PwC 2March 2016Doing Business in Mozambique
Agenda
Why this seminar?
PwC Africa Desk
Doing business in Ghana
PwC 4July 2016Doing Business in Ghana
The interest in investingin Africa continues togrow rapidly
Need for general as wellas specific hands-oninformation and ability todiscuss developmentsremains valuable
PwC
Ways the Africa Desk may support you
6July 2016Doing Business in Ghana
Algeria
Tunisia
Egypt
Sudan
South
Sudan
Mauritania Niger
Chad Eritrea
Ethiopia
CentralAfrican Republic
Kenya
UgandaDemocraticRepublic
of Congo
Cameroon
NigeriaBenin
TogoGhana
Côte
d’Ivoire
Burkina
Faso
Liberia
Sierra Leone
Guinea
SenegalGambia
Guinea Bissau
Gabon
Congo
Angola
Zambia
Malawi
ZimbabweNamibia
Botswana
South
Africa
Lesotho
Swaziland
Mauritius
Comoros
Seychelles
Mayotte
Cape Verde
Morocco
Mali
Somalia
Djibouti
Rwanda
Burundi
Tanzania
Libya
For services in these territoriesplease contact a neighbouring territory
Reunion
Equatorial Guinea
São Tomé and Príncipe
PwC offices
One-stopservice
Because of helicopterview, identification
of other cross-country alternatives
Thought leadershipthrough AfriTaxnewsletter, One
page tax summariesper African
country, countryseminars, etc.
Quick and coordinatedresponses on generaland specific questions
Proactivelyinforms
relevant partieson new
developments
PwC 8July 2016Doing Business in Ghana
Nigeria
Seminars so far
Angola
Botswana
Ethiopia
Kenya
Mozambique (2x)
Namibia
Rwanda
South Africa
Tanzania
Zambia
Mauritius
Seychelles
PwC
The PwC presence in Africa
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In Africa…
• Member firms in 33 countries with over9,000 professional staff.
• We have the largest footprint ofprofessional services on the Africancontinent.
• All our African firms are locally-owned.
• Provide a range of professional businessadvisory services to the public and privatesectors throughout the continent.
• Committed to the development andprosperity of the African people andeconomies.
Algeria
Tunisia
Egypt
Sudan
South
Sudan
Mauritania Niger
Chad Eritrea
Ethiopia
CentralAfrican Republic
Kenya
UgandaDemocratic
Republic
of Congo
Cameroon
NigeriaBenin
TogoGhana
Côte
d’Ivoire
Burkina
Faso
Liberia
Sierra Leone
Guinea
SenegalGambia
Guinea Bissau
Gabon
Congo
Angola
Zambia
Malawi
Zimbabwe
Namibia
Botswana
South
Africa
Lesotho
Swaziland
Mauritius
Comoros
Seychelles
Mayotte
Cape Verde
Morocco
Mali
Somalia
Djibouti
Rwanda
Burundi
Tanzania
Libya
For services in these territoriesplease contact a neighbouring territory
Reunion
Equatorial Guinea
São Tomé and Príncipe
PwC offices
PwCDoing Business in Ghana
Agenda
Country context
Business vehicles
Legal and labour
Tax framework
Structuring
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PwC
Country Context
14July 2016Doing Business in Ghana
1.1. General
1.2 Living and working inGhana
1.3 Economy
1.4 Risk factors
PwC
Country Context
15July 2016Doing Business in Ghana
1.1. General
1.2 Living and working inGhana
1.3 Economy
1.4 Risk factors
PwC
Country ContextGeneral
Where is Ghana?
Ghana, officially the Republic of Ghana, islocated in West Africa along the Gulf ofGuinea and Atlantic Ocean.
Ghana shares borders with Ivory Coast inthe west, Burkina Faso in the north, Togoin the East and the Gulf of Guinea andAtlantic Ocean in the south.
It is interesting to note that Ghana’sneighbours are French speakingcountries.
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Country ContextGeneral
History
• Ghana, formerly known as the GoldCoast, was first a British colony.
• In 1957, Ghana became the first sub-Saharan African nation to declareindependence.
• Ghana is a unitary presidentialconstitutional democracy with aparliamentary multi-party system.
• The current president of Ghana isJohn Dramani Mahama.
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Country Context
18July 2016Doing Business in Ghana
1.1. General
1.2 Living and working inGhana
1.3 Economy
1.4 Risk factors
PwC
Country ContextLiving and working in Ghana
• Country size of Ghana is 238,535square kilometres.
• Population size is currently about 27million (2014 estimate).
• Ghana has a tropical climate with twodistinct seasons: the wet season andthe dry season.
• Population density is 117.72 people persq km of land.
• Ghana is a lower middle incomecountry.
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Country Context
20July 2016Doing Business in Ghana
1.1. General
1.2 Living and working inGhana
1.3 Economy
1.4 Risk factors
PwC
EconomyGeneral
• Ghana is an average natural resource enriched country possessingindustrial minerals, hydrocarbons and precious metals.
• Ghana produces and exports hydrocarbons such as sweet crude oiland natural gas.
• Ghana produces high quality cocoa and is the 2nd largest producerof cocoa globally.
• Ghana is an emerging designated digital economy with a mixedeconomy hybridization.
• The Ghana Stock Exchange is the 5th largest on continental Africaand 3rd largest in sub-Saharan Africa.
• Ghana is believed to have up to 5 to 7 billion of petroleum inreserves, which is the 5th largest in Africa and the 25th largestproven reserves in the world.
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EconomyReal sector contribution
Ghana has continued toexperience a shift in the structureof its economy.
The services sector is expected tomaintain its position as thelargest contributor to theeconomy.
54%
27%
19%
Services Industry Agriculture
Source: GoG 2016 Budget
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EconomyGhana & The International Monetary Fund (IMF)
Ghana is under a 3 year Extended Credit Facility (ECF) which hasresulted in stringent fiscal policies aimed at supporting the country’smedium-term economic agenda.
Priorities of theprogramme
Pillars of theprogramme
Restore debt sustainability
Support growth with adequate capital spending
Reduction in financing costs
Restraining and prioritizing public expenditure
Increasing tax collection
Strengthening monetary policy
23July 2016Doing Business in Ghana
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EconomySnapshot of the Ghanaian economy
• Inflation : The year-on-year inflation rate as measured by the CPI stoodat 18.7% in April 2016, down from 19.2% recorded in March 2016.
• Interest rates : The Bank of Ghana Policy rate was increased from 21%in December 2014 to 26% in December 2015. It has been kept stable atthis level to date.
• Exchange Rate : Currently, the selling rate for the cedi is:
- GHS 3.8337 to US dollar
- GHS 5.6056 to the Pound Sterling
- GHS 4.2661 to the Euro
- GHS 0.2446 to the Rand
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EconomyMacroeconomic targets for 2016
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Overall GDP (including oil) - 5.4%
Overall GDP (non - oil) - 5.2%
End of year inflation - 10.1%
Overall budget deficit (% of GDP) - 5.3%
Gross international reserves - Not less than 3months import cover
PwC
EconomyHighlights of developmental projects
Transportation
• Modes of transport in Ghana isaccomplished by road transport (bus-basedmass transit system), railway, air transport(civil aviation) and water transport (ferry).
• The commitment to creating an integratedand seamless transportation system includesexpansion and refurbishment of thecountry’s local airports in Tamale andKumasi as well as the upgrade of KotokaInternational Airport.
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EconomyHighlights of developmental projects
Energy
• Increased in renewables due to shortagesof electricity.
• To fix the challenges in the power sector,ongoing power projects such as the
- 225MW Powership - IPP project
- 250MW Ameri in Takoradi (under aBuild, Own, Operate and Transferarrangement)
- the 220MW Kpone Thermal PowerProject (KTPP)
• Feasibility studies have been conductedtowards the siting of a nuclear powerplant in the country.
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Country Context
28July 2016Doing Business in Ghana
1.1. General
1.2 Living and working inGhana
1.3 Economy
1.4 Risk factors
PwC
Risk factorsInternal and external
• Inadequate supply of electricity nationwide
• Weak infrastructure across many sectors
• The impact of changes in international oiland gold prices
• Government bureaucracy when awarding andpaying for contracts
• High unemployment and poverty
• Depreciation of the local currency
• High interest and inflation rate
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Business vehicles
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2.1. Types of entities
2.2 Establishing a subsidiary
PwC
Business vehicles
31July 2016Doing Business in Ghana
2.1. Types of entities
2.2 Establishing a subsidiary
PwC
AA• Limited liability company
BB• Unlimited liability company
CC• Incorporated partnership
DD• Sole proprietorship
Business vehiclesTypes of legal entities
External entities can be registered either as a branch or a subsidiaryNB:
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Business vehiclesForeign/local investment
GIPC Act
• The Ghana Investment Promotion Centre Act, 2013 (Act 865)(“GIPC Act”) applies to all enterprises in Ghana. Entities operatingin all sectors have to comply with the GIPC Act.
• A wholly owned Ghanaian enterprise may register with the GIPC inorder to avail itself for the incentives provided under the Act.
Strategic Investment
• An investor may negotiate specific incentive packages for strategicinvestments. In monetary terms an investment of capital of aboutUS$50 million is deemed as strategic by the GIPC.
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Business vehiclesForeign/local investment
Technology transfer
• Entities operating in all sectors need to comply with theTechnology Transfer Regulations 1992 (L.I. 1547) by registeringTechnology Transfer Agreements with the GIPC.
Foreign capital requirements for all sectors are as follows:
• Joint venture with a Ghanaian - US$200,000
• Entity wholly owned by a non-Ghanaian - US$ 500,000
• Trading entities - US$ 1,000,000
34July 2016Doing Business in Ghana
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Business vehicles
Primary registration with regulatory authorities
• Registrar General’s Department
• Ghana Investment Promotion Centre (GIPC)
• Social Security and National Insurance Trust
• Ghana Revenue Authority
Secondary registration with regulatory authorities
• Ghana Free Zones Board (GFZB)
• Mineral Commission
• Petroleum Commission
• National Communication Authority (NCA)
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Business vehiclesOther regulatory matters
Upstream Petroleum Sector
• Effective February 2014, all foreign entitydesirous of carrying out activities in thepetroleum upstream sector should have alocal presence prior to forming the jointventure as required by the Petroleum (LocalContent and Local Participation)Regulations, 2013.
• All entities forming the joint venture shouldobtain operating permits from the PetroleumCommission.
• Other requirements exists for labour,purchases of goods and services, biddingprocess for contracts as well as requirementsto submit plans and periodic report to the
Petroleum Commission.
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Mining sector
• Mine support companies should beregistered to exclusively providemining related services. Limitedliability company is required.
• Holder of a mining lease, restrictedmining lease must pay royalty to theRepublic at a prescribed rate andmanner.
Financial reporting
• Ghana has adopted InternationalFinancial Reporting Standards(IFRS) as the national accountingreporting framework.
Business vehiclesOther regulatory matters
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Timelines for business setup
Procedure Time to Complete
Acquire a Tax Identification Number 2 days on average
Check for availability of company name and submitcompany documents to obtain the certificate ofincorporation
1 day
A Commissioner of Oaths authenticates forms requiredfor the certificate to commence business
1 day (simultaneous with previous
procedure)
Obtain from the Registrar-General Department thecertificate to commence business
2 days (simultaneous with previous
procedure)
Deposit paid-in capital in an account 1 day
Apply for business licenses at the Metropolitan Authority 7 days
Inspection of work premises by the MetropolitanAuthority
1 day (simultaneous with previous
procedure)
Apply for social security 1 day
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Business vehiclesBranch vs company
Distinction factor Branch Company
Period of time Typically short term Long(er) term
Minimum capitalrequirement
No • US$ 500,000 for whollyowned foreign subsidiaries
• US$ 200,000 where thereis local/Ghanaianparticipation
Corporate income tax 25% 25%
Deductibility of expenses No deduction allowed formanagement fees, interestcharges, royalties, etc. fromhead office
Generally all expenses aredeductible
Stamp duty on issuance ofequity capital
n/a 0.5% of registered amount
Liability Head office is liable Capped to capital contributionsor value shareholding incompany
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Business vehiclesBranch vs company
Distinction factor Branch Company
Audited accounts Yes Yes
Flexibility Less regulations Regulations such asshareholder decisions,meetings, etc.
Registration process No significant difference between branch / subsidiary
Local ownership n/a Minimum of 2 shareholders,but no requirement for localshareholder
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Legal system
• The Ghanaian legal system recognises both common law and customary
law.
• The 1992 Constitution is the highest law of the land and there are
provisions for legislation by parliament and other institutions.
• The judicial branch hierarchy is as follows: Supreme Court, the Court of
Appeal, the High Court and the lower courts currently comprising the
Circuit Courts, the District Courts and the Juvenile Courts.
• The National House of Chiefs, Regional Houses of Chiefs and traditional
councils, are also recognised by the law as tribunals with jurisdiction to
adjudicate over any matters affecting chieftaincy.
• Ghana recently established the Fast Track, Commercial Courts, Human
Rights Court, Financial, Industrial (Labour) and Land Courts as divisions
of the High Court to facilitate the speedy resolution of disputes,
particularly those of a specialised nature.
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Labour & employmentSome quick facts
Existing
Abundant supply ofunskilled labour /shortage of skilledlocal labour in somesectors such aspetroleum
Compulsory socialsecurity costs includeworkers’ compensation,maternity leave, sickleave and deathbenefits
An investor may employpersons of differentnationality to positionsof management,however a citizen withsimilar qualification andexperience shall havethe first option.
The employment ofexpats is restricted insome instances anddependent on theinvestment theforeign company
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ImmigrationGeneral
• All foreigners undertaking employment inGhana are to obtain both work and residencepermits prior to undertaking the employment.
• Business visas can be obtained to conductfeasibility studies, conferences, meetings andsimilar events but not to exercise employment.
• Foreign entities who are registered with theGIPC can apply for Automatic ExpatriateQuota (AEQ) for their expatriates which isequivalent to work permit.
• The total number of AEQ granted is based onpaid up capital.
• Additional quota can be applied for if the AEQis exhausted but this is given on discretionalbasis.
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AEQ based on paid up capital are:
Doing Business in Ghana
US$50,000 – US$250,000 (1 person)
US$250,000 – US$ 500,000 (2 persons
US$500,000 – US$ 700,000 (3 persons)
More than US$700,000 (4 persons)
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The Ghana ImmigrationService (GIS) isimplementing the rotatorspermit for the petroleumupstream sector forexpatriates engagedoffshore. The permit coversa period of six monthssubject to renewal.Application for this permitshould be made via thePetroleum Commission.
Immigration update
Automatic ExpatriatesQuota obtained from theGIPC for expatriatesworking in the petroleumupstream sector may haveto be done with the consentof the PetroleumCommission.
A “special permit”covering work andresidence permit has beenintroduced by the GIS forshort term businesstravellers. It is meant for allindustry sectors and itcovers a period up to sixmonths.
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Tax regimeComparing total tax rate
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Source: PwC Paying Taxes 2016
PwC
Tax regimeGeneral
• Income Tax Act, 2015 (Act 896) (“ITA”)was passed in Sept 2015 to replace theInternal Revenue Act, 2000 (Act 592)(“IRA”) & all other laws inconsistent withthe ITA.
• Implementation date of the ITA was 1January 2016.
• The ITA Consolidates laws on taxation ofincome of persons previously taxed undergeneral fiscal regime, petroleum incometax law, Minerals royalties includingtaxation of public, Mutual, and Non-ProfitCauses.
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Basis of taxation in Ghana
• For resident companies, ITA now imposestax on their worldwide income. Suchforeign sourced income includes foreignpermanent establishment of a residentcompany.
• Non-resident companies are taxed onincomes with a Ghanaian source andincome derived from GhanaianPermanent Establishment irrespectiveof the source.
• A tax credit will be allowed on non-Ghanaian sourced income for the taxespaid in a foreign country but not greaterthan average tax rate payable on thatforeign sourced income in Ghana.
Introduction of fullworldwide basis of taxationfor residents
“Worldwide Income”-Income derived from anybusiness and investmentwhether source has ceasedor brought into or receivedin Ghana
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Taxation of companies
Tax type/ Industry Tax rate
Corporate Income Tax• General corporate income tax• Export of non-traditional goods• Free Zone Companies
• Mining and petroleumcompanies
• Hotels• Income from loans advanced by
financial institutions to farmingbusiness and leasing company
• Locational incentives formanufacturing companies
25%8%0% in first 10 years followed by 15%on exports and 25% on incomefrom domestic sales35%
22%20%
up to 50% of income tax rate12.5% outside regional capitals but18.75% for those in Accra/Tema
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Taxation of Companies
Tax type/ Industry Tax rate
Withholding tax-Residents• Interest (excluding individuals
and resident financial institutions)• Interest paid to individuals• Dividend• Supply of goods, works and
services exceeding GHS 2,000• WHT on petroleum
subcontractors
Withholding tax-Non Residents• Royalties• Insurance premium with source in
Ghana• Service fee with source in Ghana
8%
1%8%3%,5% and 7.5% respectively
15%
15%5%
20%
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Taxation of Companies
Tax type Tax rate
Value Added TaxNational Health Insurance LevyStamp Duties• Stated Capital from the issuance
of new shares• Transfer on the sale of property• Secured loan
Customs and Excise taxes*• Import duties• Administrative charges• Export duties• Excise duties
15%2.5%
0.5%
0.25% - 1%0.5%
0% - 20%2.5% - 3.45%Exports do not usually attract duties2.5% - 175% of ex-factory price
*Ghana has enacted the Common External Tariff (“CET”) classification system as the bindingcustom duty regime in 2016.
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Taxation of individuals
Non-residentindividuals are taxedat a flat rate of 20%
Resident individualtax rate ranges from0% - 25%
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Current Double Tax Treaty countries
France
UnitedKingdom
Germany
South Africa
Belgium
Italy
Switzerland
Netherland
Ghana has in force double tax treatieswith the following countries
Denmark
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Treaty tax rates
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Type of income FranceUnited
KingdomGermany
SouthAfrica
Belgium ItalyThe
Nether-lands
Switzer-land
Denmark
%
Dividends(Whererecipientholds at least10% shares)
7.5 7.5 5 5 5 5 5 5 5
Dividends (Inany othercase)
15 15 15 15 15 15 10 15 15
Royalties 12.5 12.5 8 10 10 10 8 8 8
Technical/Manage-mentservice fees
10 10 8 10 10 10 8 8 8
Interest 12.5 12.5 10
10 (5%for non-residentbanks)
10 10 8 10 8
PwC
Transfer Pricing
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Transfer pricing policy
Related party transactions
Documentation
Non-compliance
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StructuringStructuring considerations
Repatriation ofFunds (incl.
forex)
ExitStrategy
Where tolocate your
holdingcompany
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Structuring considerations
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Application of double tax treaties
Exit strategy regarding capital gains taxation
Tax incentives available locally
Tax efficient financing
Exchange control compliance
PwC
ContactsGhana
66July 2016Doing Business in Ghana
Ayesha Bedwei
Partner, PwC Ghana
T: +233 302 761 500
Christiana Baah
Manager, PwC Ghana
T: +233 302 761 500
PwC
ContactsAfrica Desk - Cape Town
Charl du Toit
T: +27 21 529 2367
Asif Joosub
T: +27 21 529 2305
Doing Business in Ghana July 201667
PwC
ContactsAfrica Desk - Johannesburg
68July 2016Doing Business in Ghana
Alan Seccombe
T: +27 11 797 4110
Fabio Henriquez
T: +27 11 797 5900
Ibikunle Olatunji
T: +27 11 797 5317
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© 2016 PricewaterhouseCoopers (Ghana) Ltd. All rights reserved. In this document, “PwC”refers to PricewaterhouseCoopers (Ghana) Ltd which is a member firm ofPricewaterhouseCoopers International Limited, each member firm of which is a separate legalentity.