Remedies from Withholding Tax Surcharges
From our experience a lot of companies do not fully comply with Section 116 of the Income Tax Act 2015 (Act 896). This section indicates that a resident person shall withhold appropriate tax in accordance with paragraph 8 of the First Schedule when making payment which has a source in the country.
We have noticed taxpayers fraught with high tax risk relative to withholding tax non-compliance which culminates in huge tax assessment including interest and penalties.
Therefore, if you were unable to comply with the aforementioned section and the company is surcharged by GRA, what remedies do you have to at least mitigate your tax liabilities?
In accordance with Section 117(5), a withholding agent who fails to withhold tax but pays the tax that should have been withheld to the Commissioner- General in accordance with subsection (1) is entitled to recover an equal amount from the withholdee. The withholdee is the person to whom the payment for either goods, works or services was made.
You can take advantage of this window by doing the following:
• Prepare a schedule of the withholding tax when making payment to GRA to enable withholding tax credit certificate to be generated for the withholdee or to have their account credited as the case may be.
• Furnish the withholdee with the tax credit certificate.
• Discuss with the withholdee to make a refund to you or discuss an alternative payment arrangement.
However, it is recommended that by Q3 of the year of assessment, a tax health check is to be conducted to flag out any non-compliance so that remedial action can be taken to avert withholding tax surcharges.