8% Withholding Tax on investments for foreigners begins today
Returns on Treasury Bills or Bonds, will incur 8 percent income tax.
Beginning today 1st January, 2016 all foreign investors on Ghana’s local capital or investment markets will pay 8% Withholding Taxes on their returns.
This is according to the new Tax Act passed in Parliament in September 2015 and takes effect on the 1st of January.
Under the new law, local investors are also required to pay 1% Withholding Taxes on their returns as well. This means that all interests accruing from investment in bonds, treasury bills and shares will be reduced by 1%, an amount which will be paid to governemnt.
Pulse Business gathers that this is an attempt by the Ministry of Finance to forestall an anticipated shortfall in revenue generation in 2016, due to massive projected dips in prices of international commodities.
Meanwhile, in an exclusive interview with Pulse Business, lecturer of Banking and Finance at the University of Ghana Business School, Dr. Laud Mensah says the imposition of the 1% and 8% tax on investment for locals and foreigners respectively, is not neccessary. According to him, government can explore many other avenues in increasing tax revenue instead of discouraging investors from investing on the local market.
” A 1% Withholding tax on investments is not necessary, especially in a country where investments in local instruments are less. Mind you, Ghana’s economy is not the most attractive for investors right now. So all government will succeed in doing with this new tax is to discourage people from investing on the market, especially huge investors.”
“The measure will be counterproductive in raising the revenue government wants. It will become less lucrative for foreign investors to invest in Ghana, especially if the economy does not turn around quickly. So government is doing this to raise more revenue, but what may actually happen going forward is foreign investors may pull out of the economy because of the looming elections plus this new tax hike. It is completely an unwise decision in my opinion.” Dr. Mensah said.
