Question Tag: Double Taxation Agreement

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  • 20 Marks

IT – Feb 2020 – L1 – Q3 – Double Taxation and Relief

Advise Mauritius on double taxation relief for investments in Ghana under proposed DTA.

Mauritius seeks to enter into a Double Taxation Agreement (DTA) with Ghana. From the context of the consultation so far held with Ghana, it is evident that Mauritius intends to negotiate the DTA in order to enable its corporate sector to invest capital in Ghana. Mauritius and Ghana operate worldwide system of taxation, but Ghana has high tax rate than Mauritius.

The Minister of Finance in Mauritius approached Kinsful Tax Practitioners, a Chartered Tax Practitioners, in Ghana to advise Mauritius on the most appropriate method of double taxation relief to be included in the proposed Ghana/Mauritius Double Taxation Agreement as it impacts on portfolio investment, direct share ownership and permanent establishment.

Required
(a). As the Head of Tax at Kinsful Tax Practitioners, prepare a briefing note to the Minister of Finance of Mauritius in which you set out your advice.

(bi). State the process by which a Double Taxation Agreement can be operative in Ghana.

(bii). When interpreting a Double Taxation Agreement (DTA), where a term is not defined in the DTA itself, what should the parties do?

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  • 20 Marks

IT – Feb 2020 – L1 – Q2 – Taxation of Non-Residents

Advise on tax implications and jurisdictions for Kazeebu's aircraft operations under Ghana-South Africa DTA

Kazeebu is incorporated in South Africa. It is a newly registered aircraft operator. Directors of the company live in Ghana. They appoint agents who retail tickets on behalf of the company in Ghana. The tickets relate exclusively to three different categories of flight, all of which are within: South Africa, Ghana and United Kingdom.

Kazeebu also advertises the products of several suppliers of luxury goods in magazines which it supplies on its aircraft. It receives advertising fees from these suppliers.

South Africa determines corporate tax residence on the basis of the place of incorporation and place of central management and control.

The management of Kazeebu consulted Accor Consulting, a firm of Chartered Tax Practitioners to advise them on the tax implication of their activities. You are in the employment of Accor Consulting and your Managing Partner referred the issues to you.

Required
Prepare a memo to your Managing Partner in which you clearly
a. identify the tax implications of Kazeebu transactions, and
b. determine the jurisdictions to tax
(Answer within the context of Ghana/South Africa Double Taxation Agreement and Ghana Tax Laws)

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  • 20 Marks

IT – Feb 2020 – L1 – Q1 – Taxation of Non-Residents

Advise on UK tax liability for payments to a Ghanaian company under Ghana-UK DTA.

Dzoboku Lullaby Limited is a Ghanaian music and orchestral company. Syntax Promotion, a company resident in the United Kingdom, extended an invitation to Dzoboku Lullaby Limited to a musical concert held in London in December, 2019.

Professor Abu, an employee of Dzoboku Lullaby Limited, was billed to perform for Syntax at two separate concerts in London, one at Gustaff Hall and the other at Gibson Hall. The following payments were made to Dzoboku Lullaby Limited by Syntax Promotion:
a. £100,000 for the public performance at the Gustaff Hall.
b. £20,000 for using the Professor’s image to advertise. The payment was deposited into Dzoboku Lullaby Limited’s bank account.
c. £50,000 for the cancellation of Gibson Hall’s event.
d. 2% of the gate proceeds received.
e. 20% of income that accrued from businesses that advertised at the Gustaff Hall event.

Her Majesty Revenue and Customs (HMRC) in the United Kingdom wrote to the Syntax Promotion demanding tax in respect of all incomes paid to Dzoboku Lullaby Limited. Syntax objected to the HMRC request stating that Dzobuku Lullaby Limited has no Permanent Establishment in the United Kingdom and, therefore, cannot be liable for a United Kingdom tax on business income earned by Dzoboku Lullaby Limited since there is a double tax agreement between Ghana and the United Kingdom.

Think Tank Consulting, a firm of Chartered Tax Practitioners in Accra was consulted by Syntax Promotion to advise them on the HMRC demand.

You are a Chartered Tax Practitioner in the employment of Think Tank Consulting and Syntax request was referred to you to deal with by your Managing Partner.

Required
Prepare a briefing note to the Managing Partner of Think Tank Consulting in which you set out clearly, with reasons, whether United Kingdom’s tax is due on each of the payments made to Dzoboku Lullaby Company Limited as demanded by the HMRC.

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  • 20 Marks

IT – Aug 2020 – L1 – Q3 – Business Presence and Characterization

Analyze tax consequences of CPL Group’s technical experts’ activities in Ghana for Mavie Limited.

Mavie Limited is resident entity in Ghana. Mavie Limited was established seven months ago when the Corona Virus 2019 (Covid-19) pandemic began. It sells personal protection equipment (PPE), including medical sanitizer, face and nose masks for self-protection against the infectious disease. The company was jointly owned by Eyra Foundation and Akusa S.A. on 40% and 60% shareholdings respectively. Eyra Foundation is resident in Ghana. Akusa S.A, is a company resident in South Africa and is 100% owned by CPL Group Plc., a multinational company resident in Netherland.

In the last six months, two technical experts from CPL visited Mavie Ltd on 3 months rotation to provide technical support to the staff of Mavie Ltd.

Last month Mavie Ltd declared an interim dividend and subsequently transferred Akusa’s share of the dividend.

The management of Mavie Ltd approached your firm, Emiraldo Consulting to advise them on the implication of the above transactions. You are a Chartered Tax Practitioner in the employment of Emiraldo Consulting and the Managing Partner requests you to draft the advice for Mavie Ltd.

Required Prepare a draft report setting out the tax consequences of

a. Dealings with CPL Group Ltd in Ghana.

b. Payment of dividend to Akusa S.A. by Mavie Limited.

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  • 20 Marks

IT – Aug 2020 – L1 – Q1 – Taxing Rights and Jurisdiction

Explain tax implications of Volta Airlines' activities under domestic law and DTA, focusing on UK incorporation and Ghana operations.

Volta Airlines is incorporated in the United Kingdom (UK) and is a newly registered aircraft operator, operating for the past few months. United Kingdom determines corporate tax residence on the basis of the place of incorporation and place of central management and control.

Directors of Volta Airlines live in Ghana. They appoint agents who retail the airline’s tickets on behalf of the company in Ghana. The tickets relate exclusively to three different categories of flight, all of which are within the United Kingdom, South Africa and Ghana

The airline also agreed under an International Airlines Technical Pool agreement to provide spare parts and maintenance services to other airlines landing at the Ghana’s Kotoka International Airport. Volta Airlines receives maintenance fees from these services performed in Ghana.

Volta Airlines also advertises the products of several multinational companies in magazines which it supplies on its aircraft. It receives advertising fees from these companies.

Required:

a. Within the context of domestic tax law and the Double Tax Agreement explain the tax implication of activities of Volta Airlines.

b. Which country has the jurisdiction to tax the corporate income of airlines? Give reasons for your

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  • 20 Marks

ATP – Aug 2020 – L2 – Q2 – Income Tax Computation

Compute Mr Paa Kwesi Arthur’s tax liability for 2019, including salary and dividend income.

Mr Paa Kwesi Arthur returned to Ghana after staying in the Netherlands for over 20 years and took up an appointment with Amanfro Limited as Investment Analyst effective 1st January 2019. His gross monthly basic salary for 2019 year of assessment was GH¢12,000.00. He contributed 5.5% and 10% of his monthly basic salary to Social Security and National Insurance Trust (SSNIT) and Goodwill Pension Trust respectively.
Mr Paa Kwesi Arthur, is a widow and all his children are schooling in the Netherlands. He is only responsible for the up keep of his biological parents, who are above seventy years of age.

Mr Paa Kwesi Arthur has investments in Germany, from which he earned a gross dividend of 12,000 Euros in 2019, from which 720 Euros was withheld as dividend tax and the balance remitted to him in Ghana. There is a Double Taxation Agreement between Ghana and Germany.

The rate of Exchange is GH¢6.2 to 1.00 Euro.

Required:

a) Compute the tax liability of Mr Paa Kwesi Arthur for 2019 Year of assessment.

b) Explain the basis of your computation.

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  • 20 Marks

IT – Aug 2020 – L1 – Q3 – Permanent Establishment

Analyze if technical experts’ presence in Ghana constitutes a Service PE under Article 5 of Ghana-Netherlands DTA.

(A) This question must be answered within the context of permanent establishment under Article 5 (1) of DTA between Ghana and Netherland and within domestic tax law. The presence of the technical expert may likely constitute a Service PE.                                                                                                                                                                                                                                                                                        (B)This question is based on the Article 10 (Dividend) of Double Tax Agreement (DTA). It also espoused the concept of Beneficial Ownership Concept in Paragraph 2 of Art 10 of the DTA.

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  • 15 Marks

IT – Aug 2020 – L1 – Q2 – Taxing Rights and Jurisdiction to Tax

Application of Article 8 of Ghana-South Africa and UK-Ghana DTAs to tax profits from international air transport and ancillary income of Kazeebu.

CHARTERED INSTITUTE OF TAXATION, GHANA PAPER 9: INTERNATIONAL TAXATION FEB 2020 SITTINGS

QUESTION 2 Introduction Address

  1. Relevant provisions that are needed to address the concern of the company are Section 7 and 101 (4) of the Income Tax Act (ITA) 896, Article 3(1)(H) and Article 8 of the Double Taxation between Ghana and South Africa and United Kingdom (UK) and Ghana.

ITA 896 General Rules

  1. The rule in respect of resident entity is that an entity is resident in Ghana where the entity is incorporated under the company Act 992 or it has its affairs centrally managed in Ghana.
  2. Provision in section 7 of the ITA 896 is relevant. Section 7 exempts the income of a non-resident person from business of operating ships, aircraft, where the Commissioner General is satisfied that equivalent exemption is granted by the country of residence of that person to a person resident in Ghana.
  3. Considering that, there is DTA between Ghana and South Africa, the provisions in the DTA, prevail over the provision in the ITA. See section 98 of Revenue Administration Act 915.

Changes to UN/OECD MTC article 8

  1. Prior to 2017, the tie breaker rules for allocation of taxing right of state by resident status was changed from place of effective management (POEM) to a determination being made by mutual agreement and also to the manner in which profits arising from international shipping and air transport will be allocated from the State with the company’s place of effective management to the State of the enterprise.

The DTA and determination of the taxing right The General rules in the DTA 2. There is a need to consider Articles 3 and 8 of the DTA between South Africa and Ghana and the UK and Ghana. The relevant provisions in DTA with UK and South Africa are the same. 3. Where the relevant activity falls within Articles 3 and 8, Articles 5 and 7 do not apply therefore Article 8 trumps Articles 5 and 7. 4. Article 8(1) of the DTA states that Profits of an enterprise of a Contracting “State from the operation of ships or aircraft in international traffic shall be taxable only in that State”. Para 2 of the commentary to the article 8 provides that states prefer to assign taxing right to the states of the enterprise. 5. Article 3(1)(h) of the DTA also defined international traffic” to mean any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State 6. On the basis of Article 8(1) and paragraph 2 of the Commentary to article 8, and on the basis of the fact in the case, there is no specific need to consider the location of Kazeebu’s place of effective management. 7. Rather where the relevant activities fall within Article 3 and Article 8 is where the taxing right will be located. 8. Most likely, South Africa has the right to tax all the relevant profits as it is the most likely state to be “Contracting State of the enterprise” based on the facts. Remember, the company is incorporated in South Africa. And exclusive use of place of effective management has changed to enterprise of the state. In fact, this is the position of Ghana/ South Africa DTA. 9. Where the aircraft (as part of the same voyage) flies between a place in Ghana to South Africa (leg one) and then flies from the South Africa location to another location in South Africa (leg two), both legs of the journey will fall within the definition of “international traffic” so longer as the flight originate from South Africa. 10. According to Article 8, South Africa has the right to tax profits derived by Kazeebu from “international traffic”, air / ship traffic within its borders and also that occurring within third countries, the United Kingdom. 11. In this case South Africa will have the right to tax any profits derived by Kazeebu from sales made by the Ghanaian agent that are for travel wholly within South Africa under the Ghana / South Africa DTA (i.e. category (a) flights above) and may have the right to tax any profits arise from flight made to UK wholly within UK which flight originate from South Africa. 12. The relationship between the agents in Ghana and Kazeebu needs not be considered as has been the case in Article 5 (5) and Article 7(1). 13. Commentary on Article 8(1), para 4-4.3, the allocation rule in Article 8 applies not only to the profits directly obtained from ticket sales but also to profits obtained from activities that are not directly connected with these sales provided these other activities are ancillary to the operation of Kazeebu’s airline business. Where the activities are considered to be ancillary then profits from these activities will be taxable only in the state of the enterprise, i.e. Ghana. 14. Although the advertising fees may not be considered to be directly related to Kazeebu’s international traffic operations, these are derived from an activity that is ancillary to the operation of Kazeebu’s aircraft. 15. South Africa will have the right to tax the income derived from the advertisement. One marks each for each relevant point

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  • 20 Marks

IT – Aug 2020 – L1 – Q1 – Double Taxation and Relief

Application of Article 18 of UK-Ghana DTA to tax income of an entertainer, including performance fees, royalties, and cancellation payments.

CHARTERED INSTITUTE OF TAXATION, GHANA PAPER 9: INTERNATIONAL TAXATION FEB 2020 SITTINGS

QUESTION 1 Address Introduction This question deal with the application of article 18 (2) of the Double Tax Agreement (DTA) between Ghana and United Kingdom.

General principle under article 18 is stated below Para 1: Income derived by entertainer, from his personal activities exercised in the other Contracting State is taxed in that state. It can also be taxed in the other state, notwithstanding the provisions of Articles 7 and 15- 2 marks

Para 2: Income accruing to another person in respect of personal activities exercised by an entertainer or a sportsman in his capacity notwithstanding the provisions of Articles 7 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised. 2 marks

In determining whether income falls under Article 18 of Double Taxation Agreement between UK and Ghana or another article, the controlling factor will be whether the income in question is predominantly attributable to the performance artist or other activities or property rights. 2 marks a. Notwithstanding the provision in Article 7 and article 15 of the DTA, the £100,000 paid to Dzoboku Lullaby Ltd for the public performance of the Professor will be tax in the UK under Article 18(1) and (2). It is also taxable in Ghana under section 3 and 5 of Income tax Act 896. 2 marks b. The nature of this income requires that the image for advert amount to an exploitation of right, taxable under article 12 – Royalty.

Commentary to the Article 18(1), provided that in general, other Articles would apply whenever there was no direct link between the income and a public exhibition by the performer in the country concerned. As result this income will be taxable in the UK. It may also be tax in Ghana. 2 marks c. Where similar income which could not directly be attributed to such performances or appearances would fall under the standard rules of Article 7 or Article 15 as the case may be. Payments received in the event of the cancellation of a performance in the Gibson Hall are outside the scope of Article 18 and fall under Articles 7. That income is taxable in Ghana only under section 3 and section 5 of the Income Tax Act 896. 2 marks d. 2% of the gate proceeds paid to Dzoboku lullaby. This income relates directly to the appearance of the Professor. So, notwithstanding the provision in Article 7 and article 15 of the DTA, the amount paid to Dzoboku Lullaby Ltd for the for the gate proceeds in respect of public performance of the Professor will be tax in the UK under Article 18(1) and (2). It is also taxable in Ghana under section 3 and 5 of Income tax Act 896. 2 marks e. 20% of income that accrued from businesses that advertised and paid to Dzoboku Lullaby Ltd will be tax in the UK under article 18 (1) and (2). It will also be tax in Ghana under section 3 and 5 of the Act 896. 2 marks

Conclusion Subject to the aforementioned, the HMRC, is justified in assessing the income for tax in a, b, d and e. Income stream c is only taxable in Ghana

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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  • 20 Marks

IT – Feb 2020 – L1 – Q3 – Double Taxation and Relief

Advise Mauritius on double taxation relief for investments in Ghana under proposed DTA.

Mauritius seeks to enter into a Double Taxation Agreement (DTA) with Ghana. From the context of the consultation so far held with Ghana, it is evident that Mauritius intends to negotiate the DTA in order to enable its corporate sector to invest capital in Ghana. Mauritius and Ghana operate worldwide system of taxation, but Ghana has high tax rate than Mauritius.

The Minister of Finance in Mauritius approached Kinsful Tax Practitioners, a Chartered Tax Practitioners, in Ghana to advise Mauritius on the most appropriate method of double taxation relief to be included in the proposed Ghana/Mauritius Double Taxation Agreement as it impacts on portfolio investment, direct share ownership and permanent establishment.

Required
(a). As the Head of Tax at Kinsful Tax Practitioners, prepare a briefing note to the Minister of Finance of Mauritius in which you set out your advice.

(bi). State the process by which a Double Taxation Agreement can be operative in Ghana.

(bii). When interpreting a Double Taxation Agreement (DTA), where a term is not defined in the DTA itself, what should the parties do?

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  • 20 Marks

IT – Feb 2020 – L1 – Q2 – Taxation of Non-Residents

Advise on tax implications and jurisdictions for Kazeebu's aircraft operations under Ghana-South Africa DTA

Kazeebu is incorporated in South Africa. It is a newly registered aircraft operator. Directors of the company live in Ghana. They appoint agents who retail tickets on behalf of the company in Ghana. The tickets relate exclusively to three different categories of flight, all of which are within: South Africa, Ghana and United Kingdom.

Kazeebu also advertises the products of several suppliers of luxury goods in magazines which it supplies on its aircraft. It receives advertising fees from these suppliers.

South Africa determines corporate tax residence on the basis of the place of incorporation and place of central management and control.

The management of Kazeebu consulted Accor Consulting, a firm of Chartered Tax Practitioners to advise them on the tax implication of their activities. You are in the employment of Accor Consulting and your Managing Partner referred the issues to you.

Required
Prepare a memo to your Managing Partner in which you clearly
a. identify the tax implications of Kazeebu transactions, and
b. determine the jurisdictions to tax
(Answer within the context of Ghana/South Africa Double Taxation Agreement and Ghana Tax Laws)

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  • 20 Marks

IT – Feb 2020 – L1 – Q1 – Taxation of Non-Residents

Advise on UK tax liability for payments to a Ghanaian company under Ghana-UK DTA.

Dzoboku Lullaby Limited is a Ghanaian music and orchestral company. Syntax Promotion, a company resident in the United Kingdom, extended an invitation to Dzoboku Lullaby Limited to a musical concert held in London in December, 2019.

Professor Abu, an employee of Dzoboku Lullaby Limited, was billed to perform for Syntax at two separate concerts in London, one at Gustaff Hall and the other at Gibson Hall. The following payments were made to Dzoboku Lullaby Limited by Syntax Promotion:
a. £100,000 for the public performance at the Gustaff Hall.
b. £20,000 for using the Professor’s image to advertise. The payment was deposited into Dzoboku Lullaby Limited’s bank account.
c. £50,000 for the cancellation of Gibson Hall’s event.
d. 2% of the gate proceeds received.
e. 20% of income that accrued from businesses that advertised at the Gustaff Hall event.

Her Majesty Revenue and Customs (HMRC) in the United Kingdom wrote to the Syntax Promotion demanding tax in respect of all incomes paid to Dzoboku Lullaby Limited. Syntax objected to the HMRC request stating that Dzobuku Lullaby Limited has no Permanent Establishment in the United Kingdom and, therefore, cannot be liable for a United Kingdom tax on business income earned by Dzoboku Lullaby Limited since there is a double tax agreement between Ghana and the United Kingdom.

Think Tank Consulting, a firm of Chartered Tax Practitioners in Accra was consulted by Syntax Promotion to advise them on the HMRC demand.

You are a Chartered Tax Practitioner in the employment of Think Tank Consulting and Syntax request was referred to you to deal with by your Managing Partner.

Required
Prepare a briefing note to the Managing Partner of Think Tank Consulting in which you set out clearly, with reasons, whether United Kingdom’s tax is due on each of the payments made to Dzoboku Lullaby Company Limited as demanded by the HMRC.

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  • 20 Marks

IT – Aug 2020 – L1 – Q3 – Business Presence and Characterization

Analyze tax consequences of CPL Group’s technical experts’ activities in Ghana for Mavie Limited.

Mavie Limited is resident entity in Ghana. Mavie Limited was established seven months ago when the Corona Virus 2019 (Covid-19) pandemic began. It sells personal protection equipment (PPE), including medical sanitizer, face and nose masks for self-protection against the infectious disease. The company was jointly owned by Eyra Foundation and Akusa S.A. on 40% and 60% shareholdings respectively. Eyra Foundation is resident in Ghana. Akusa S.A, is a company resident in South Africa and is 100% owned by CPL Group Plc., a multinational company resident in Netherland.

In the last six months, two technical experts from CPL visited Mavie Ltd on 3 months rotation to provide technical support to the staff of Mavie Ltd.

Last month Mavie Ltd declared an interim dividend and subsequently transferred Akusa’s share of the dividend.

The management of Mavie Ltd approached your firm, Emiraldo Consulting to advise them on the implication of the above transactions. You are a Chartered Tax Practitioner in the employment of Emiraldo Consulting and the Managing Partner requests you to draft the advice for Mavie Ltd.

Required Prepare a draft report setting out the tax consequences of

a. Dealings with CPL Group Ltd in Ghana.

b. Payment of dividend to Akusa S.A. by Mavie Limited.

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  • 20 Marks

IT – Aug 2020 – L1 – Q1 – Taxing Rights and Jurisdiction

Explain tax implications of Volta Airlines' activities under domestic law and DTA, focusing on UK incorporation and Ghana operations.

Volta Airlines is incorporated in the United Kingdom (UK) and is a newly registered aircraft operator, operating for the past few months. United Kingdom determines corporate tax residence on the basis of the place of incorporation and place of central management and control.

Directors of Volta Airlines live in Ghana. They appoint agents who retail the airline’s tickets on behalf of the company in Ghana. The tickets relate exclusively to three different categories of flight, all of which are within the United Kingdom, South Africa and Ghana

The airline also agreed under an International Airlines Technical Pool agreement to provide spare parts and maintenance services to other airlines landing at the Ghana’s Kotoka International Airport. Volta Airlines receives maintenance fees from these services performed in Ghana.

Volta Airlines also advertises the products of several multinational companies in magazines which it supplies on its aircraft. It receives advertising fees from these companies.

Required:

a. Within the context of domestic tax law and the Double Tax Agreement explain the tax implication of activities of Volta Airlines.

b. Which country has the jurisdiction to tax the corporate income of airlines? Give reasons for your

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  • 20 Marks

ATP – Aug 2020 – L2 – Q2 – Income Tax Computation

Compute Mr Paa Kwesi Arthur’s tax liability for 2019, including salary and dividend income.

Mr Paa Kwesi Arthur returned to Ghana after staying in the Netherlands for over 20 years and took up an appointment with Amanfro Limited as Investment Analyst effective 1st January 2019. His gross monthly basic salary for 2019 year of assessment was GH¢12,000.00. He contributed 5.5% and 10% of his monthly basic salary to Social Security and National Insurance Trust (SSNIT) and Goodwill Pension Trust respectively.
Mr Paa Kwesi Arthur, is a widow and all his children are schooling in the Netherlands. He is only responsible for the up keep of his biological parents, who are above seventy years of age.

Mr Paa Kwesi Arthur has investments in Germany, from which he earned a gross dividend of 12,000 Euros in 2019, from which 720 Euros was withheld as dividend tax and the balance remitted to him in Ghana. There is a Double Taxation Agreement between Ghana and Germany.

The rate of Exchange is GH¢6.2 to 1.00 Euro.

Required:

a) Compute the tax liability of Mr Paa Kwesi Arthur for 2019 Year of assessment.

b) Explain the basis of your computation.

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  • 20 Marks

IT – Aug 2020 – L1 – Q3 – Permanent Establishment

Analyze if technical experts’ presence in Ghana constitutes a Service PE under Article 5 of Ghana-Netherlands DTA.

(A) This question must be answered within the context of permanent establishment under Article 5 (1) of DTA between Ghana and Netherland and within domestic tax law. The presence of the technical expert may likely constitute a Service PE.                                                                                                                                                                                                                                                                                        (B)This question is based on the Article 10 (Dividend) of Double Tax Agreement (DTA). It also espoused the concept of Beneficial Ownership Concept in Paragraph 2 of Art 10 of the DTA.

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  • 15 Marks

IT – Aug 2020 – L1 – Q2 – Taxing Rights and Jurisdiction to Tax

Application of Article 8 of Ghana-South Africa and UK-Ghana DTAs to tax profits from international air transport and ancillary income of Kazeebu.

CHARTERED INSTITUTE OF TAXATION, GHANA PAPER 9: INTERNATIONAL TAXATION FEB 2020 SITTINGS

QUESTION 2 Introduction Address

  1. Relevant provisions that are needed to address the concern of the company are Section 7 and 101 (4) of the Income Tax Act (ITA) 896, Article 3(1)(H) and Article 8 of the Double Taxation between Ghana and South Africa and United Kingdom (UK) and Ghana.

ITA 896 General Rules

  1. The rule in respect of resident entity is that an entity is resident in Ghana where the entity is incorporated under the company Act 992 or it has its affairs centrally managed in Ghana.
  2. Provision in section 7 of the ITA 896 is relevant. Section 7 exempts the income of a non-resident person from business of operating ships, aircraft, where the Commissioner General is satisfied that equivalent exemption is granted by the country of residence of that person to a person resident in Ghana.
  3. Considering that, there is DTA between Ghana and South Africa, the provisions in the DTA, prevail over the provision in the ITA. See section 98 of Revenue Administration Act 915.

Changes to UN/OECD MTC article 8

  1. Prior to 2017, the tie breaker rules for allocation of taxing right of state by resident status was changed from place of effective management (POEM) to a determination being made by mutual agreement and also to the manner in which profits arising from international shipping and air transport will be allocated from the State with the company’s place of effective management to the State of the enterprise.

The DTA and determination of the taxing right The General rules in the DTA 2. There is a need to consider Articles 3 and 8 of the DTA between South Africa and Ghana and the UK and Ghana. The relevant provisions in DTA with UK and South Africa are the same. 3. Where the relevant activity falls within Articles 3 and 8, Articles 5 and 7 do not apply therefore Article 8 trumps Articles 5 and 7. 4. Article 8(1) of the DTA states that Profits of an enterprise of a Contracting “State from the operation of ships or aircraft in international traffic shall be taxable only in that State”. Para 2 of the commentary to the article 8 provides that states prefer to assign taxing right to the states of the enterprise. 5. Article 3(1)(h) of the DTA also defined international traffic” to mean any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State 6. On the basis of Article 8(1) and paragraph 2 of the Commentary to article 8, and on the basis of the fact in the case, there is no specific need to consider the location of Kazeebu’s place of effective management. 7. Rather where the relevant activities fall within Article 3 and Article 8 is where the taxing right will be located. 8. Most likely, South Africa has the right to tax all the relevant profits as it is the most likely state to be “Contracting State of the enterprise” based on the facts. Remember, the company is incorporated in South Africa. And exclusive use of place of effective management has changed to enterprise of the state. In fact, this is the position of Ghana/ South Africa DTA. 9. Where the aircraft (as part of the same voyage) flies between a place in Ghana to South Africa (leg one) and then flies from the South Africa location to another location in South Africa (leg two), both legs of the journey will fall within the definition of “international traffic” so longer as the flight originate from South Africa. 10. According to Article 8, South Africa has the right to tax profits derived by Kazeebu from “international traffic”, air / ship traffic within its borders and also that occurring within third countries, the United Kingdom. 11. In this case South Africa will have the right to tax any profits derived by Kazeebu from sales made by the Ghanaian agent that are for travel wholly within South Africa under the Ghana / South Africa DTA (i.e. category (a) flights above) and may have the right to tax any profits arise from flight made to UK wholly within UK which flight originate from South Africa. 12. The relationship between the agents in Ghana and Kazeebu needs not be considered as has been the case in Article 5 (5) and Article 7(1). 13. Commentary on Article 8(1), para 4-4.3, the allocation rule in Article 8 applies not only to the profits directly obtained from ticket sales but also to profits obtained from activities that are not directly connected with these sales provided these other activities are ancillary to the operation of Kazeebu’s airline business. Where the activities are considered to be ancillary then profits from these activities will be taxable only in the state of the enterprise, i.e. Ghana. 14. Although the advertising fees may not be considered to be directly related to Kazeebu’s international traffic operations, these are derived from an activity that is ancillary to the operation of Kazeebu’s aircraft. 15. South Africa will have the right to tax the income derived from the advertisement. One marks each for each relevant point

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  • 20 Marks

IT – Aug 2020 – L1 – Q1 – Double Taxation and Relief

Application of Article 18 of UK-Ghana DTA to tax income of an entertainer, including performance fees, royalties, and cancellation payments.

CHARTERED INSTITUTE OF TAXATION, GHANA PAPER 9: INTERNATIONAL TAXATION FEB 2020 SITTINGS

QUESTION 1 Address Introduction This question deal with the application of article 18 (2) of the Double Tax Agreement (DTA) between Ghana and United Kingdom.

General principle under article 18 is stated below Para 1: Income derived by entertainer, from his personal activities exercised in the other Contracting State is taxed in that state. It can also be taxed in the other state, notwithstanding the provisions of Articles 7 and 15- 2 marks

Para 2: Income accruing to another person in respect of personal activities exercised by an entertainer or a sportsman in his capacity notwithstanding the provisions of Articles 7 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised. 2 marks

In determining whether income falls under Article 18 of Double Taxation Agreement between UK and Ghana or another article, the controlling factor will be whether the income in question is predominantly attributable to the performance artist or other activities or property rights. 2 marks a. Notwithstanding the provision in Article 7 and article 15 of the DTA, the £100,000 paid to Dzoboku Lullaby Ltd for the public performance of the Professor will be tax in the UK under Article 18(1) and (2). It is also taxable in Ghana under section 3 and 5 of Income tax Act 896. 2 marks b. The nature of this income requires that the image for advert amount to an exploitation of right, taxable under article 12 – Royalty.

Commentary to the Article 18(1), provided that in general, other Articles would apply whenever there was no direct link between the income and a public exhibition by the performer in the country concerned. As result this income will be taxable in the UK. It may also be tax in Ghana. 2 marks c. Where similar income which could not directly be attributed to such performances or appearances would fall under the standard rules of Article 7 or Article 15 as the case may be. Payments received in the event of the cancellation of a performance in the Gibson Hall are outside the scope of Article 18 and fall under Articles 7. That income is taxable in Ghana only under section 3 and section 5 of the Income Tax Act 896. 2 marks d. 2% of the gate proceeds paid to Dzoboku lullaby. This income relates directly to the appearance of the Professor. So, notwithstanding the provision in Article 7 and article 15 of the DTA, the amount paid to Dzoboku Lullaby Ltd for the for the gate proceeds in respect of public performance of the Professor will be tax in the UK under Article 18(1) and (2). It is also taxable in Ghana under section 3 and 5 of Income tax Act 896. 2 marks e. 20% of income that accrued from businesses that advertised and paid to Dzoboku Lullaby Ltd will be tax in the UK under article 18 (1) and (2). It will also be tax in Ghana under section 3 and 5 of the Act 896. 2 marks

Conclusion Subject to the aforementioned, the HMRC, is justified in assessing the income for tax in a, b, d and e. Income stream c is only taxable in Ghana

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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