Real estate and property taxes in Ghana is generally a complex issue. You need to consult your tax expert before signing any agreements or sending any money if you intend to purchase real estate in Ghana but do not already reside there. They can tell you about the kinds of local taxes and residential income taxes that will be imposed on your acquisition. This is significant because, although it is expected of them, not all real estate agencies pay these taxes in full or on schedule. Later on, things may get more complicated for you if your real estate agency isn’t paying their taxes or you don’t have a nice connection with them.
What is Real Estate?
Real Estate is considered as land and any permanent structures, such as houses, or improvements, whether natural or man-made, attached permanently to the land . One type of real property is real estate. It is not the same as personal property, which includes things like cars, boats, jewelry, furniture, and farm equipment but has no attachment to the land permanently.
As opposed to real land, personal property includes items like cars, yachts, jewelry, furniture, and farm equipment that are not permanently affixed to the ground. Some real estate may be for rent, sale or personal use.
What is Property Tax?
A property tax is often computed as a percentage of the market value or worth of the property. The assessed value is then multiplied by the millage rate also referred to as the property tax rate to get the annual tax due. A property tax, often known as a property rate, is a real estate tax that is determined by the property’s assessed value. It is known as Property Rate in Ghana. Property rates are governed under Act 936, the Local Governance Act of 2016.
Types of Property Tax in Ghana
Below are the main property taxes in Ghana.
- Value Added Tax (VAT)
In Ghana, Value Added Tax, or VAT, plays a big role in real estate deals. This is especially true for commercial properties like hotels, motels, and hostels. The purpose of this tax is to collect a portion of the total value added at every supply chain link. When these commercial premises are sold or otherwise transferred, VAT is applied in the real estate context. - Capital Gains Tax
This refers to the amount of tax owed on profits from the sale of real estate is known as capital gains tax. The purpose of this tax is to gather the money that people or companies profit from the sale of real estate. - Rental Income Tax
The Rental Income Tax is imposed on the money received by renting out a property. This tax, whose rate varies according on the type of property, affects owners of real estate who receive revenue from renting out their properties. - Property Tax
An annual levy based on a property’s value is called property tax. It gives local governments a way to make money for infrastructure development and public services. The location of the property affects the property tax rate.
What Property Tax covers in Ghana
Real estate developers were to pay a 17.5% VAT but upon deliberation with the various stakeholders in the industry, this was pegged at 5%. Even though this new tax has divided opinions, it is expected that the low rate charge will help stakeholders and the general public come to appreciate the long-term benefits of the new tax. The real estate VAT is levied on commercial properties such as hostels, motels and hotels. The real estate VAT does not apply to residential properties.
- Taxes on local properties in Ghana
When buying real estate in Ghana, one thing to keep in mind is that even if you don’t reside there, you can still be required to pay taxes on your property. For instance, local property taxes will apply to a Ghanaian living in France who purchases real estate in Ghana. This might be challenging for foreigners wishing to purchase real estate overseas since it’s critical to comprehend the applicable taxes before entering into any agreements. Because their landlord underpays their taxes, many are unaware that they are being taxed.
- Who is in charge of property taxes in Ghana.
Property taxes are a common method used by governments around the world to raise revenue. While the specifics vary by country and jurisdiction, property taxes generally involve an annual assessment of the value of a property, which is then taxed at a set rate.
- Penalty for late payment of property tax.
Penalties for late tax payments exist in Ghana, just like they do in the US. In Ghana, the government may impose fines on you if you do not pay your taxes on schedule. This also holds true for any taxes imposed on the purchase of your property if you are a foreign national. If you fail to pay your taxes and fines by the deadline, you may be fined up to 10% of the property’s total value.
Google’s People Ask Questions – FAQS
- How much is tax on real estate in Ghana?
The rate is 0.5% of the property value. Property Tax – Local government authorities levy this annually on commercial and residential properties. Rates range from 0.5% to 2% of the assessed property value. Gift Tax – A donor may incur gift tax of 5% when transferring a property as a gift. - How do I pay property taxes in Ghana?
Payment can be done via the Ghana.gov payment platform using Mobile Money, Bank Card, *222# or by visiting the nearest bank to make payment. - Who is exempt from property tax in Ghana?
Individuals over 70 and full-time students enjoy exemptions from the basic rate. Two additional taxes contribute to the financial landscape: ground rent and real estate VAT. Ground rent, an annual fee paid to the Lands Commission, acknowledges the rightful owners of the land.
Conclusion
It can be difficult to purchase a home in Ghana, therefore it’s critical to understand the tax ramifications. You may learn more about the taxes you will be responsible for paying on your home and how to prevent late fees by reading the guidance that follows. Despite the challenges involved in getting a real estate property in Ghana, BOT Properties Ltd makes it very easy for investors. They are ready to guide you on how to make your real estate investment journey much easier.
Learn more about their hottest real estate investment offer for 2024