Pensions are not taxable – Finance Ministry
The Ministry of Finance has explained that pensions are not taxable in Ghana.
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In a press statement in reaction to media reports that pensions were now being taxed under the new income tax law, the Ministry said Article 199 (3) of the Constitution states, “The pension payable to any person shall be exempt from tax.”
Below is a copy of the Finance Ministry’s statement
The Ministry of Finance’s attention has been drawn to publications on Myjoyonline.com, Graphic Online and other media networks on the issue of taxation of Pensions in Ghana.
Unfortunately the publications have misrepresented the comments of the Hon. Minister.
The Hon. Minister at no point in his presentation say that the Income Tax Act, 2015 (Act 896) imposes a tax on pensions or that there is an intention to tax pensions in Ghana.
The reference to the pension income in his delivery was to explain the philosophy of taxation of pension adopted general in literature and in countries that tax pensions.
PENSIONS ARE NOT TAXABLE IN GHANA. Article 199 (3) of the Constitution states, “The pension payable to any person shall be exempt from tax.”
The Income Tax, 2015 (Act 896) treats pension as an exempt amount under Section 7(1)(d). This means any amount paid as pension shall not be taxed.
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However, under Section 112 (95) of the National Pensions Act, 2008 (Act 766) where voluntary contributions are made to a pension fund and withdrawal from the fund is made before one goes on pension, the amount will be taxed approximately, if the contribution is not up to ten years for those in the formal sector and five years for those in the informal sector.
Section 112 (5) of Act 766 further provides
“A withdrawal of all or part of a contributor’s accrued benefits under a provident fund or personal pension scheme.
a. On or after retirement shall be exempt
b. Shall be subject to the appropriate income tax for contributors in the formal sector before ten years of contributions and before retirement;
c. Shall be subject to the appropriate income tax for contributors in the informal sector before five years of contributions and before retirement.
We hope the above sets the records straight and puts to rest the misinformation in the public domain
Listen to Mr Terkper’s explanation at the Graphic Business – Stanbic Breakfast Meeting in audio attached below
{mp3}terkper_on_tax_pensions{/mp3}