SETTING UP & OPERATING BUSINESS IN GHANA

TYPE OF BUSINESS Company In Ghana there are Regulations in lieu of Memorandum and Articles of Association. The Regulations of a company state : the name of the company, with Limited as the last word of the name in the case of a company limited by shares the nature of the business, which the company is authorised to carry on that the company has all the powers of a natural person of full capacity except in so far as such powers are expressly excluded by the Regulations the names of the first directors of the company that the powers of the directors are limited. The Regulations of a company limited by shares or by guarantee shall also state that the liability of its members is limited. In the case of a company having shares, the Regulations shall also state the number of shares with which the company is to be registered. Branch External companies which establish a place of business in Ghana shall, within one month of the establishment of the place of business, deliver to the Registrar for registration : A certified copy of the charter, statutes, regulations, Memorandum and Articles or other instrument constituting or defining the constitution of the company in a language acceptable to the Registrar. A statement in duplicate in the prescribed form giving the following particulars regarding the company, namely its name; the nature of its business or businesses or other main objects; the present forenames and surname and any former forename or surname, and the address and business occupation of some one or more person, in this Code referred to as a local manager, authorised to manage the business in Ghana; if the company has shares, the number and nominal value, if any, of its authorised and issued shares, the amount paid up thereon and the amount remaining payable thereon, distinguishing between the amounts paid and payable in cash; the address of its registered or principal office in the country of its incorporation; the address of its principal place of business in Ghana and the postal address; and the name and address in Ghana of a person authorised by the company to accept service of process and other documents on its behalf. The Registrar will register the said documents in the register of external companies. Registration normally takes approximately seven days. Company Tax Taxation of companies is administered by the Commissioner of Internal Revenue, through Inspectors of Taxes at various locations throughout the country. The fiscal year, otherwise referred to as the year of assessment, is the calendar year ending 31 December. Although the fiscal year is the calendar year, taxpayers, except employees, are permitted to maintain accounting dates other than calendar but are required upon selection of a date to prepare their annual financial statements consistently to that date. Income Subject to Tax Income tax is charged on the income of any person occurring in, deriving from, brought into or received in Ghana in respect of: profits or gains from any trade, business, profession or vocation profits or gains from any employment including any allowances or benefits paid in cash or given in kind to or on behalf of an employee other than in respect of medical or dental costs or of any passage from or to Ghana. dividends, interest or discounts; royalties, premiums and any other profits arising from property including rents from immovable property; and receipts, including royalties, from land or any natural resources in Ghana whether paid in or outside Ghana. management or technical service fees Other Taxes Selective Alien Employment Tax Petroleum Income Tax Mining Tax Additional Profit Tax Royalties Capital Gains Tax Stamp Duty Gift Tax Customs & Excise Duties and Sales Tax Branch Tax A branch is taxed on its income subject to the provision that where a non-resident person carries on any trade, business, profession or vocation in Ghana, part of the operations of which may be carried on outside Ghana, the full gains or profits of that trade, business profession or vocation shall be deemed to be derived from Ghana. In the case of a company operating in Ghana which is a branch or subsidiary or associated company of a non-resident company: The profit for the period deemed to arise in connection with the operations of that company shall be computed by reference to the total consolidated profits of the whole Group of companies taking into account the proportion which the turnover of that company bears to the total consolidated turnover of the Group. The Commissioner may, where he is satisfied with the results of the company operating in Ghana, for any period, compute the profits of such company without reference to the total consolidated profits of the whole of the Group. The Commissioner may take into account other relevant considerations in determining the proportion of the total consolidated profits of the Group which should be attributed to the company operating in Ghana. Indirect Taxes Sales Tax is levied on the sale, gift, transfer, exchange and importation of goods under the Sales Tax Act. Generally, the wholesale dealer must collect the tax. On locally manufactured goods sales tax is levied at rates between 7,5% and 35%. The rate of sales tax on imported goods is 20%. Excise duties are levied on goods manufactured or produced in Ghana such as alcohol, tobacco, petroleum products and textiles. Customs duties are levied on imported goods under a single customs tariff based on the Brussels Tariff Nomenclature System. Stamp Duty is levied on a wide range of legal instruments. Capital Gains Capital Gains tax was introduced in Ghana in 1975. All individuals and legal entities realising chargeable capital gains are liable to pay capital gains tax. Such capital gains are commuted separately from other income and are not subject to income tax. Capital gains applies to the total amount of gain accruing from the sale of the following assets : buildings, business and business assets including goodwill, land (other than agricultural land), and stocks and shares. Capital gains tax is levied at a rate of 5% of the realised gains. Individual Tax Individuals who are liable to tax pay income tax on graduated rates from 0% - 35%. The Gains or Profits derived from any employment exercised in Ghana shall be deemed to be derived from Ghana whether the gains or profits from such employment are received in Ghana or not. A non-Resident person will only be subject to income tax on income derived from or accruing in Ghana. INCENTIVES Foreign Companies There are a number of investment incentives available to foreign companies wishing to invest in Ghana. Businesses involved in agriculture, manufacturing, construction and building industry, tourism and general services are entitled and incentives. Companies are allowed to retain 35% of export proceeds in an external account to be used to pay incidental expenses of a company sold to authorised dealers. Capital allowance is granted to all companies setting up an establishment in Ghana depending on the type of asset. For example, the write-off of new or secondhand machinery and equipment, annual wear allowance and a depreciation allowance on the cost of buildings used in the manufacturing process. Corporate Tax The rate of tax is: 8% on export income for companies in the non-traditional export sector. 25% for hotels and 35% for all other sectors A further rebate of 25% for manufacturing companies located in regional capitals other than Accra-Tema and 50% for manufacturing companies located outside regional capitals. Tax Holidays Real Estate : 5 years Agriculture : 3 - 10 years Rural Banking : 10 years Other tax concessions Accelerated depreciation allowances at the rate of 50% per annum for 2 years for Plant Expenditure and 20% per annum for 5 years for Building Expenditure applicable to all sectors except banking, finance, commerce, insurance, mining and petroleum. Loss - carry - over of 5 years for all sectors except Insurance business which is unlimited. Fully deductible Capital Expenditure for Research and Development. Exemption from minimum chargeable income of 5% of Turnover during the first five years. Exemption from income tax payable on the provision of accommodation for employees on farms and building, timber, mining and construction sites. Withholding tax Tax rate on Dividends 10% Tax rate on interest 10% Tax on Royalties, management, technology transfer fee 15% (for non-Residents only) Custom duties 100% duty exemptions for plant machinery equipment and parts thereof. Export free zones and export processing zones In July, 1995, the Ghanaian Parliament enacted the country's free Zone Act which created one of the world's most attractive packages of Incentives for hassle-free business operation for exporting firms. These incentives serve to amplify business in what is already a centre for international business. Highlights of Free Zone Act (FZA) The FZA allows for production, manufacturing, and services, including financial services. Exemption from taxes of import into free zone area. Exemption from taxes on profits for 10 years. Up to 30% of the annual production can be sold in the national customs zone. A foreign investor may take hold of 100% of shares in free Zone property. Income tax after 10 years shall not exceed 8%. Foreign and domestic investors shall have equal status. No Nationalization or expropriation within a free zone. Free Zone enterprises shall have ability to hold a foreign currency account. Contract negotiations and terminations determined by the free zone enterprise.   The following information must be provided: name, surname, date of birth, passport number, where issued, date of issue and expiry. EXCHANGE CONTROL The Exchange Control Act is being revised. In practice it is now possible to transfer monies through authorised dealers without Exchange Control approval provided necessary documentation is produced to support the transfer. There is no restriction on the introduction of funds by way of foreign loans, but this must be cleared with the Central Bank. There are no longer any local borrowing restrictions for a foreign-owned company or branch of a foreign company. There are no restrictions on the repatriation of profits. Investments approved under the Ghana Investment Promotion Centre Act 1994 are guaranteed free transfer of profits, interest fees, charges, loan repayments, liquidation proceeds and, in the case of expatriate personnel, a certain quota of their annual earnings. VISA REQUIREMENTS All visitors to Ghana must possess valid passports issued by their home governments, except nationals of any member country of the ECOWAS who may produce travel certificates in lieu of passports. All non-ECOWAS citizens require Visas at a fee before entry. Ghana Missions and Embassies are authorised to issue visas or entry permits to all classes of visitors destined to Ghana. Where no Ghanaian mission has been established the visitors may apply directly or through his/her Ghanaian associate by fax, at least two weeks before the visit, addressed to: The Chief Executive Ghana Investment Promotion Centre P O Box M193 Ministries - Accra Telephone: (233-21) 665125-9 Fax: (233-21) 663801