Understanding Ghana’s Modified Tax Scheme: Categories, Thresholds & Who Qualifies

Ghana’s Modified Tax Scheme is designed to simplify tax compliance for individuals in the informal sector. It aims to encourage voluntary tax compliance, expand the tax base, and ensure fairness across income levels and business types according to the Ghana Revenue Authority (GRA).

1. Categories Under the Presumptive Tax System

The system is divided into three main categories based on turnover and the nature of business income:

a. Presumptive Tax Based on Installment (PTI)

• Applies to micro businesses whose income levels fall within the lowest bracket.
• Tax is paid using fixed installment amounts determined by income tiers and activity type.
• Average turnover for the last three consecutive years must not exceed GHS 20,000.

b. Presumptive Tax Based on Turnover (PTT)

• Applies when annual turnover is more than GHS 20,000 but not more than GHS 500,000.
• Tax is charged at a flat rate of 3% on total annual sales (turnover).

c. Modified Cash Basis (MCB)

• Applies to businesses with turnover above GHS 20,000 but not exceeding GHS 500,000.
• Tax is paid on profit (earnings minus allowable expenses related to producing that income).
• Ideal for small businesses that keep basic financial and expense records.

2. Qualification Criteria

To qualify for any of the presumptive tax categories, an individual must:

• Be a resident of Ghana.
• Earn income solely from their own business (not from employment).
• Earn income only from sources within Ghana.
• Not be registered for VAT.

3. Who Does NOT Qualify for Presumptive Taxation?

Presumptive taxation is designed as a simplified form of Personal Income Tax for informal sector operators. Therefore, the following individuals cannot apply for PTI or PTT:

• Professionals with formal qualifications (e.g., lawyers, engineers, accountants).
• Owners of multiple businesses or multiple business outlets.
• Partners in formally registered business partnerships.
• Individuals who voluntarily opt out of presumptive tax.

These individuals must instead register under the Modified Cash Basis (MCB) or the standard taxation system, depending on their specific circumstances.