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Executive summary

The Commissioner-General (CG) of the of Ghana Revenue Authority (GRA), the officer responsible for the administration of the tax laws, has issued an Administrative Manual (AM) on Ghana's Double Taxation Treaty (DTT). The main aim of the guideline is to provide the procedural requirements that must be met for a person to avail itself of the benefits provided under a DTT between Ghana and another country, obtain a tax credit for foreign tax paid, initiate a Mutual Agreement Procedure (MAP), and eliminate double taxation resulting from primary transfer pricing adjustments in a country with which Ghana has no DTT.

This Alert highlights the key matters set forth in the AM.

Detailed discussion

The CG, exercising his power to issue Practice Notes (PN) under the Revenue Administration Act, 2016, Act 915 (as amended), has issued an AM on Ghana's DTT Policy framework to provide guidance on the administration of DTTs, the use of foreign tax credits, and the elimination of double taxation in Ghana.

The manual is titled, "Ghana's Double Taxation Treaty Administration Manual," and numbered GRA/AG/2024/002. The AM was issued and published by the CG of the GRA on 24 March 2024.

The AM seeks to provide the procedure for:

1. Determining a taxpayer's eligibility to obtain benefits under a DTT between Ghana and another contracting state
2. Obtaining tax relief for foreign tax paid
3. Initiating a request for MAP
4. Determining whether a taxpayer may benefit from an adjustment to eliminate double taxation resulting from transfer pricing adjustment made by another state with which Ghana has no DTT

Obtaining double taxation relief under the DTT

As a first step, taxpayers who seek to avail themselves of the benefits under a DTT between Ghana and another country, obtain a foreign tax credit for foreign tax paid, or obtain a Ghana tax residency certificate may submit an application in accordance with the guidelines provided in the AM.

Obtaining DTT benefits from the GRA

The application to obtain a benefit under a DTT between Ghana and another contracting state may be made to the GRA in one of two ways:

1. The completed prescribed form and all accompanying documents may be submitted through the GRA taxpayer's online portal.
2. The completed prescribed form and all accompanying documents may be submitted to the tax authority of the other contracting state, which will then be forwarded to the GRA.

Details of the prescribed form and required documents

The form to be completed must contain some relevant information. It must contain the name, address, and taxpayer identification number (TIN) of the taxpayer or the taxpayer's authorized representative, the taxpayer's country of residence, the DTT, and the article(s) in the DTT affecting the taxpayer's transaction, details of the transaction, the relevant tax year and any other information as may be required by the CG.

Further, the taxpayer must submit a comprehensive set of documents. These include:

1. A copy of the official registration document of the taxpayer, which should detail beneficial ownership, directorship, and other officers of the taxpayer
2. An original Certificate of Tax Residence for the relevant period, if the taxpayer is non-resident for tax purposes in Ghana
3. A copy of the contract relating to the transaction
4. Evidence of taxpayer's tax compliance status including copies of tax returns, tax payment receipts, tax clearance certificates and other relevant documents
5. Any other document the CG may deem relevant

Obtaining DTT benefits from another competent authority

A resident taxpayer who seeks to obtain DTT benefits from a competent authority from another contracting state may either:

1. Submit the completed prescribed form and all necessary attachments through the GRA taxpayer's online portal; the form will then be submitted to the appropriate authority of the other contracting state.
2. Submit the completed prescribed form and all accompanying documents to the competent authority of the other contracting state in accordance with the laws for obtaining treaty benefits in that other country.

If using the online portal is not feasible, the official email address of the GRA's Treaties Unit (TU) may be used to submit the application.

The prescribed form and documents required are similar to those described under "Details of the prescribed form and Required Documents," above.

Procedure to obtain relief from double taxation under the Income Tax Act, 2015, Act 896 (as amended) (the ITA)

A Ghanaian resident taxpayer who seeks to obtain a relief from double taxation under Sections 111 and 112 of the ITA must complete and submit the application form together with all necessary documentation via the GRA online portal.

The official email address of the TU may be used to submit the application if the using online portal is not feasible.

The application must provide information about the taxpayer, its representative (where applicable), the nature of the transaction, the tax period in question and any other information that may be required by the CG. Additionally, some relevant documents, including registration documents, beneficial ownership, proof of foreign tax payment, the contract underpinning the transaction and any other documents the CG may require, must be submitted.

Procedure for obtaining a tax residency certification

A taxpayer seeking to obtain a Ghanaian tax residency certificate for any period must submit an application, along with all necessary documents, through the GRA's online portal. If using the online portal is not feasible, the application may be submitted using the official email address of the TU.

The application must contain information similar to that required for relief from double taxation under the ITA, except for details regarding the nature of the transaction. Further, the application must include a copy of the taxpayer's official registration document with details of beneficial ownership and company officers, evidence of tax compliance status through tax returns and payment receipts and any other documents the CG may require.

Evaluation procedure

An application to enjoy DTT benefits or relief from double taxation under sections 111 and 112 of ITA shall be evaluated by the TU once submitted.

The evaluation procedure comprises four (4) main steps:

1. Identification of persons
2. Determination of tax residence
3. Determination of ownership and type of income
4. Determination of tax rate

Identification of persons

A "person," which can be an individual, company or any other body of persons, is eligible for benefits under a DTT if they are tax resident in either or both of the contracting states. For a detailed discussion on the definition of each type of person mentioned, the manual refers to Article 3 of both the United Nations Model Double Taxation Convention between Developed and Developing Countries (the "United Nations Model Convention") and Model Tax Convention on Income and on Capital (the "OECD Model Tax Convention").

In cases of uncertainty in determining the nature of a person, the Republic of Ghana can, where allowed by Article 3 of the relevant DTT, refer to the Ghanaian tax laws to determine the nature of the person (i.e., individual, company, among others).

Determination of tax residence

At this step of the process, the GRA's TU carries out procedures to establish that the taxpayer was tax-resident of either Ghana or the other contracting state during the relevant period. The TU may gather information on the taxpayer's residency and tax compliance status from the other contracting state's tax authority through the Exchange of Information framework.

If the taxpayer is considered a resident for tax purposes in both Ghana and the other contracting state, the TU will apply the DTT's "tiebreaker" rules to determine the taxpayer's residence. Upon determining the taxpayer's country of tax residency (as either Ghana or the other contracting state) the TU will assess whether the taxpayer qualifies for treaty benefits under the provisions of the DTT in question.

To determine whether a taxpayer qualifies for foreign tax credit under section 111 and 112 of the ITA, the TU assesses whether the taxpayer was Ghanaian tax-resident under section 101 of the ITA during the relevant period.

For requests concerning certification of residency for tax purposes in Ghana, the TU shall verify whether the taxpayer was indeed a resident under section 101 of the ITA during the time in question.

If the TU is approached by a competent authority of another contracting state for a DTT verification of a taxpayer's residency status, the TU will determine whether the taxpayer was a tax resident in Ghana under section 101 of the ITA during the relevant period and provide any additional support requested by the other state.

Determination of ownership and type of income

After the determination of a taxpayer's residency, the TU shall identify the type of income the qualified taxpayer's transactions falls under in the DTT. If the transaction involves passive income like rental income, dividends, interest or royalties, the TU will decide if the taxpayer is the "beneficial owner" of that income based upon the provisions of the relevant DTT. The term "beneficial ownership" as used in this context does not apply to a situation where the person is acting as a conduit, agent or nominee to receive the income on behalf of another. Thus, the beneficial owner must be the person who uses the income and has the risk and control over the income.

Consequently, where an agent or nominee is involved, the TU will determine who the principal is and confirm whether the true owner meets the tax residency criteria set out under "Determination of tax residence," above.

In determining the beneficial owner of a certain type of income, TU may gather information from the competent authority of the other contracting state and refer to relevant documentation on preventing treaty abuse.

When reviewing applications for relief from double taxation granted under sections 111 and 112 of the ITA, the TU will assess whether the taxpayer's foreign income is related to employment, business or investment activities.

Rates of tax

Where the TU determines that the taxpayer meets all the criteria in the previous steps of the procedure, the TU shall determine the appropriate tax rate applicable to the taxpayer's transaction under the relevant DTT provision.

For an application for credit of foreign tax paid, the TU will verify the income tax paid on the foreign income by the taxpayer.

Methods of double taxation relief

The AM provides for the following methods of obtaining double tax relief:

1. Where a taxpayer qualifies to avail itself of the benefits in a DTT, the TU will decide how to eliminate the double taxation based on the provisions of the relevant DTT.
2. When a taxpayer applies for relief from double taxation under sections 111 and 112 of the ITA, the TU will assess the taxpayer's eligibility to use either the exemption or credit method, or elect to use the deduction method. In instances where a taxpayer is eligible for a foreign tax credit, the credit cannot exceed the person's average Ghanaian income tax rate for that year when applied to their assessable foreign income.

Evaluation timelines

The TU is required to complete the evaluation of a request and respond to the taxpayer with its decision within 30 days of the date it was duly submitted.

Initiation of Mutual Agreement Procedure

If taxpayers identify that the tax treatment they have received, or will receive, in one or both contracting state(s) does not align with the provisions of a DTT, they may file a formal request using the prescribed form and attach all necessary documentation within the specified timeline provided by the relevant DTT. In the absence of specified timelines by the relevant DTT, the taxpayer must submit the request within three years from the date of notice of the tax treatment that they consider to be inconsistent with the DTT.

The AM describes some issues in respect of which the taxpayer can assert that the tax treatment is at variance with the provisions of a DTT. The manual also provides for the details and supporting documents to be included in the request by the taxpayer.

The taxpayer or their representative must sign a declaration of accuracy for their MAP request. Although the GRA can review MAP cases alongside domestic tax objections, MAP proceedings may be delayed until local objections are resolved. The TU will confirm receipt of a MAP request, check its eligibility and proceed based on the request's validity, not the merits of the taxpayer's objection to the tax. Rejected requests will be explained to the taxpayer. If the TU accepts the request and agrees with the objection, it may direct a tax adjustment without involving another state. If the TU needs the other state's involvement, both will communicate to resolve the issue. Taxpayers will be informed of any agreements reached and must agree to the terms for implementation. If no agreement is reached, the case will be closed. Agreed adjustments will be made by the relevant tax authority according to the DTT's timeframe.

Corresponding adjustment procedure

Taxpayers who realize that a primary transfer pricing adjustment in a non-DTT state may cause double taxation must complete the prescribed form, attach necessary documents and submit same through the GRA taxpayer's portal or the TU's email address.

The TU, upon receipt of the application, will assess whether the request is justified. If the TU finds that the request has merit, it will notify the relevant department within the GRA to make an adjustment to remove the double taxation on the income. If the TU decides that the request lacks merit, it will provide the taxpayer with the reasons for its decision.

Certification of entitlement

The TU, upon determining a taxpayer's eligibility for benefits under a DTT or qualification for foreign tax credit under sections 111 and 112 of the ITA, will issue the taxpayer a Certificate of Qualification that is electronically verifiable. This certificate will specify the treaty benefits and the timeframe for which the taxpayer qualifies.

If a taxpayer is deemed ineligible for DTT benefits, the TU will issue a Certificate of Non-Qualification, providing an explanation for the failure to meet the benefit criteria.

The TU will also issue an electronically verifiable Certificate of Residence detailing the period of tax residency when it ascertains that a taxpayer was a tax resident in Ghana. On the other hand, reasons will be provided if the TU ascertains that a taxpayer did not maintain tax residency in Ghana for a given period.

Taxpayers wishing to contest a TU decision may file an objection in accordance with the procedures set forth in the Revenue Administration Act, 2016 (Act 915).