- 5 Marks
Question
The provisions of the Income Tax Act, 2015 (Act 896) require a resident person who pays an amount for works or the supply of goods and services to another resident or non-resident person with a source in Ghana to withhold tax from the payment at the rate specified under Paragraph 8 of the First Schedule of the Act and pay same to the Commissioner-General.
Required:
Explain with examples the following:
i) Final withholding tax. (2.5 marks)
ii) Withholding tax on account. (2.5 marks)
Answer
i) Final Withholding Tax:
A final withholding tax means that the income on which the tax is withheld is not included in the taxpayer’s assessable income, and the tax withheld is considered the final tax liability. The income will not be subject to further tax deductions or adjustments. Example: Dividend payments subject to final withholding tax at a rate of 8%.
(2.5 marks)
ii) Withholding Tax on Account:
A withholding tax on account means that the income on which the tax is withheld is still considered in the taxpayer’s assessable income. After calculating the total tax liability, the withheld tax is credited against the final tax liability, and the taxpayer will either pay the difference or get a refund. Example: Payments to contractors where the tax withheld is credited to their overall tax liability.
(2.5 marks)
- Tags: Final Tax, Income Tax Act, Tax law, Tax on Account, Withholding Tax
- Level: Level 2
- Topic: Withholding Tax Administration
- Series: DEC 2023
- Uploader: Kwame Aikins