- 10 Marks
Question
Describe the tax treatment of the following transactions in the context of the Income Tax Act, 2015 (Act 896).
i) Payment of GH¢2,500 salary for a casual worker in the month of Feb 2024.
ii) Payment of Bonus of GH¢32,000 to an employee with an Annual Basic salary of GH¢180,000.
iii) Payment of GH¢3,200 to a temporary worker in the month of July 2024.
iv) Payment of income to a non-resident employee in Ghana.
v) Redundancy payment to an employee.
Answer
i) Casual salary of GH¢2,500
- It will be taxed at 5% on the gross amount of GH¢2,500.
- This constitutes a final tax, and the employee will not be entitled to any relief or deduction.
ii) Bonus payment of GH¢32,000
- Bonus payments up to 15% of annual basic salary will be taxed as a final tax at 5%.
- 15% of Basic Salary = 15% × 180,000 = GH¢27,000
- Bonus of GH¢32,000 exceeds GH¢27,000 by GH¢5,000
- Tax treatment:
- GH¢27,000 taxed at 5% → GH¢1,350
- Excess GH¢5,000 is added to salary and taxed at graduated rates.
iii) Temporary worker salary of GH¢3,200
- The full amount of GH¢3,200 is taxable using the graduated tax rates.
- The employee is entitled to relief and deductions under the tax law.
iv) Taxation of Non-Resident Employee
- Gross income earned by a non-resident employee in Ghana is taxable at a flat rate of 25%.
v) Redundancy Payment
- Not taxable because redundancy payments are not made in return for services rendered.
- Tags: Bonus Taxation, Employee Compensation, Income Tax, Non-resident taxation, Redundancy
- Level: Level 2
- Topic: Income Tax Liabilities
- Series: Nov 2024
- Uploader: Salamat Hamid