Response to Asew LTD on Transfer Pricing Documentation Requirements

Dear Mr. Nii Armaah,

We acknowledge receipt of your inquiry regarding your transfer pricing compliance obligations following the tax assessment by the Ghana Revenue Authority (GRA). Below is a summary of your obligations under the Transfer Pricing Regulations, 2020 (L.I. 2412) regarding the documentation required and their respective deadlines:

(i) Transfer Pricing Documentation Requirements

As per Regulation 7 of L.I. 2412, all entities engaging in transactions with related parties must maintain contemporaneous transfer pricing documentation under the three-tier documentation approach, which consists of:

1. Master File

   • This provides a global overview of the Multinational Enterprise (MNE) Group, detailing its business operations, global allocation of income, and tax policies.
   • Filing Deadline: Not later than four (4) months after the end of each basis period (i.e., financial year).

2. Local File

   • This contains detailed information on the specific related-party transactions of the Ghanaian entity, including the pricing methods used, functional analysis, and economic conditions.
   • Filing Deadline: Not later than four (4) months after the end of each basis period.

3. Country-by-Country Report (CbCR)

   • Applicable to entities that are part of an MNE Group with consolidated revenue exceeding EUR 750 million (or its equivalent in Ghana Cedis).
   • The report provides detailed country-specific data on income, taxes paid, and key economic activities.
   • Filing Deadline: Not later than twelve (12) months after the end of the reporting fiscal year.

(ii) Conditions for Exemption from Transfer Pricing Documentation Requirements

Under Regulation 7(7) of L.I. 2412, a company may be exempted from maintaining and filing transfer pricing documentation under the following conditions:

1. Monetary Threshold Exception:

   • If the total monetary value of the controlled transaction does not exceed the Ghana Cedi equivalent of USD 200,000, the company is exempted from filing a Master File and Local File.
   • However, the GRA may aggregate multiple related transactions if they appear to be structured for tax avoidance.

2. Registered Technology Transfer Agreements:

   • A company engaged in a technology transfer agreement with a related party may elect to be exempt from transfer pricing documentation requirements if:
     • The agreement is registered with the Ghana Investment Promotion Centre (GIPC).
     • The amount charged complies with the Second Schedule of the L.I. 2412, which limits royalty, know-how, and management/technical fees to 2% of net profit.

3. Low Value-Adding Intra-Group Services:

   • If a company renders or receives intra-group services and applies the cost-plus method with a markup not exceeding 3%, it can apply for an exemption.
   • The exemption must be notified in writing to the GRA within 30 days of entering the arrangement.

Conclusion

Asew LTD should review its related-party transactions to determine if they qualify for any exemptions. If not, the company must immediately prepare and file its transfer pricing documentation to avoid further penalties.

Should you require further clarification, please feel free to reach out.

Best regards,
[Your Name]
Senior Transfer Pricing Associate
Fameye and Associates