The Ghana Revenue Authority (GRA) is poised to fully digitalize the application process for treaty benefits, a significant move announced by Nana Mensah Otoo, Head of the GRA’s International Tax Office. This initiative, revealed during a webinar hosted by the UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana, aims to enhance efficiency and accessibility for taxpayers and multinational companies navigating international tax landscapes, especially amidst ongoing global and local tax reforms.
Streamlining Cross-Border Tax Compliance
The digitalization of treaty benefit applications is designed to significantly reduce compliance costs for businesses operating across borders. By streamlining the process, the GRA expects to enhance tax certainty and improve access to Double Taxation Agreements (DTAs) for qualifying entities.
Currently, the manual verification process, which includes confirming tax residency certificates with treaty partners, can lead to extended processing times. Mr. Otoo highlighted common issues such as incomplete submission of critical contract details, missing withholding receipts, and failure to provide proof of payments, all of which contribute to delays in approving treaty benefit applications.
While the automated system promises to improve the ease of doing business in Ghana, taxpayers will still be required to formally apply to the GRA for approval to utilize DTAs. This ensures a structured approach to benefit eligibility and compliance.
Evolving International and Local Tax Frameworks
The webinar also shed light on broader international tax cooperation frameworks and local tax reforms under development. Ghana has signed the ECOWAS Treaty, intended to boost intra-regional trade, though it awaits parliamentary ratification.
Daniel Nuer, Technical Adviser at the Ministry of Finance, shared insights into the development of a United Nations Framework Convention on International Tax Cooperation. An intergovernmental committee is working on this, with finalization and submission to the UN General Assembly anticipated by September 2027. The convention aims to foster a transparent, equitable, and effective international tax system, offering uniformity and resilience.
Addressing the Digital Economy and Remote Services
Ghana is actively considering new mechanisms to tax digital assets and is planning to introduce a “significant economic presence” test. This test is intended to capture income from remote and digital services, addressing limitations of the traditional Permanent Establishment (PE) concept in the digital age.
These measures, including digital asset taxation, aim to reaffirm the taxing rights of source countries like Ghana. Amendments to income tax laws are expected to expand the tax net and ensure fairer taxation of economic activities occurring within the country’s borders.
Understanding Ghana’s Tax Treaties
Ghana’s Double Taxation Agreements (DTAs) are crucial instruments designed to prevent double taxation, curb tax evasion, and provide a clear framework for cross-border investors. The country has initiated 36 DTAs, with 14 currently in force, including agreements with major economies like the United Kingdom, Germany, France, the Netherlands, and Belgium.
These agreements typically offer relief on withholding taxes, clarify thresholds for permanent establishments, enhance dispute resolution mechanisms, and promote cooperation between tax authorities. They are instrumental in helping multinational businesses structure investments, repatriate profits efficiently, and mitigate excessive tax exposure.
Private Sector Challenges and GRA’s Response
Despite the benefits, the private sector continues to face challenges in the interpretation and administration of DTAs. Lawyer and tax practitioner Dawda Mohammed Hafisdeen noted that determining what constitutes a permanent establishment remains a significant hurdle for many businesses.
Complexities in contracts, particularly those involving supply and installation, can lead to uncertainty as authorities may deem them a single taxable activity. Administrative bottlenecks and lengthy dispute resolution timelines, sometimes spanning years for mutual agreement procedures, also impact investment certainty and business profitability.
Responding to these concerns, Nana Mensah Otoo reiterated the GRA’s commitment to balancing tax compliance with the promotion of investment and ease of doing business. He emphasized the GRA’s “investment pro” stance and explained that contract reviews are conducted to ensure proper alignment with business activities before treaty approvals are granted.
Mr. Otoo urged taxpayers to ensure contracts are well-structured and, where necessary, separated to facilitate clearer tax assessments. The GRA remains dedicated to providing guidance and improving administrative efficiency as international tax rules evolve.
Looking Ahead: Engagement and Adaptation
Daniel Nuer advised businesses to stay abreast of emerging international tax developments and to engage with tax authorities early in their cross-border transactions. The webinar also covered essential topics such as withholding tax obligations, exchange of information, mutual assistance, PE rules, beneficial ownership, and transfer pricing.
As Ghana embraces digitalization and adapts to global tax changes, businesses can anticipate further enhancements in tax administration and a continued focus on ensuring fair taxation of economic activities, both domestically and internationally. The upcoming UN Framework Convention on International Tax Cooperation is also a significant development to monitor, promising a more unified global approach to taxation.
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