Ghana to Expand Double Taxation Agreements with 36 New Treaties. The Ministry of Finance in Ghana is planning to expand its network of Double Taxation Agreements (DTAs), adding 36 new treaties to the 14 currently in effect.
This initiative aims to enhance international economic partnerships and streamline tax compliance for multinationals operating in Ghana.
Expanding the Double Taxation Network
Daniel Nuer, Head of the Tax Policy Unit at the Ministry of Finance, revealed during a recent webinar organized by the UK-Ghana Chamber of Commerce and PwC Ghana that six of these new agreements are awaiting parliamentary ratification.
Negotiations are ongoing with five countries, including Hungary, Israel, UAE, Korea, and Egypt, while five other treaties have been concluded but are yet to be signed.
Additionally, three DTAs are in the early stages of discussion, and another three are undergoing renegotiation to update outdated provisions.
“Some of these treaties were negotiated over 20 years ago and have become outdated. We’re renegotiating them to reflect current economic realities and modern tax models,” Nuer explained.
Benefits of the New Agreements
Once these agreements are finalized and ratified, they will provide significant tax relief, reduce tax rates based on mutual agreements, and offer exemptions for certain sectors such as foreign airlines and shipping companies.
Moreover, these treaties will introduce a Mutual Agreement Procedure (MAP) to resolve tax disputes, fostering a more favourable business environment in Ghana.
To benefit from these treaties, individuals or companies must be residents of Ghana or the partner country, the beneficial owners of the income, and comply with the treaty’s Limitations of Benefits (LOB) provisions, where applicable.
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Understanding Ghana’s Corporate Tax Residency
Ghana’s Income Tax Act of 2015 mandates that all resident individuals and companies are taxed on their global income. The Act defines a company as a tax resident if it is incorporated under Ghanaian law and its management and control are exercised in Ghana at any point during the tax year.
Michael Adu-Owusu, Head of CRS Compliance & Enforcement at the Ghana Revenue Authority (GRA), highlighted that this framework also establishes the concept of a Permanent Establishment (PE).
A PE in Ghana refers to a fixed place of business where a non-resident entity conducts business or engages in significant projects for more than 90 days.
The tax obligations for a company depend on its classification as either a PE or based on its Place of Effective Management (PoEM).
Challenges with Tax Compliance
Navigating Ghana’s tax laws can be complex, especially for foreign entities that establish liaison offices rather than full operational setups. Godwin Kofi Matachor, a Senior Manager in International Tax at EY Ghana, pointed out the challenges in categorizing such entities under Ghanaian tax law.
Nuer advised companies facing uncertainties to consult with the GRA to determine their tax status. “It’s crucial to engage with the GRA for clarity on tax obligations,” he emphasized. He also noted that in the absence of a DTA, a Foreign Tax Credit (FTC) system would be used to mitigate potential double taxation.
Future of International Tax Cooperation
Looking ahead, Nuer disclosed that the UN Model Convention on International Tax Cooperation is being revised to create a unified framework that could standardize DTAs across different jurisdictions.
This revision aims to harmonize tax rules, making it easier for multinationals to comply with Ghana’s tax laws.
“In the coming years, we expect these revisions to provide clearer guidance on international tax issues,” Nuer said, expressing optimism about the future of tax cooperation.
Guidance for Taxpayers
To ensure compliance, Nuer encouraged non-resident taxpayers and businesses to seek guidance from the GRA’s Client Service Unit.
The webinar, moderated by PwC Ghana’s Christiana Osei-Mensah, also covered topics such as final withholding taxes for non-residents, DTA tax rates, and the impact of residency changes on tax obligations.
Yvonne Nikoi, Head of the Accounting and Taxation Department at Minkah-Premo, Osei-Bonsu, Bruce-Cathline and Partners (MPOBB), also contributed to the discussions, providing additional insights into tax compliance and benefits under Ghana’s evolving tax landscape.