Building a Tax-Smart Company Structure in Ghana

1. Choice of Legal Entity & Jurisdiction

§  Limited Liability Company (Ltd) is generally preferred for investors wanting limited liability, ease of raising funding, and more formal governance. 

§   Foreign companies may operate via a branch or establish a permanent establishment (PE). 

§   Non-resident entities engaging in business via a PE are taxed on Ghana‐source income as if resident. 

§  Partnerships / Sole Proprietorships may be simpler but expose owners to unlimited liability and often have less favorable tax treatment for significant or cross-border business.

§  Choosing a Ghana-incorporated company gives better access to local incentives, treaty benefits, etc. 

§  For foreign investors, consider setting up via a holding company in a treaty jurisdiction if that reduces withholding taxes, but ensure substance and compliance to avoid abuse.

§  Foreign investors should also try registering with the GIPC to benefit from the incentives under the GIPC Act

2. Corporate Income Tax (CIT) Rates & Incentives

§  The general CIT rate is 25% for most resident companies. 

§  Some sectors pay special rates, such as the hotel industry (22 %), mining & upstream petroleum (35 %), non-traditional exports (8%), financial institutions lending to agriculture/leasing (20 %), etc.  

§  Free Zone enterprises get a CIT holiday for 10 years, then a rate of 15 % on export income, 25% on domestic sales. 

§  If your business qualifies as non-traditional exports or is in a free zone, the CIT savings can be substantial. 

§  Plan the location of operations: Additional incentives are provided to businesses based on their location, such as a rebate of up to 25% for manufacturing companies located outside Accra/Tema (CIT at 18.75%) and rebate of 50% for manufacturing companies located outside the regional capital. (CIT at 12.5%) 

§  If eligible for tax holidays (e.g., agro-processing, tree crops, waste processing, etc.), structure business timelines so you maximize the holiday period.

3. Withholding Taxes (WHT), Dividends & Repatriation

§  Dividends paid by resident companies are subject to 8 % WHT (final). Non-residents are also 8 %. 

§  Interest (excluding payments to individuals and except when paid to resident financial institutions) is subject to 8% WHT.

§  Royalties and natural resource payments are subject to 15 % WHT. 

§  Fees (management, technical, services) are subject to 20 % WHT for non-residents; for resident persons, various rates depending on the service and threshold. 

§  Dividends when paid by a resident entity to another resident company holding at least 25% of its voting rights is exempt from tax. Resident companies should take advantage of this when deciding on an investment strategy.

§  Use treaty benefits by non-resident entities where available to reduce WHT by ensuring proper documentation to claim treaty rates. 

§  If repatriating profits, plan timing and structure (dividends vs interest vs royalties) to minimize WHT. 

§  Consider whether payments are final or on account ― structure payments so the WHT is credited against your CIT (if possible) improves cash flow.

4. Location & Sector Incentives

§  Many industries benefit from tax holidays or reduced CIT for the first years: e.g., agro-processing, waste processing, tree crop farming, cocoa by-products, rural banking, and low-cost housing. Rates during holidays can be as low as 5%.  

§  After holidays, entities may enjoy reduced rates depending on location. E.g., manufacturing companies located outside regional capitals often pay lower CIT. 

§  When selecting a site, balance logistical/operational costs vs tax savings in less developed regions to take advantage of location incentives. 

§  Ensure your business qualifies structurally for incentives (use local raw materials, export content thresholds, etc.). 

§  For real estate, certified low-cost housing gets a special tax holiday. Consider certification early.

5. Capital Structure (Debt vs Equity)         

   §  Interest payments are deductible (but thin-capitalization and transfer pricing rules can limit the benefit). 

   §  Dividends are not deductible as in the case of interest. 

   §  There are rules around minimum chargeable income if persistent losses occur under certain conditions. If a company has incurred losses for several years, there is a legal minimum taxable base: 5% of turnover. However, this does not apply in some cases (e.g., businesses in the first 5 years of operations or farming business).

   §  Use debt financing judiciously to gain deduction benefits but avoid excessive leverage that triggers thin capitalization risk or raises red flags. 

   §  Consider hybrid instruments or intra-group loans under treaty jurisdictions. However, this must be at arm’s length.

6. Transfer Pricing, Documentation & Compliance

   §  Transactions with related parties must follow  the arm’s length principle. Transfer pricing documentation is required under Ghanaian tax laws. This documentation includes TP returns, Local file, Master file, and Country-by-Country Report

   §  Among other compliance requirements is withholding taxes on payments made to suppliers and remitting same to the GRA. Failure to withhold and remit results in surcharges.

   §  Establish proper policies early. This includes documentation of contracts or comparables that should be maintained for audits. 

   §  Use advanced rulings if available for uncertain transactions or major project planning. 

   §  Build tax risk management (internal audits, periodic reviews) into corporate governance.

   §  Ensure transfer pricing documentation compliance

7. Indirect Taxes: VAT, Exemptions & Indirect Reliefs

   §  VAT of 15 % is charged on the supply of taxable goods and services, plus additional levies: NHIL (2.5 %), GET Fund (2.5 %), and Covid-19 Recovery levies as applicable.  

   §  There is a flat-rate scheme (3%) for small suppliers with an annual turnover between GHS200,000 and GHS500,000. 

   §  Suppliers of immovable properties are also required to charge VAT at 5% in addition to the Covid-19 Recovery levy.

   §  Exports are treated as zero rated and certain agricultural products, education, health, etc., are treated as exempt supplies and are subject to VAT and levies at zero rate or exempted. 

  §  Entities should plan supply chains to maximize zero rating where viable (exports, etc.). 

  §  Monitor thresholds (for VAT registration, flat rate) closely as transaction volumes or turnover grows to avoid non-compliance.

8. Losses, Credits & Reliefs

  §  Unrelieved tax losses can be carried forward for up to five years after the year of loss. 

  §  Tax paid on income earned outside the country     may be claimed as a credit when assessing the tax payable in Ghana. This will reduce the tax liability for entities earning foreign income.

   §  Keep a good track of loss history and ensure losses are properly reported and documented. 

   §  For businesses with foreign operations, ensure foreign income tax is well documented and tax payment receipts and credit certificates are available, so credit claims are legitimate.

9. Governance, Timing & Strategic Planning

   §  All tax returns must be filed on time. E.g., CIT is generally due four months after the financial year end, and quarterly installments are often required.

   §   Ensure registrations with all regulators (GRA, GIPC, Free Zones if applicable), local licenses, etc., are up to date. 

   §  Use treaties and investment promotion authorities, such as the GIPC approvals, to secure incentives.

   §  Transfer pricing documentation for entities in controlled relationship.

   §  Incorporate tax planning into the business plan from the outset. 

   §  Seek professional tax / legal advice, especially for cross-border, large-scale capital expenditures, or non-traditional business models. 

   §  Build in flexibility as tax laws and incentives change to structure for resilience.

   §  Ensure TP documentation compliance.