REAL ESTATE MINUTE: REAL ESTATE TAXES–Pro tips you should know

I am sure if there was a visibility test for the most visible government agencies, Ghana Revenue Authority (GRA) will win that prize hands down. It is not uncommon to see a GRA official literally breathing down the neck of attendants at various check out points at various commercial outlets. They are there to collect in real time taxes by ensuring compliance. Other forms of taxes, beyond retail, especially those regarding property maintenance, sale, purchase, rental etc. aren’t so easy to collect and require investors, landlords fully fulfilling their obligations. Failure to do so could result in legal action. Should you fail to fulfill your property tax obligations and the taxes unpaid accumulate beyond a certain threshold, then your property will be at the mercy of that state which can repossess and auction off the property in question. In rare cases where the outstanding taxes are so high, other properties belonging to the offender could be auctioned off to defray the outstanding debt.

As good citizens, we are implored to fulfill our tax obligations but lack of proper accounting, record keeping and good old “outsmarting aban” (outsmarting the government) means we tend to have outstanding tax obligations or find ourselves in messy situations. Here is what to know about property taxes and the pro tips advised.

The Forms

While there may be a few number of taxes including capital gains tax (15%on property sale); stamp duty (applies to legal documents drawn on sale and purchase of properties and rate is usually 0.5% of the property value); even a gift tax of 5% can be charged when transferring properties that are gifted to you, as well as interestingly, inheritance tax for properties inherited. While there are these taxes, the ones that easily resonate are rent income tax and property tax.

Property Tax

This is an annual tax charged on every real estate property, including land and is payable to the GRA. It is payable on residential and commercial properties. Property tax, popularly known in Ghana as property rate, paid on immovable property, is collected annually by the GRA who are charged with assessing and collection of property related taxes determines how much is to be paid by Ghanaian property owners.

Property tax is levied annually by local authorities on the estimated value of the property, depending on the classification of the area where the property is located. Previous rates ranged from 0.5% to 3%. These rates were by far, the highest rates paid on properties in the capital, Accra in comparison with other regions of Ghana.

Rent Income Tax

According to the GRA, rent income is one which accrues to someone as a result of the letting or leasing a property to another person. The tax paid on rent income is referred to as Rent Tax. Rent Tax must be paid within 30 days after the rent income is received. There are two rates for rent tax; 8% for residential premises and 15% for non-residential premises. Payment of the rent tax can be made at the nearest Domestic Tax Revenue Division Office. Failure to fulfill this tax obligation could attract an interest of 125% of the statutory rate compounded monthly.

Pro Tips

As advised as citizens you should see to the fulfilment of all tax obligations. There are few tips to make your life easier though. If you are an organization, it is advised to use structures like trusts and partnerships which can significantly reduce tax liabilities. You can also establish a holding company with individual subsidiaries owning properties separately. It is also important to keep in mind that certain related property costs like interest, repairs, maintenance, insurance and agent fees are tax deductible against rental income.

State Protection

So, as we say in these parts “shine your eyes”,  grab a seat, spend some time over books because in as much as fulfilling your tax obligations sometimes seem like an unnecessary burden and “money gone down the drain”, there are certain benefits and protection that the state provides to you when your taxes check out. By fulfilling your tax obligations, you are captured in state records and recognized as the legitimate property owner with your address attached. With state recognition, you are protected in case of unforeseen claims and disputes. So you see, taxes are not a one way affair that benefit only the state, you stand to gain as well. Pick up that phone and call your Assembly and work those numbers.

The writer is the Executive Director of Yecham Property Consult

 & Founder of Ghana Green Building Summit.

 

Email: [email protected]

Linkedin: Cyril Nii Ayitey TettehTweet

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