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Did you know that you're legally required to pay tax on any gift received, whether in cash or kind, except in specific exempt cases?
According to the Income Tax Act, 2015 (Act 896), a gift is taxable when received in relation to one’s employment, business, or investment, unless it is received under a will, upon intestacy, or transferred to a spouse, child, or parent. In all other cases, such gifts are subject to tax under Ghana’s income tax law.
While this may come as a surprise to many, gift tax applies to both resident and non-resident Ghanaians despite minimal enforcement by the Ghana Revenue Authority (GRA).
Like it or not, this provision certainly applies to the recent $5,000 gift from Nigerian Afrobeats artist Davido to Ghanaian music promoter and recent social media sensation Ananzo.
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ALSO READ: Ananzo flaunts cash on social media after receiving $5,000 gift from Davido [Video]
Months after the financial pledge after a viral social media post, Ananzo has finally showed off the cedi equivalent of the amount received from Davido.
The financial pledge came after Davido responded to a video of Ananzo enthusiastically promoting his song With You.
Impressed by the viral content, Davido commented: "5K US FOR YOU", which generated widespread attention.
Now that the money is ‘with him’, Ananzo is legally required to pay the gift tax, or he might end up getting hot instead of staying cold, with the GRA on his heels.
What You Should Know About Gift Tax in Ghana
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The Ghana Revenue Authority (GRA)
Under Act 896, gifts fall into the following categories:
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Gift from Employment
Under section 4(2)(vii) of Act 896, 2015, this is defined as a gift a person may receive in respect of employment. Such gifts may arise out of one's employment relationship, donated by the employer, an associate of the employer, or a third party under an arrangement with the employer or an associate of the employer.
Gift from Business
Under section 5(2)(vi) of Act 896, 2015, this is defined as a gift that a person may receive in respect of business he/she owns either fully or partially.
Gift from Investment
Under section 6(2)(v) as amended, this is a gift received by a person other than a gift received in respect of business or employment.
Tax Rates on Gifts
Gifts from Employment or Business: Taxed at graduated rates and added to the individual’s total income for the assessment year.
Gifts from Investment: Taxed at:
15% for resident Ghanaians
25% for non-resident Ghanaians
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How Gifts Are Valued
The value of a taxable gift is based on its market value at the time it is received.
Submitting Gift Tax Returns
Anyone who receives a taxable gift not related to business or employment must, within 21 days, submit a written return to the GRA with the following:
Description and location of the gift
Market value of the gift and how it was calculated
Tax payable on the gift
Full name and address of the donor
Any other information required by the Commissioner
Payment of the tax is due at the time of submitting the return.
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How Much Tax Should Ananzo Pay?
Given that Ananzo received the $5,000 from Davido not in relation to any formal employment or business arrangement, but rather as appreciation for his viral video performance, this gift falls under the Gift from Investment category.
Based on the Bank of Ghana’s exchange rate, Davido’s $5,000 gift equals approximately GH₵51,540. At the 15% gift tax rate, Ananzo who is a resident Ghanaian is required to pay GH₵7,731 to the GRA.
ALSO READ: TikToker gifted $5K for promoting Davido aims to become Africa's top music promoter
Final Thoughts
It remains to be seen whether Ananzo will fulfil this obligation or whether the GRA will take action. Regardless, this case is a reminder that gifts especially high-value ones are not exempt from taxation in Ghana.
So, the next time you receive a gift, remember: pay your gift tax and contribute your part to building the nation.