Daniel Nuer, Head of the Tax Coverage Unit on the Ministry of Finance, Ghana, has revealed that the Ministry of Finance is working to introduce about 36 extra Double Taxation Agreements.
That is along with the 14 at present being enforced in Ghana.
Based on Mr. Nuer, six of the agreements are pending Parliamentary ratification, 5 are nonetheless being negotiated (Hungary, Israel, UAE, Korea, and Egypt), whereas 5 extra have been concluded however are but to be signed.
Moreover, whereas discussions have begun on three others, three extra are being renegotiated.
“We’re renegotiating them as a result of though they have been negotiated some time again – some greater than 20 years in the past, they weren’t ratified. Issues have modified then, equivalent to fashions which are actually outmoded so we have to renegotiate them and convey them updated “, he remarked throughout a UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana webinar on Tax Residency Guidelines in Ghana: Making ready Multinationals for Compliance”.
These treaties, as soon as they arrive into power, will present aid from double taxation, scale back tax charges based mostly on negotiated agreements, present exemptions to firms equivalent to international airways and transport firms, and supply entry to Mutual Settlement Process (MAP) for dispute decision amongst others.
Nonetheless, for an individual to profit from these treaty agreements, the individual should be a resident of Ghana, a resident of the treaty accomplice, or each; be a helpful proprietor of the earnings, and meet any limitation of Advantages (LOB) or Entitlement to Advantages provisions contained within the treaty, the place relevant.
Defining Ghana’s Company Tax Residency Guidelines
Tax residency is a crucial side of taxation for each people and entities, figuring out which nation has the appropriate to tax people’ world-wide earnings.
In Ghana, the Earnings Tax Act 2015 (Act 896) imposes taxes on the overall earnings of ‘Resident Individual(s), together with firms, from all sources (home and international).
Based on Michael Adu-Owusu, the Head – CRS Compliance & Enforcement at Alternate of Info (EOI) on the Ghana Income Authority, a ‘firm’ is one that’s included below the legal guidelines of Ghana (Corporations Act 2019 (Act 992), with the administration and management of its affairs being exercised in Ghana at any time in the course of the 12 months.
By this association, the earnings tax act establishes what’s termed as a Everlasting Institution (PE). A PE is an entity separate from its proprietor and topic to tax below Part 1 in the identical method as a resident firm, if the PE is a Ghanaian everlasting institution.
A Ghanaian PE is a spot in Ghana the place a non-resident individual carries on enterprise, or engages in a building, meeting or set up venture for ninety days or extra.
Actions of a PE embody when an proprietor of an organization employs a person resident in Ghana or makes a sale of buying and selling inventory of the identical or an identical variety as these bought by a PE.
“So, the extent that this rule apples, the entity can be thought-about to be PE and the tax rule will apply accordingly’, Mr. Adu-Owusu mentioned.
An organization may be deemed taxable based mostly on its Place of Efficient Administration (PoEM). PoEM is the place the place key administration selections which are needed for the conduct of the entity’s enterprise as a complete are in substance, made.
Some elements to be thought-about in figuring out PoEM embrace the place the place the CEO and different senior executives normally stick with it their actions.
Tax Residency Standing and Challenges with Compliance
An organization working in Ghana can fall between a PE and a PoEM. This will result in challenges complying with the tax legal guidelines.
As an illustration, Godwin Kofi Matachor, a Senior Supervisor in Worldwide Tax and Transaction Companies with EY Ghana and a speaker in the course of the webinar, highlihted that it’s typically difficult to correctly label international firms who solely arrange liaison workplaces in Ghana, in lieu of producing or offering any service. This makes their tax obligations as both PE or PoEM tough to find out.
Mr. Nuer, in response, urged tax payers to seek the advice of the Commissioner Normal of the GRA to find out their standing.
“It’s at all times necessary to speak to the GRA. As soon as your issues get to the GRA, there are a number of exams that will be utilized and whether it is decided, as an example, that you’re a PE, the corporate must file a return and make some funds”.
Mr. Nuer burdened additional that, “Your residency determines how you might be taxed. It doesn’t change your legal responsibility to tax. That’s the reason, if we’re unsure, we use the mutual help programme to find out the place you must pay the tax”.
Nonetheless, within the absence of a Double Taxation treaty, a international tax credit score system (FTC) is used. FTCs, Mr. Nuer mentioned, scale back tensions that will come up as a consequence of misconceptions in double taxation circumstances.
Resolving Worldwide Tax Points
Mr. Nuer revealed that the UN Mannequin Conference is at present being revised to arrange a framework conference on worldwide tax cooperation, in addition to set up protocols on how the framework will function.
The revision will synthesise and harmonise double taxation agreements throughout varied jurisdictions to eradicate completely different issues of what constitutes a resident firm from one jurisdiction to the opposite.
Mr. Nuer was optimistic that “Within the subsequent few years after this stuff are accomplished, we’ll get a good suggestion of what to anticipate”.
Whereas Mr. Nuer doesn’t anticipate the principles to vary a lot, he expects that the revised conference will harmonise present double taxation points to allow multinationals simply adjust to Ghana’s tax residency guidelines.
“We could have one algorithm. Ghana is not going to have a unique algorithm completely different from the UK or the USA. There can be usually some stability within the guidelines so multinationals can interact comfortably with the GRA.
The Method Ahead
Mr. Nuer suggested taxpayers searching for additional training on DTAs and their commentaries to seek the advice of the UN Mannequin Conference.
“We have now departed from what the Organisation for Financial Co-operation and Growth (OECD) makes use of. Regardless that the GRA makes use of a hybrid commentary, ours is nearer to that supplied by the UN Mannequin”, he mentioned.
To be usually compliant with Ghana’s company tax legal guidelines, Mr. Nuer additional suggested non-resident taxpayers to contact the GRA’s Consumer Service Unit however “When you’ve been registered for VAT, then it signifies that mechanically, you may have a TIN and might due to this fact use the GRA internet portal”, he mentioned.
Mr. Adu-Owusu added that the “GRA’s Consumer Service is readily available to help, whether or not it’s IT associated, laws, misunderstanding, or regardless of the challenge is, it will likely be duly addressed so that you can conveniently adjust to the legal guidelines and pay your taxes”.
The webinar, moderated by PwC Ghana’s Christiana Osei-Mensah, mentioned a spread of associated matters together with the cost of ultimate withholding taxes in non-resident circumstances, DTA tax charges, tips on how to entry DTA treaty advantages, and the way a change in residency standing impacts tax obligations and compliance.
Yvonne Nikoi, Head of the Accounting and Taxation Division of Minkah-Premo, Osei-Bonsu, Bruce-Cathline and Companions (MPOBB), additionally spoke in the course of the occasion.