What Is Withholding Tax?
Withholding tax (WHT) is a mechanism where the person making a payment (the withholding agent) deducts a specified percentage of tax at the point of payment and remits it to the Ghana Revenue Authority (GRA) on behalf of the recipient. The recipient receives a withholding tax certificate and can use the amount withheld as a credit against their final income tax liability.
WHT applies to specific types of payments made by businesses and individuals designated as withholding agents. It is essentially a prepayment of the recipient's income tax, collected at source to improve tax compliance and revenue collection.
When Does Withholding Tax Apply?
Withholding tax applies when a designated withholding agent makes payments for goods, services, rent, investment income, or other specified transactions. Not all payments are subject to WHT — the obligation depends on the type of payment, the status of the payer, and whether the recipient is a resident or non-resident of Ghana.
Any person or entity registered as a withholding agent by GRA is required to deduct WHT on qualifying payments. Large businesses, government agencies, and institutions are typically required to register as withholding agents.
Withholding Tax Rates by Payment Type
The following table shows the current WHT rates for common payment types:
| Payment Type | Resident Rate | Non-Resident Rate |
|---|---|---|
| Rent (commercial property) | 8% | 15% |
| Fees, commissions, and contract payments | 7.5% | 15% |
| Management and technical service fees | 7.5% | 15% |
| Dividends | 8% | 8% |
| Interest | 8% | 8% |
| Royalties and natural resource payments | 10% | 15% |
| Insurance premiums | 5% | 5% |
| Supply of goods (GHS 2,000+) | 3% | 20% |
| Endorsement fees | 10% | 15% |
| Lottery/gambling winnings | 5% | 10% |
For non-resident recipients, Ghana may have Double Taxation Agreements (DTAs) with their country of residence that provide reduced WHT rates. Always check the applicable DTA before applying the default non-resident rate. Ghana has DTAs with countries including the UK, France, Germany, South Africa, Italy, Belgium, the Netherlands, and several others.
Withholding Agent Obligations
As a withholding agent, you have the following legal obligations:
- Deduct — Withhold the correct percentage from every qualifying payment before releasing funds to the recipient.
- Remit — Pay the withheld amount to GRA by the 15th of the month following the month of payment.
- File returns — Submit a monthly withholding tax return to GRA detailing all payments made and tax withheld.
- Issue certificates — Provide each recipient with a withholding tax certificate showing the gross amount paid, WHT rate applied, and tax withheld. The certificate is the recipient's proof of prepayment.
- Keep records — Maintain records of all withholding transactions for at least 6 years, including invoices, payment vouchers, and copies of WHT certificates issued.
Filing and Payment Timeline
| Activity | Deadline |
|---|---|
| Deduct WHT | At the point of payment |
| Remit WHT to GRA | 15th of the following month |
| File monthly WHT return | 15th of the following month |
| Issue WHT certificate to recipient | Within 15 days of deduction |
| Annual WHT reconciliation | 31st March of the following year |
Withholding Tax Certificates
A WHT certificate is a critical document for both the withholding agent and the recipient. It serves as proof that tax has been deducted and remitted, and the recipient uses it to claim a credit against their income tax liability. Each certificate should contain:
- Name and TIN of the withholding agent
- Name and TIN of the recipient
- Date of payment and period covered
- Gross amount of the payment
- WHT rate applied
- Amount of tax withheld
- Net amount paid to the recipient
- GRA payment reference number (proof of remittance)
Recovery and Offset Mechanisms
The recipient of a payment from which WHT has been deducted can recover the tax in the following ways:
- Credit against final tax — When filing the annual income tax return, the recipient deducts all WHT certificates from their total tax liability. If the WHT exceeds the tax due, the excess is refundable or can be carried forward.
- Final tax treatment — For certain payment types (e.g., dividends to resident individuals at 8%), the WHT is a final tax and no further tax is payable on that income. The income is excluded from the graduated tax computation.
- Refund application — If WHT credits exceed total tax liability, the recipient can apply to GRA for a refund. GRA typically processes refunds within 90 days, though delays can occur.
Practical Examples
Example 1: Rent Payment
A company pays GHS 10,000 monthly rent to a Ghanaian landlord:
- WHT rate: 8% (resident)
- WHT deducted: GHS 800
- Net payment to landlord: GHS 9,200
- The company remits GHS 800 to GRA by the 15th of the following month and issues a WHT certificate to the landlord
Example 2: Consultant Fee (Non-Resident)
A Ghanaian company pays USD 20,000 (approximately GHS 320,000) to a UK-based consultant:
- Default non-resident WHT rate: 15%
- Ghana-UK DTA rate for technical fees: 10%
- WHT deducted (applying DTA): GHS 32,000
- Net payment to consultant: GHS 288,000
- The company must verify the consultant's tax residency status and obtain the necessary DTA documentation before applying the reduced rate
Penalties for Non-Compliance
| Offence | Penalty |
|---|---|
| Failure to withhold when required | Agent becomes liable for the full WHT amount plus penalties |
| Late remittance to GRA | Interest at 125% of BoG statutory rate per annum |
| Failure to issue WHT certificate | GHS 500 per certificate not issued |
| Late filing of WHT return | GHS 500 per month or part thereof |
| Failure to register as withholding agent | GHS 500 per month plus back-assessment |
How Nexus Ledger Helps
Nexus Ledger automates withholding tax calculations across your payables. When you record a payment to a supplier, consultant, or landlord, the system automatically identifies whether WHT applies, calculates the correct rate, generates the WHT certificate, and tracks the remittance deadline. The monthly WHT return is pre-populated from your transaction records. Use the Compliance Calendar to stay on top of the 15th-of-month remittance deadline.