Ghana's 2026 Employment Tax Reset: GRA Clarifies Per Diem Treatment

A new development is reshaping the compliance landscape for employment income tax in Ghana this year. The Ghana Revenue Authority (GRA) has issued formal guidance clarifying when per diem and subsistence allowances especially public servants are taxable under the Income Tax Act, 2015 (Act 896) as amended. This carries immediate implications for employers, payroll administrators, and tax practitioners advising on remuneration structuring. Part I: GRA Clarifies the Tax Treatment of Per Diem and Subsistence Allowances

In a letter dated 24 July 2026 (Ref. DTRD/OPS/07/2026) addressed to the Controller and Accountant-General, the Domestic Tax Revenue Division of the GRA set out its position on the “Tax Treatment of Per Diem and Subsistence Allowances under the Income Tax Act, 2015 (Act 896) as amended.”

The stated purpose of the communication is to distinguish per diem payments that constitute taxable employment income from those that are exempt. The GRA grounds its position in Section 4 of Act 896, which brings the gains or profits from employment (including salaries, wages, allowances, bonuses, gratuities and any other payments or benefits received in respect of employment ) as chargeable income subject to income tax unless a specific exemption applies. The Authority is explicit that the taxability of a per diem turns on its substance and purpose, not merely on how it is labelled or described in payroll records.


When Per Diem Is Taxable

Per diem payments that compensate an employee for services rendered, or that confer an economic benefit beyond the reimbursement of business expenses, form part of employment income and are taxable under Sections 4 and 8 of Act 896. The GRA identifies three illustrative categories:
1. Daily subsistence allowances paid without regard to actual official travel or expenditure;

2. Fixed per diem allowances paid as a regular component of an employee's remuneration; and

3. Excess amounts retained by an employee after official travel where the payment is not supported by the actual business expenditure incurred.

More broadly, the letter states that per diem should be subjected to PAYE where it constitutes additional remuneration, is paid irrespective of official travel, exceeds reasonable business travel requirements with the excess retained without accountability, or is paid where there is no genuine official business purpose.

When Per Diem Is Exempt

By contrast, genuine reimbursements or reasonable allowances paid solely to defray expenses necessarily incurred in the performance of official duties do not constitute taxable employment income — provided they are wholly, exclusively, and necessarily incurred in carrying out the employer's business, and are properly accounted for. The GRA's reasoning is that such payments merely restore the employee to the financial position held before the expenditure and confer no personal economic gain. Per diem may generally be treated as non-taxable where it:



1. represents a reasonable estimate of accommodation, meals, local transportation, and incidental expenses;

2. is supported by the employer's travel policy and appropriate administrative approvals; and

3. is subject to accountability that is, unspent balances are refunded to the employer, or the employee otherwise accounts satisfactorily for the expenditure in line with the employer's accountability procedures.

The GRA has reminded employers of their existing obligation under Act 896 to withhold and remit PAYE on all taxable employment income, warning that failure to correctly withhold may trigger the enforcement and penalty provisions of the Act. It has also encouraged the Controller and Accountant-General's Department to ensure that payroll and travel policies clearly distinguish between accountable reimbursements that merely defray official expenses and allowances that constitute employment income subject to PAYE.

For practitioners, the letter effectively codifies a substance-over-form, accountable-plan test that mirrors approaches used in several other jurisdictions: an allowance survives exemption only where it is tied to actual official travel, reasonably estimated, policy-governed and reconciled. Employers (particularly in the public sector, where per diem is a common feature of remuneration for travel, training, and workshops) should treat this as a prompt to audit existing travel and subsistence policies, tighten approval and retirement (accountability) procedures, and revisit any per diem paid as a routine top-up to salary rather than as a genuine expense reimbursement.

Practical Implications for Employers and Tax Practitioners

Audit travel and subsistence policies now. Confirm that per diem is paid only against approved official travel, is reasonably estimated, and is subject to genuine accountability (retirement of unspent balances or expenditure justification), so that it falls on the exempt side of the GRA's test.

Separate fixed allowances from true reimbursements in payroll structuring. Any per diem or subsistence element paid as a routine, non-travel-contingent top-up to salary should be treated as taxable employment income and subjected to PAYE withholding.

Review withholding exposure. Given the GRA's reminder about enforcement and penalty provisions, i.e., employers especially those in the public sector and large taxpayer segment specifically addressed in the July 2026 letter should assess historical per diem practices for retrospective withholding risk.

The per diem clarification points toward a common administrative theme in 2026: tighter alignment between the substance of payments and their tax treatment.

Sources: GRA letter Ref. DTRD/OPS/07/2026, “Tax Treatment of Per Diem and Subsistence Allowances under the Income Tax Act, 2015 (Act 896),” 24 July 2026.

This article is for general information only and does not constitute tax or legal advice. Specific transactions should be assessed against the final text of any enacted legislation and current GRA guidance.