In March 2024, the Ghana Revenue Authority issued a Practice Note most CITG students have never opened. It clarifies Minimum Chargeable Income, MCI — a provision introduced by the Income Tax (Amendment) Act, 2023, Act 1094, into Section 2A of the Income Tax Act, 2015, Act 896. If you’re preparing for a sitting anytime soon, this is examinable, current, and worth mastering ahead of your competition.
What MCI Actually Is
MCI is 5% of a person’s turnover for a year of assessment, charged where that person has declared tax losses for the previous five consecutive years of assessment. Turnover means total business or investment income before any expenses or operating costs are deducted — this is not profit, and it is not chargeable income. The rule kicks in from the sixth year and continues every year after that until the taxpayer finally declares a genuine tax profit.
There are exactly two exclusions, both in Section 2A(2) of the Act: a business within its first five years of operations is excluded entirely, and a person engaged in farming is excluded entirely, regardless of how many consecutive loss years they’ve had.
Where Students Get It Wrong
Take Mike.com Ltd, which declared losses every year from 2018 through 2023 — six straight loss years — on a 2023 turnover of GH¢8,000,000. MCI applies cleanly: 5% of GH¢8,000,000 is GH¢400,000, taxed at 25%, giving GH¢100,000 payable.
Asempaye Wholesale and Retail Company Limited is where it gets interesting. The company declared losses every year from 2018 to 2022 — five consecutive years — then returned to an adjusted profit of GH¢50,000 in 2023 on turnover of GH¢530,000. On the surface, that looks like a profit year that should escape MCI. But Section 17 requires the company to first offset that profit against its unrelieved losses brought forward — GH¢25,000, GH¢15,000 and GH¢10,000, totalling exactly GH¢50,000. Once that relief is applied, chargeable income for 2023 is nil. Because there is no genuine profit left standing, MCI still applies: 5% of GH¢530,000 is GH¢26,500, taxed at 25%, giving GH¢6,625 payable.
The Two Contrast Cases That Seal the Rule
A-Z Company Ltd had the same five consecutive loss years, but its 2023 profit before adjustment was GH¢210,000 — large enough that even after absorbing all brought-forward losses, GH¢40,000 of genuine chargeable income survived. Because a real profit remains after relief, MCI does not apply, and tax is charged normally on the GH¢40,000 at 25% — GH¢10,000.
Moonlight Company Ltd declared a mix of profits and losses across its years, rather than five consecutive loss years. Even though losses appear in several of those years, the chain isn’t unbroken, so the five-consecutive-years condition is never met — MCI never applies, and its sixth-year chargeable income of GH¢190,000 is simply taxed at the normal rate.
Exam tip: Run every MCI question through three checks in order: (1) is the taxpayer excluded — first five years of operation, or farming? (2) were the previous five years consecutive loss years, with no break in the chain? (3) after applying Section 17 loss relief to the current year, is there genuine positive chargeable income left? Only if the answer to (3) is no do you compute MCI as 5% of turnover at the applicable rate. Where a business runs segments taxed at different rates, MCI itself is apportioned across those segments by their share of total turnover before each segment’s own rate is applied.
Conclusion
MCI is one of the few genuinely new provisions in the Income Tax Act right now, and that newness is exactly why it’s worth mastering ahead of your sitting — it’s underrepresented in every study guide printed before 2024, which makes it exactly the kind of question that separates a well-prepared candidate from everyone else in the hall.
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