to does not include the value of a taxable gift received by that person under a will or upon intestacy, by that 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.
In Ghana the definition of who a relation is constitute a big problem. People can be related by just mere association and not necessarily by blood. A Father’s colleague at work place can be referred to as an uncle though not blood related. An old school friend can be referred to as an aunt. The Ewe tribe from the Volta region for instance, will refer you as a brother or sister so long as you hail from the Volta region or you speak their language. This becomes difficult to determine who a cousin, nephew, aunt or uncle is. Unless there is a creative means of determining who a relative is, the application of this law won’t be effective.
WHAT CONSTITUTES A TAXABLE GIFT
For the purpose of the law, it is immaterial whether or not that person physically received the asset so long as the act, omission or transaction inured or inures to the benefit of that person. A Taxable gift means-
a. any of the following assets situated in Ghana: building of a permanent or temporary nature, land, shares, bonds and other securities, money, including 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 or over any of the assets referred to in above.
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 the Ghana for cumulative 183 days within the year of assessment.
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.
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.
VALUATION
The value of a taxable gift is the market value of the gift at the time of the receipt. In Ghana the market value is difficult to determine. The price of goods is not constant. A common range of value would be applicable in this regard.
PROCEDURE RELATING TO GIFT TAX– Returns and Payment of Tax
any person receiving a taxable gift shall, within thirty (30) days of receipt, furnish the Commissioner with a return in writing containing the following information:
the description and location of the taxable gift;
the total value of the gift,
how it is calculated and tax payable with respect to that gift;
the full name and address of the donor of the gift;
Any other information required by the Commissioner.
This does not apply where the gift referred to in that subsection together with any other taxable gifts received by that person during the same year of assessment does not exceed fifty (50) Ghana Cedis.
Where a person is required to furnish a return under that person shall remit to the Commissioner the amount of tax calculated as payable and the payment of tax is due at that time.
Assessments and Application of Income Tax Procedure
The Commissioner General of the Ghana Revenue Authority shall, based on a person’s return furnished under section 108 of ACT 509, 2000 as amended and on any other information available, make an assessment of the value of the taxable gift received by that person and the tax payable thereon within one year from the date the return is furnished. Where section 78 applies to a person and that person furnishes a return under section 108, the Commissioner is deemed to have made an assessment of the value of the taxable gift received by that person and the tax payable on that assessment are those respective amounts shown in the return.
It must be emphasized that the knowledge of this law is very limited in Ghana. Therefore it affects the application of it. Though data is not readily available at the Ghana Revenue Authority on the percentage of Ghanaian who of their will, file and pay their gift tax returns my observation indicates poor compliance of this law. It beholds on each Ghanaian who receives a gift to take the necessary steps and file the returns.
About the writer…
Peter A. Williams is a Tax consultant, a Chartered Accountant and Certified Business Process Outsourcing Master Trainer and an SME finance coach. He blogs on issues on Finance, Management, Fraud, risk, Tax and business process re-engineering. He currently works with Pentecost University College as a Deputy Account Manager and was part-time Lecture in Quantitative Methods and Advance Taxation. He consults for Gospelgh.com pro bono. He may be contacted via aklamationpet@gmail.com or you can read more articles via aklamanuwilliams.wordpress.com
