Order of Paying Tax

This Practice Note is issued in respect of section 49 of the Revenue Administration Act, 201 6 (Act 915), which provides for the regulation and order of payment of multiple tax liabilities under the tax laws.

In this Practice Note the word "Act" means the Revenue Administration Act. Definitions and expressions used in this Practice Note have the same meaning as they have in the Act.

The purpose of this Practice Note is to provide for uniformity in the application of order of payment by taxpayer by way of:

1. • Giving priority to payment of third party taxes (Withholding taxes and VAT)
2. • Addressing the phenomenon of aged liabilities ignored for current ones
3. • Resolving non collection of interests and penalties imposed
4. • Notifying taxpayers on the order of payment of multiple tax liabilities

A person with multiple tax liabilities is to note and comply with the order of payment as follows: third party taxes* (ii) principal liability according to age of the debt (old debt must be settled before current debt) (iii) penalty (iv) Interest *for third party liabilities, priority should be given to liability that does not relate to the person i.e. PAYE, VAT, CST, Withholding Tax (WHT) before others e.g. Company Income Tax (CIT)

Agyengo Enterprise Limited is liable to pay taxes under the following tax types for 2019 Year of Assessment;

1. • PAYE,.. GHC 10,000
2. • WHT. GHc 20,000
3. • Company Income Tax. ..GHc 50,000 Penalty.. ..GHc 2,800 > Interest. ..GHC 15,000 TOTAL GHc 97,800 However, the taxpayer can make payment less than the total amount outstanding for all the above tax types. The Taxpayer has at his disposal only GHs 70,000. The order of payment would be as follows;

Solution — order of payment

Zuana

Solution — order of payment

NB: However, payment for the above tax handles should be made separately in view of separate bank accounts.

Emali Communication Limited is liable to pay taxes under the following tax types

1. • VAT/NHIL. . GHc 20,000
2. • CST... GHc 18,000 EXCISE.
3. • GHc 15,000 IMPORT DUTY/VAT.
4. • GHc 50,000 > CIT... GHc 40,000 > PAYE. GHc 15,000
5. • WHT ...GHC 45,000 TOTAL GHc 203,000 However, the taxpayer can make payment less than the total amount outstanding for all the above tax types. The Company issued a cheque of GHc138,000 to settle outstanding taxes. The order of payment would be as follows:

Solution — order of payment

Source arithmetic note: the seven allocations printed in the note total GHS 153,000, although the narrative states that the cheque is GHS 138,000. The figures are reproduced as issued and should not be treated as a reconciled computation.

NB: However, payment for the above tax handles should be made separately in view of separate bank account. In the illustration above IMPORT DUTY/VAT is considered last in the payment because goods or asset of the taxpayer will be in the custody of customs and can readily be auctioned to defray the tax liability Also, the taxpayer would be compelled to make arrangement for payment to avoid rent and demurrage.

K. S Company owes the following taxes:

1. 1. CIT 2017 (First and Second Quarters) GHc 200,000
2. 2. CIT 2016....... GHc 60,000
3. 3. PAYE (NOV-DECEMBER, 2016). GHc 50,000
4. 4. PAYE (JAN -MAY, 2017) .... GHc 30,000
5. 5. WHT SURCHARGE (2015).... GHc 20,000
6. 6. TOTAL.... GHc 360,000

Assuming the company issued a cheque of 250,000 defray its liabilities. The order of payment shall be as follows

Solution — order of payment

NB: However, payment for the above tax handles should be made separately in view of separate accounting systems. - 28/5