AT – Nov 2017 – L3 – Q3d – Tax administration in Ghana, Tax planning

Explaining the tax implications on early withdrawal from the voluntary 3rd tier.

Question

Mango Company Ltd has written to you as a tax advisor to advise on the tax implication of an employee withdrawing from the contribution to the voluntary third (3rd) tier before its 10th anniversary.

Required:
State the tax implication on such withdrawals.

(2 marks)

Answer

Under the Pension Act, 2008 (Act 766), the voluntary 3rd tier pension scheme allows contributions by both employees and employers with approved fund managers. Withdrawals from the 3rd tier pension fund are allowed only after 10 years.

Tax Implication:
Any withdrawal made by an employee before the 10th anniversary of contributions will be subject to tax at the rate of 15% on both the principal and the earnings (interest).

(2 marks)

Tags: Early Withdrawal, Pension Fund, Voluntary 3rd Tier
Level: Level 3

Topic: Tax administration in Ghana, Tax planning
Series: NOV 2017

Uploader: Dotse