The concept of residence is probably the most fundamental (and maybe, most important) in the world of taxation. And someone may ask why? The reason is pretty simple…in the world of taxation, where you are considered resident determines where you are taxed (ie. which country has the right to tax you).
We will explore the issue of residence into much detail, but for now let us begin with the rule as it pertains to specific countries.
Part VII of the Income Tax Act, 2015 (Act 896) deals with issues relating to International Taxation. Section 101 of Act 896 clearly spells out the tax residence rules specific to Ghana.
An individual is considered resident in Ghana for a year of assessment if that individual is
- a citizen of Ghana, other than a citizen who has a permanent home outside of Ghana and lives in that home for the whole of that year;
- present in Ghana during that year for an aggregate period of 183 days or more in any 12 month period that commences or ends during that year;
- an employee or official of the Government of Ghana posted abroad during the year; or
- a citizen of Ghana who is temporarily absent from Ghana for a period of not more than 365 continuous days, where that citizen has a permanent home in Ghana;
This means that if Mr Dwayne, who is a citizen of Jamaica (born in Jamaica) visits Ghana and spends more than 183 days in Ghana, he will be considered a resident of Ghana for tax purposes (point 2 above) even though he is not a national of Ghana. He will thus be taxed in Ghana under the residence tax rules on all his earnings from the start of the 183 day period. ie. from the first day he came to Ghana – Section 102(2).
In another scenario, Ms Johnson who is a citizen of Ghana and has a permanent home at East Legon visits Ethiopia and spends 200 days there and then comes back to Ghana for 3 days and then goes back to Ethiopia and spends another 200 days there. Even though in total she spent 400 days in Ethiopia, she will still be considered tax resident in Ghana because she did not spend 400 continuous days in Ethiopia. Had the 400 days in Ethiopia been continuous, she would have been considered non-resident for tax purposes in Ghana (point 4 above).
A partnership is considered resident in Ghana for a year of assessment if any of the partners resided in the country at any time during that year.
This implies that if Donald, Bernard, Clint and Mavis are in a partnership providing consultancy services in Ghana and Donald, Mavis and Clint have been living in the UK for the past 3 years, with Bernard staying in Ghana, the partnership will be considered resident in Ghana because a partner (Bernard) resided in Ghana at some point during the year. As such the partnership income will be subject to Ghana residence tax rules.
A trust is considered resident in Ghana if
- that trust is established in Ghana;
- a trustee of the trust is resident in the country at any time during the year; or
- a person resident in Ghana directs or may direct senior managerial decisions of the trust at any time during the year, whether the directive is given
- alone or jointly with other persons; or
- directly or through one or more interposed entities.
A company is considered resident in Ghana for a year of assessment if
- that company is incorporated in Ghana under the Companies Act, 1963 (Act 179); or
- the management and control of the affairs of the company are exercised in Ghana at any time during that year.
Any other individual, partnership, trust or company is considered non-resident for the purposes of taxation.