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Bank Business
The income-tax treatment of banking business under Act 896.
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Legal effect and current-law check
Sections 100–102 of the Revenue Administration Act, 2016 (Act 915) govern statutory practice notes: a practice note binds the Commissioner-General until revoked but does not bind a taxpayer. A later inconsistent enactment or practice note displaces it to the extent of the inconsistency. This record therefore identifies the note’s own authority and date; the current consolidated law must still be checked.
Document class
GRA practice note
Stated authority
Income Tax Act, 2015 (Act 896)
Reader status
Use with current consolidated law
Act 915 route
1.0 TAX LAW+
The Commissioner-General of the Ghana Revenue Authority is empowered under paragraph 2 of the Seventh Schedule of the Income Tax Act, 2015 (Act 896) to issue
Commissioner-General. Accordingly, this Practice Note is issued in respect of Banking Business under section 87 of the Act.
2.0 INTERPRETATION+
In this Practice Note, unless the context requires otherwise, the word “Act” means the Income Tax Act, 2015 (Act 896).
Definitions and expressions used in this Practice Note, unless the context requires otherwise, have the same meaning as they have in the Act.
3.0 THE PURPOSE OF THIS PRACTICE NOTE+
The purpose of this Practice Note is to give clarity and provide guidance to officers of the Ghana Revenue Authority, Tax Practitioners, Consultants, Taxpayers and the general public on separating the banking business of a company engaged in banking from other business activities of the company as provided under section 87 and 88(4) of the Act to ensure consistency in the implementation of the Act.
4.0 APPLICATION OF THE LAW+
The provisions of sections 87(1) and 88(4) of the Act require that a company engaged in a banking business as defined under section 90 of the Banking Act, 2004 (Act 673) and the first schedule of the Non-Bank Financial Institutions Act, 2008 (Act 774) should keep the banking business separate from other business activities of the company. Separate books of accounts are required to be kept for the banking business and the other business activities of the bank.
The chargeable income from the banking business of a person is required to be determined separately from the chargeable income of any other business activity of the person.
ILLUSTRATION 1
A company that engages in Banking Business, Assets Management Business and Insurance Business is required to keep separate books of accounts for the Banking Business, the Assets Management Business and the Insurance Business.
The chargeable income of the company is required to be determined separately for the banking business, Assets Management Business and the Insurance Business.
Banking Business
ILLUSTRATION 2
Company A is engaged in the business of Banking, Assets Management and Insurance. Information gathered from their records indicates the following performance results for 2016 year:
Banking Business Assets Management Insurance GHS GHS GHS
| Description | GHS | GHS | Total GHS |
|---|---|---|---|
| Gross Profit | 1,200,000 | 350,000 | 200,000 |
| Expenses | 800,000 | 250,000 | 150,000 |
| Net Profit before Tax | 400,000 | 100,000 | 50,000 |
| Non-Allowable Expenses | 200,000 | 50,000 | 50,000 |
| Capital Allowance | 250,000 | 80,000 | 75,000 |
Determine the Chargeable Income of the businesses of Company A as required under the Income Tax Act, 2015(Act 896) for 2016 year of assessment.
SOLUTION
Banking Business Assets Management Insurance
| Description | GHS | GHS | GHS |
|---|---|---|---|
| Net Profit before Tax | 400,000 | 100,000 | 50,000 |
| Add: Non-Allowable 200,000 | 50,000 | 50,000 | |
| Expenses 600,000 | 150,000 | 100,000 | |
| Deduct: Capital 250,000 | 80,000 | 75,000 | |
| Allowance Chargeable Income | 350,000 | 70,000 | 25,000 |
Note: Company A is required to prepare separate Financial Statements for each of the
three business activities.
Official source
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