doing business in africa · pdf filedoing business in africa focus on ghana ... such as sweet...

Doing Business in Africa

Focus on Ghana

July 2016

www.pwc.com

PwC 2March 2016Doing Business in Mozambique

Agenda

Why this seminar?

PwC Africa Desk

Doing business in Ghana

PwC

Why this seminar?

3July 2016Doing 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

PwC Africa Desk


PwC

Ways the Africa Desk may support you


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

Thought leadershipAfriTax newsletter



Nigeria

Seminars so far

Angola

Botswana

Ethiopia

Kenya

Mozambique (2x)

Namibia

Rwanda

South Africa

Tanzania

Zambia

Mauritius

Seychelles

PwC

Upcoming event


PwC

The PwC presence in Africa


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


Doing business inGhana

PwC

Fun factSurvival tip for Ghana


CharleyWotey!!!!

PwCDoing Business in Ghana

Agenda

Country context

Business vehicles

Legal and labour

Tax framework

Structuring

13July 2016

PwC

Country Context


1.1. General

1.2 Living and working inGhana

1.3 Economy

1.4 Risk factors

PwC

Country Context


1.1. General


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.

Doing Business in Ghana16

July 2016

PwC

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.


July 2016

PwC

Country Context


1.1. General


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.


July 2016

PwC

Country Context


1.1. General


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.


July 2016

PwC

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


PwC

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


PwC

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


July 2016

PwC

EconomyMacroeconomic targets for 2016


July 2016

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.


July 2016

PwC

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.


July 2016

PwC

Country Context


1.1. General


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


July 2016

PwC

Business vehicles


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:


PwC

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.


PwC

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


PwC

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)


PwC

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.


PwC

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


PwC

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


PwC

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


July 2016

PwC

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


July 2016

PwC

Legal and Labour


3.1 Legal system at aglance

3.2 Labour

PwC

Legal and Labour



3.2 Labour

PwC

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.


July 2016

PwC

Legal and Labour



3.2 Labour

PwC

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


PwC

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.


July 2016

PwC

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)

47July 2016

PwC

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.


PwC

Tax regime


PwC

Tax regimeComparing total tax rate


July 2016

Source: PwC Paying Taxes 2016

PwC

Tax regimeTime to comply


July 2016


PwC

Tax regimeNumber of payments


July 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.


PwC

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


PwC

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


PwC

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%


PwC

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.


PwC

Taxation of individuals

Non-residentindividuals are taxedat a flat rate of 20%

Resident individualtax rate ranges from0% - 25%


PwC

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


PwC

Treaty tax rates


July 2016

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


July 2016

Transfer pricing policy

Related party transactions

Documentation

Non-compliance

PwC

Structuring


PwC

StructuringStructuring considerations

Repatriation ofFunds (incl.

forex)

ExitStrategy

Where tolocate your

holdingcompany


PwC

Structuring considerations


July 2016

Application of double tax treaties

Exit strategy regarding capital gains taxation

Tax incentives available locally

Tax efficient financing

Exchange control compliance

PwC

Contacts


PwC

ContactsGhana


Ayesha Bedwei

Partner, PwC Ghana

E: [email protected]

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


Alan Seccombe

T: +27 11 797 4110


Fabio Henriquez

T: +27 11 797 5900


Ibikunle Olatunji

T: +27 11 797 5317


PwC

Q & A


We are here to help you navigateAfrica

This publication has been prepared for general guidance on matters of interest only, and doesnot constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty(express or implied) is given as to the accuracy or completeness of the information containedin this publication, and, to the extent permitted by law, PricewaterhouseCoopers (Ghana) Ltd,its members, employees and agents do not accept or assume any liability, responsibility orduty of care for any consequences of you or anyone else acting, or refraining to act, in relianceon the information contained in this publication or for any decision based on it.

© 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.

doing business in africa · pdf filedoing business in africa focus on ghana ... such as sweet...

Documents