TaxLawGHby MSL Business School
MSL Business SchoolGhana business tax authority guide
Capital allowance in Ghana
The definitive guide to Ghana’s tax depreciation system: qualifying ownership and use, asset classes, rates, pool movements, disposals, vehicle limits, specialised operations and worked computations.
Published and prepared by MSL Business School through TaxLawGH, its tax and fiscal policy education platform.
MSL Business School capital allowance at a glance
MSL Business School Controlling framework
Capital allowance replaces accounting depreciation for Ghana income tax.
The principal annual rates are 40%, 30%, 20%, 10% and one divided by useful life. The allowance is available for a qualifying depreciable asset that the taxpayer owns and uses in producing business income.
Accounting depreciation is added back in the tax computation. Capital allowance is then calculated under the Third Schedule, with pooling, time-apportionment, disposal and sector rules.
Eligibility
Ownership, business use and depreciable character must all be established.
An asset employed in producing business income that is likely to lose value because of wear and tear, obsolescence or the passage of time.
The claimant must own the asset under the tax rules; a user does not claim merely because it bears operating costs.
The asset must be used in carrying on the claimant’s business during the relevant basis period. Private use is excluded or apportioned.
The Third Schedule pool and ownership rules must be applied at the end of the basis period, including any additions and realisations during the year.
No double deduction: The cost or depreciation of the same asset cannot be deducted again as an ordinary operating expense.
Asset classes and rates
Current Ghana capital allowance table
| Class | Principal asset categories | Method and rate |
|---|---|---|
| Class 1 | Computers, data-handling equipment and peripheral devices | 40% reducing balance |
| Class 2 | Vehicles; construction and earth-moving equipment; heavy and specialised trucks; manufacturing plant and machinery; qualifying long-term crop costs | 30% reducing balance |
| Class 3 | Rail and water transport assets; aircraft; specialised public-utility assets; office furniture; other assets not assigned elsewhere | 20% reducing balance |
| Class 4 | Buildings, structures and similar works of a permanent nature | 10% straight line |
| Class 5 | Intangible assets | 1 divided by useful life, straight line |
| Petroleum operations | Capital-allowance expenditure for each separate petroleum operation | 20% straight line |
| Mineral operations | Capital-allowance expenditure for each separate mineral operation | 20% straight line |
Classification follows the statutory description and actual function of the asset, not the ledger label chosen by the taxpayer.
Pool mechanics
Classes 1 to 3 use reducing-balance pools.
The pool basis begins with the prior closing tax written-down value, adds qualifying expenditure and capitalised amounts, and reflects consideration from disposals under the Third Schedule. For a period shorter or longer than 365 days, the annual rate is adjusted by the number of days in the basis period.
Illustration boundary: A real pool must apply the precise timing, disposal, excess-consideration, private-use and day-count rules to the facts.
Limits and special adjustments
Three rules prevent common overclaims.
After the annual allowance is calculated, a residual pool balance below GHS 500 is granted as additional capital allowance. It is not a general immediate write-off for each low-cost asset.
The recognised cost of a road vehicle other than a commercial vehicle is limited to GHS 75,000; the excess does not enter the pool.
The cap does not apply to a vehicle designed to carry more than half a tonne or more than 13 passengers, or used in a transportation or vehicle-rental business.
The immediate deduction is limited to 5% of the pool’s tax written-down value at year end; qualifying excess is added to the relevant pool.
Disposals and pool dissolution
Disposal proceeds change the pool and can create assessable income.
Consideration from a realised asset is applied under the pool rules before the current allowance is finalised.
Where statutory consideration exceeds the relevant pool balance, the excess can be included in assessable income under the balancing rule.
When all assets in a pool are realised, the pool is dissolved and the balance is dealt with under the Third Schedule.
Market-value and controlled-relationship rules can replace the stated consideration where the statutory conditions apply.
Do not use accounting gain: The tax effect of a disposal follows the pool and realisation provisions; it is not automatically the accounting profit or loss on disposal.
Special sectors and accelerated allowance
Petroleum, mining and excise-stamp machinery have tailored rules.
Capital-allowance expenditure is placed in a separate pool for each petroleum operation and allowed at 20% straight line. Disposal consideration enters assessable income under the specialised rule.
Capital expenditure is ring-fenced to a separate pool for each mineral operation and allowed at 20% straight line.
An importer or manufacturer of excisable goods receives 50% in the first year and 50% in the second year for qualifying machinery used to affix excise tax stamps.
Class 5 uses one divided by useful life; the legal or economic term and any statutory limitation must be established.
Capital allowance working-paper standard
The asset register must support the return from acquisition to disposal.
- 01Record qualifying cost
Keep supplier invoice, import documents, commissioning cost, ownership evidence and payment records.
- 02Assign statutory class
Document the asset’s actual function and the Third Schedule class.
- 03Track use and dates
Record available-for-use date, business/private allocation, basis-period days and any movement between locations or operations.
- 04Reconcile the pool
Bridge opening value, additions, repairs capitalised, transfers, disposals, annual allowance and closing value.
- 05Test caps and special rules
Apply the non-commercial vehicle cap, GHS 500 residual rule, sector ring-fencing and accelerated allowance only where supported.
- 06Retain disposal evidence
Keep sale agreement, invoice, receipts, market-value evidence and pool calculation for each realisation.
Capital-allowance asset register
Move from acquisition evidence to the correct pool, allowance and disposal adjustment.
Record the asset, specification, serial or location and the business activity in which it is used.
Evidence legal or economic ownership and the date the asset is first used to produce business income.
Reconcile purchase price and qualifying directly attributable expenditure, excluding recoverable tax and unsupported amounts.
Assign the asset to the statutory class, rate, method and pool, including any sector-specific treatment.
Identify non-business or exempt-income use and make the required limitation or apportionment.
Distinguish deductible repairs from capital improvements and update the asset record accordingly.
Record consideration, market-value rules, disposal date and the resulting pool adjustment or realisation.
Reconcile the register, financial-statement fixed assets and tax-computation allowance for each basis period.
Frequently asked questions
Capital allowance in Ghana questions
What are Ghana’s capital allowance rates?
The principal rates are 40% for Class 1, 30% for Class 2, 20% for Class 3, 10% for Class 4 and one divided by useful life for Class 5.
Is accounting depreciation deductible?
No. Accounting depreciation is added back. Capital allowance is the tax deduction for qualifying depreciable assets.
What is the GHS 500 capital allowance rule?
After the annual allowance is calculated, a residual pool balance below GHS 500 is granted as additional allowance. It is not an immediate write-off for every asset under GHS 500.
What is the capital allowance cap for a private vehicle?
The recognised cost of a road vehicle other than a commercial vehicle is capped at GHS 75,000.
What is a commercial vehicle for the cap?
It includes a vehicle designed to carry more than half a tonne or more than 13 passengers, or used in a transportation or vehicle-rental business.
How are mining and petroleum assets allowed?
Capital-allowance expenditure is placed in a separate pool for each mineral or petroleum operation and allowed at 20% straight line.
Can capital allowance be carried forward?
The annual allowance itself is claimed in its relevant year. Any resulting business loss is governed separately by the income-tax loss rules.
How are asset disposals treated?
Disposal consideration is applied under the statutory pool or specialised operation rules and can reduce a pool or create an assessable balancing amount.
MSL Business School legal reference map
Primary authority and operative framework
- Income Tax Act, 2015 (Act 896), as amendedGeneral deduction framework, depreciable assets, realisations and business income.
- Third Schedule to Act 896, as amendedAsset classes, rates, methods, pools, day-count formula, disposals, vehicle cap, residual rule and specialised operations.
- Income Tax Regulations, 2016 (L.I. 2244), as amendedSupporting computation, classification and record requirements.
- Revenue Administration Act, 2016 (Act 915), as amendedReturns, records, assessments, corrections, interest, penalties and objections.
Authority hierarchy: The legislation controls the tax result. Administrative guidance and the online portal explain current procedure; they do not create a rate, exemption, deduction or deadline.
Institutional publisher
TaxLawGH is MSL Business School's Ghana tax education platform.
This guide forms part of MSL Business School's public tax and fiscal policy education work. MSL publishes TaxLawGH to make Ghana's tax law accurate, understandable and useful to taxpayers, employers, practitioners, students and policy professionals.
Explore MSL Business School →