Withholding Tax: What Payers Need to Know

Withholding tax is a system where the person making a payment deducts a percentage of tax at source and remits it to the Ghana Revenue Authority (GRA) on behalf of the recipient.

When Does Withholding Tax Apply

You must withhold tax when making payments for:

- Services provided by resident persons (7.5%) - Services provided by non-resident persons (20%) - Goods supplied by resident persons (3%) - Rent payments (8% for residents, 15% for non-residents) - Dividends, interest, and royalties (8% for residents, varying rates for non-residents)

Your Obligations as a Withholding Agent

- Deduct the correct rate from each qualifying payment - Remit the withheld amount to GRA by the 15th of the following month - Issue a withholding tax certificate to the payee - File monthly withholding tax returns - Keep records of all withholding transactions for at least 6 years

Common Scenarios

- Paying a freelance graphic designer GHS 10,000 for website work: withhold GHS 750 (7.5%), pay the designer GHS 9,250, and remit GHS 750 to GRA - Paying a supplier GHS 50,000 for goods: withhold GHS 1,500 (3%), pay the supplier GHS 48,500

Penalties

Late remittance attracts penalties and interest. Failure to withhold when required can result in the withholding agent being held liable for the tax amount plus penalties.