Everything you should know about the tax you pay for receiving gift(s)

Every country imposes a levy on its citizens as tax. In Ghana, the citizenry pays a number of these taxes including vehicle income tax, rent tax, Pay As You Earn (PAYE), communication service tax, gift tax, among others.

The revenues generated from these taxes are mostly used to finance government expenditures and developmental projects.

Though some people know about the taxes they pay, many do not know there is an amount of money deducted as taxes anytime they receive gifts from friends, loved ones, employees, and so on.

Gift tax

Gift tax, just as its name proposes; is a levy paid by an individual who receives gift(s). – be it money, real estate, car, etc on a birthday, wedding, or any special occasion.

You will recall that the daughter of Reverend Sam Korankye-Ankrah’s daughter, Naa Dromo Korankye-Ankrah, was chased by the Ghana Revenue Authority to pay tax on the $1m cheque she received at her wedding on July 10, 2021.

This move by the GRA to extend an invitation to Naa Dromo answer some questions at their office courted several controversies on social media.

However, in Ghana, payment of gift tax is in accordance with Income Tax Act 2015 Act 896.

According to the Ghana Revenue Authority, “when a person receives a gift in respect of their employment, business, and/or investment other than under a Will, upon intestacy or by way of transfer to the spouse, child or parent of that person, any such gift is taxable under the income tax law.”

Rate of Tax

The revenue arm of government said, tax payable on gifts under section 4(2vii) – gifts from employment, and 5(2vi) – gifts from businesses, is at a graduated rate that is added to the person’s income from employment or business for the year of assessment.

The tax payable on gift from investment is 15% for a Ghanaian resident and 25% for a non-resident Ghanaian.

Gift from employment

Any gift a person receives from his/her employer or in the line of work is considered as a gift from employment.

This type of gift tax is under section 4(2vii) of Act 896, 2015.

Returns and payment of tax

When a gift is received by an individual and that gift is not in respect of business and employment, the taxpayer shall within 21 days of receiving the gift submit it to the GRA in writing.

The writing to GRA should contain the following;

– The description and location of the taxable gift
– The total value of the gift
– How it is calculated and tax payable with respect to that gift
– The full name and address of the donor of the gift
– Any other information required by the Commissioner

Note: That person shall remit to the GRA Commissioner the amount of tax calculated as payable and the payment of tax is due at the time the return was submitted.

Source: Ernestina Serwaa Asante