Banks Suspend 1% Withholding Tax

Financial institutions operating in the country have suspended the 1% withholding tax on interest earned by individuals.

This follows the directive from the Ghana Revenue Authority (GRA) to all the financial institutions.

GRA’s directive to the institutions was in response to government’s proposals to Parliament to reverse a legal provision imposing 1% withholding tax on interest earned by individuals.

The tax imposition on interest is part of provisions in the new Income Tax Act, 2015 (Act 896) which came into force on January 1, 2016.

Under the new law, local investors were required to pay 1% withholding tax on their returns.

This means that all interests accruing from investment in bonds, treasury bills and shares were to attract the 1% withholding tax.

There has been huge public outcry over the imposition of the tax on interests, after banks and financial institutions sent SMS alerts to their customers to inform them about the deductions.

Government immediately announced that proposals had been submitted to Parliament to reverse the tax.

Despite the announcement by government, the implementation of the 1% withholding tax was still in force.

However, GRA, in a statement issued yesterday, said government had submitted proposals to parliament for the reversal of the tax and in that regard financial institutions must stop charging the tax.

“We wish to bring to your attention that government has submitted proposals to Parliament for amendment of the relevant sections of the Income Tax Act 2015, (Act 896) to reverse the imposition of 1% withholding tax on interest earned by individuals.

“In this regard, financial institutions are directed to suspend the imposition of 1% withholding tax on interest earned by individuals,” the statement said.

Source: Daily Guide