The Ghana Revenue Authority (GRA) has explained that private universities will pay tax only if they make profits.
“It needs be emphasised that for business entities, it is only their business profits that are subject to tax. Where a loss is made, no tax is payable,” it said.
A statement signed by the Commissioner-General of the GRA, Mr George Blankson, and issued by the authority said it was, “therefore, essential that as business entities, private educational institutions prepare their financial statements showing the results of their activities for each year of assessment and file all relevant tax returns with the GRA as required by law for a determination of their actual taxes payable”.
The statement was in reaction to calls by the Conference of Heads of Private Universities in Ghana (CHPUG) for the immediate restoration of the tax exempt status of private universities.
According to the CHPUG, the taxation of private universities per the amended Internal Revenue Act was detrimental to the interest of university education and Ghana’s development planning.
But the GRA, in its statement, said the expression “educational institution of a public character” contained in the definition of “exempt organisation” became an issue, resulting in interpretations that differed from the fundamental intention of a focus on public educational institutions.
It said it was on that basis that Section 6 of the Internal Revenue (Amendment) Act, Act 859, 2013, redefined the meaning of “exempt organisation” to clarify the status of educational institutions.
“Under Section 6 of Act 859, ‘exempt organisation’ includes a person (a) that functions as (i) a religious or charitable institution of a public character; (ii) a state-owned or state-sponsored educational institution,” it said, stressing that “the other aspects of the meaning of ‘exempt organisation’ under the principal enactment (Act 592) as earlier indicated remain unchanged”.
In effect, it said, an “exempt organisation” which undertook an activity of a business nature and derived income as a result would be subject to tax on the income from that business.
The statement said the “exemption status” outlined under Section 10 (1)(d) of Act 592 did not confer total tax exemption on all categories of income, even for an institution or organisation which qualified as an “exempt organisation”.
“Private educational institutions, including private universities, as well as private pre-tertiary institutions, just as other private enterprises, are subject to tax on their business and other incomes, subject to any other exemptions and concessions provided for in the Internal Revenue Act, 2000 (Act 592) as amended,” it stated.
It explained that by the provisions of Act 859, it was only a state-owned or state-sponsored educational institution which could qualify as an “exempt organisation”.
It, however, stated that where such a state-owned or state-sponsored educational institution, as an “exempt organisation”, undertook any activity that was in the nature of a business, the income derived from that activity was fully taxable under Section 10(1)(d) of Act 592.