Exploring the Angelic Blessings within the Triangular Tax System (3): A tax planning perspective

By Fred Kwasi ANOKYE

In the first and second articles, I respectively explored mortgage interest tax concession as well as pensions contributions & donations as tax planning opportunities. This current article draws taxpayers’ attention to the deductibility of personal tax reliefs provided as another angelic blessing within the triangular tax system of Ghana.

PERSONAL TAX RELIEFS

A personal relief is an approved deductible amount intended to reduce the taxable income of an individual which eventually lessens the tax burden. The personal circumstances of individuals are taken into consideration in granting this relief. Section 51 and the Fifth Schedule of the Income Tax Act, 2015 (Act 896) as amended by the Income Tax (Amendment) Act, 2019 (Act 1007) provide for the deductibility of the personal reliefs. These personal reliefs are discussed successively in the next sections.

1) Marriage/Dependant spouse/Responsibility relief – This relief is granted to an individual who provides for the necessities of life of a dependant spouse or has at least two (2) dependant children. It is either you are married and you provide for your spouse or you are not married but you have at least two (2) children depending on you.

In either of the situations, you can enjoy the relief. An individual is entitled to claim a relief amount of GH¢1,200 (monthly GH¢100) for the whole year. It is important however to note that where both couple are gainfully employed, only one of them can claim the relief. Marriage certificate should be attached as evidence of being married.

2) Disability relief – This relief is granted to an individual who has a disability. To enjoy this, the individual must obtain certification from the Department of Social Welfare evidencing the disability of the person.

An amount equivalent to 25% of the assessable income of that individual from employment or business is given as the relief on monthly basis. It is instructive to note that a disabled person does not qualify for this relief in respect of his/her investment income. Meaning if the person’s only source of income is investment income, disability relief cannot be granted.

3) Aged/Old age relief – This relief is given to an individual who is at least sixty (60) years old. This is meant for individuals who have reached retirement age but still actively earn taxable income. Such an individual is entitled to claim a relief amount of GH¢1,500 (monthly GH¢125) for the entire year. The Ghana card, Voter’s ID or birth certificate can be attached as evidence of the age.

4) Child education relief – Child education relief is granted to an individual who sponsors the education of his/her biological child or a ward he/she is taking care of in a recognized registered educational institution in Ghana approved by the Ministry of Education. An individual can claim the relief in respect of a maximum of three (3) children or wards.

Again, only one individual can claim this relief in respect of the same child or ward. An annual amount of GH¢600 ((monthly GH¢50) per child/ward is granted as the relief. An individual can attach school fees receipts as evidence of taking care of the education of the children.

5) Aged dependant relative relief – This relief is granted to an individual who takes care of the necessities of life of his/her dependant relative, other than a child or spouse, who is at least sixty (60) years of age. An individual can claim the relief in respect of a maximum of two (2) dependent relatives.

Again, only one individual can claim this relief in respect of the same dependent relative. An individual is entitled to claim a relief amount of GH¢1,000 (monthly GH¢83.33) per dependent relative for the whole year. The Ghana card, Voter’s ID or birth certificate of the dependents can be attached as evidence of their ages.

6) Cost of training relief – This is given to an individual who has undergone training to update his/her professional, technical or vocational skills or knowledge. Knowledge has been defined to exclude academic knowledge. Therefore, any knowledge gained that leads the individual to obtain an academic certificate such as a diploma or degree disqualifies the individual from claiming this relief. The amount of relief granted is the lower of the cost of training and GH¢2,000 per training course. Evidence of payment for the training should be attached.

It is important to note that except for cost of training relief, the rest are granted upfront (i.e. on monthly basis). For cost of training relief, you can only claim upon filing your annual tax returns.

It is instructive to also note that per Regulation 2 of the Income Tax Regulations, 2016 (L.I. 2244), non-residents cannot claim personal reliefs, unless provided for under a Double Taxation Agreement.

As a simplified illustration, consider these details of two employees working in the same entity, Fredizzo Ltd. Yaw Aboagye (Monthly Basic salary – GH?10,000, approved personal tax reliefs – marriage, children education – for 3 children, aged dependent relative – for 2 relatives, disability) and Aba Kwegyeba (Monthly Basic salary – GH?10,000, no personal tax reliefs).  All other things being equal, and assuming a marginal tax rate of 25%, Aboagye will enjoy a monthly tax blessing/saving of GH?729.16. See scenario in the table.  

SCENARIO – ABOAGYE WITH RELIEFS AND ABA WITH NO RELIEFS                                            

DETAILS	YAW ABOAGYE	ABA KWEGYEBA
	GH?	GH?
Basic salary	10,000	10,000
Less: Personal tax reliefs:
Marriage (1,200/12)	100	_
Children education (600/12) *3 children	150	_
Aged dependents (1,000/12) *2 dependents	166.66	_
Disability (25%*10,000)	2,500	_
Total Personal tax reliefs	2,916.66	_
Taxable income	7,083.34	10,000
Tax liability (25%*taxable income)	1,770.84	2,500
Tax blessings/savings (2,500 – 1,770.84)	729.16

 

To take advantage of these tax blessings, an individual would have to formally apply by following the procedures below.

HOW TO APPLY FOR A PERSONAL TAX RELIEF

1. Download a tax relief application form from GRA’s website (https://gra.gov.gh/wp-content/uploads/2021/04/Tax-reliefs.pdf) or pick a form from any GRA tax office in Ghana, fill and attach the necessary evidence.
2. Submit the completed form to your tax office for approval. Once approved, you will be given a tax relief card.
3. Submit the tax relief card to your employer’s payroll unit for processing.
4. Your payroll unit will deduct your relief amount from your income before computing your tax liability.

NOTE: For timely processing by GRA, it is advisable to submit the application form in December each year, so that you can start enjoying it from January the following year.

CONCLUSION

In conclusion, take a critical look at your personal circumstances and apply for the personal tax relief(s) applicable to you to minimize your tax liability. It takes minimal effort to enjoy these tax blessings.

REFERENCES

• Income Tax Act, 2015 (Act 896) as amended
• Income Tax Regulations, 2016 (L.I. 2244).
• GRA Practice Note on Gains or Profits from Employment under the Income Tax Act, 2015 (Act 896).

The writer is an astute Academic, an Accounting and Tax Professional with considerable experience in Lecturing, Research and Tax administration. He is a Chartered Accountant, a Chartered Tax Practitioner and an Adjunct Lecturer at the University of Ghana Business School.

Email: [email protected]

Tel: 233249713272

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