This piece is for educational purposes and to sensitise the general public about gift tax. It will also help us to learn how gift tax arises, how to pay it, the time frame one has to file, the marginal tax relief and exemptions associated with gift tax. After reading this piece just walk into any tax office and request for Gift Tax Returns form and sincerely submit your gift tax for the month of December 2020 since it is the month with most gifts in a year.

Gift tax is a kind of tax paid on gifts received from other persons or organisations. Gifts, as we all know, come in forms of money or item given to someone without the expectation of consideration. A gift is therefore a free item or money received without working for it. In most cases, assets you inherited typically aren’t taxable income. However, if the assets later produce income (perhaps they earn interest or dividends, or you collect rent), that income is likely taxable.

A gift according to the tax law arises under two main conditions. There’s gift derived as a result of employment and there are those derived from sources other than employment (receivables). As enshrined in Income Tax Act 2015 (Act 896), gifts are added to either employment income, investment income or business income depending on the source.

According to Evans Agariga, employment gift arises when there is a link between the payment and the employment and that the gift would not have been made but the employment. Gift received from employment is taxable. Employment gift include payment of tips, gift of any kind to show appreciation at work, end of service awards and the almighty ex-gratia. Gifts acquired through employment have to be added to the total assessable income and calculated using the graduating tax schedule stipulated by the Ghana Revenue Authority. 

Some monetary exchanges are not subject to the gift tax no matter their amount. Included in those exceptions are almost all monetary exchanges between a husband and a wife if both spouses are citizens, all amounts of money paid directly to an educational institution to cover tuition, or all amounts of money paid directly to a medical institution to cover medical expenses. Direct gifts made to educational and/or medical institutions can be made on behalf of any person, not just a person related to the giver.

Receivables include all other gifts received but not as a result of employment. It includes a gift from family and friends and it can be in the form cash, land, car, building, hampers from friends that have nothing to do with employment. Taxable gifts include buildings, land, shares and bonds in Ghana, business and business assets, money including foreign currency not forgetting the Xmas hampers received from loved ones during the festivities and beyond. Gifts are taxed at a rate of just 15% of a value in excess of Fifty Ghana Cedis (GHS50). The value of taxable gift is the market value of the gift at the time of the receipt. Taxable gift refers to the amount OR value left after deducting the GHS50 from the gift value. It is payable by the recipient of the gift.

Exemptions of Gift Tax

A gift received by a person under a will or upon intestacy, by a religious body which uses the gift for the benefit of the public or a section of the public or, for charitable or educational purposes and by a person from that person’s spouse, child, parent, aunt, uncle, nephew, or niece are all exempted from Gift Tax.

The onus to pay Gift Tax lies on the receiver of the said gift, however there is nothing wrong for the giver to pay it on the receiver's behalf by informing the revenue admin officials. If you can pay tax on your employment and other incomes that you have worked for, why shouldn’t you pay tax on something you got for free?

 Let’s pay our taxes correctly to ensure development.

The writer, Mustapha M S. Yorda, has an accounting and finance background