(a)

1 August 2016
The Chief Operating Officer
Koranten Systems
P. O. Box 2222
Accra
Ghana
Dear Sir
Introduction
This letter has reference to our recent discussion on doing business with Berchem and Gritty in Ghana
Since BerchemPlc Uk (BP) has had some form of presence in Ghana for the past couple of years, we need to establish the residential status BP has acquired over this period whilst in Ghana. We then will follow up with the type of taxes, if any, that the tax laws prescribe for BP trading in or with Ghana.

Is BP a Ghana Resident company?
Sec 161 of Act 592 defines a resident company as follows: A company is a resident company for a year of assessment if it is
a) Incorporated under the laws of Ghana, or
b) Has its management and control exercised in Ghana at any time during the year.

The new Act, Act 896 maintains same definition for a Resident company.
BP is not a Ghana incorporated company nor does BP have its management and control exercised in Ghana. The definition above invariably will mean BP is a non-resident entity in Ghana. If BP were resident, taxes required of resident companies would have become due and payable by BP to the GRA.

Is BP a Permanent Establishment (PE)?
Sec 167 of ACT 592 defines a PE to mean a place where a person carries on business, and
a) A place where a person carries on business through an agent, other than a general agent of independent status acting in the ordinary course of business as such;
b) A place where a person has, is using, or is installing substantial equipment or machinery; or
c) A place where a person is engaged in a construction, assembly, or installation project for ninety days or more, including a place where a person is conducting supervisory activities in relation to such project.

Act 896 (110) expands the above PE definition to include
a) A place in the country where a non-resident person carries on business or that is at the disposal of the person for that purpose.

It would appear from the above extensive definition that BP is a PE here in Ghana. Therefore taxes would be paid in accordance with tax rules governing the operation of a business entity established as a PE in Ghana. We shall discuss this tax payment options under “taxes payable” caption as below.

b). The charge to tax
Sec 1(1) of Act 592 indicates that: a person who has a chargeable income shall pay, subject to this Act, for each year of assessment income tax calculated in accordance with this Act.

Sec 5 & 6 of Act 592 further indicates that, the chargeable income of a person is that persons total assessable income for the year.

For a resident person, the chargeable income is the full amount of the person’s income from the business accruing in, derived from, brought into, or received in Ghana during the year of assessment.

In the case of a non-resident person, the full amount of the person’s income from the business accruing in or derived from Ghana. This portion specifically captures BP’s trading activities in Ghana. A nonresident’s income, including a PE, may suffer a onetime withholding tax of $20 %$ on turnover when not locally registered and when tax returns will not be submitted to the GRA, or the usual corporate tax rate of $25 %$ on taxable profits where BP is registered as a Branch Entity in Ghana.

Sec 65 and 66 of Act 592 and Sec 109 of Act 896 expect a PE to account fully for its business tour in Ghana to the GRA and pay taxes as appropriate on incomes derived or accrued in Ghana.

Taxes Payable
BP trading with GEC directly as a non-resident entity and receiving payments in BP’s name from billings made by BP directly to ECG

BP trading with GEC is the raison d’etre of BP in Ghana. We discuss BP’s tax expectation as follows. BP had the prerogative to register with Ghana’s Registrar General or to do onetime business and leave the country.
a) Under Act 592
a. Withholding Tax
The application of the withholding tax to BP is of two types depending on whether BP is a registered entity or non-registered entity doing short term business in Ghana.
As a registered resident entity: Where BP is a registered non-resident entity in Ghana, BP should have suffered a withholding tax deduction of $5 %$ which is a tax credit to the final tax payable by BP. GEC should have deducted this withholding tax up front to pay to the GRA on behalf of BP. The $5 %$ tax credit eventually goes to BP to defray the final tax payable on taxable profits derived on its business activities at the end of the year in Ghana.
As a non-registered non-resident entity: BP would have suffered a final withholding tax of $20 %$ ( $15 %$ in 2014 ) on turnover if BP had executed a one-time contract term with GEC and did not expect to file tax returns with the GRA. The withholding tax should have been withheld by the GEC who is expected to have paid the tax so deducted to the GRA by the $15^{\text {th }}$ day following the month in which the deduction was made.
b. Corporate taxes payable
Where BP is registered in Ghana as a resident entity, the final corporate tax rate is $25 %$ on assessed taxable profits. Any prior $5 %$ withholding tax deducted by GEC would have been a tax credit in respect of the final tax of $25 %$ on taxable profit. BP is expected to provide year-end financial statements for all the years it operates in Ghana to the GRA and taxes due will be based on taxable profits declared from these financial statements over the years.
c. Filing of returns
Act 592 imposes a reporting responsibility on BP to furnish tax returns periodically to the GRA. The tax returns include:

• Audited financial statements for each year,
• Tax computation for each year,
• Monthly employee tax returns and cheque to pay any taxes due, if any,
• Quarterly estimated corporate tax payable which must be paid end of each quarterly period, and
• Monthly withholding tax schedules.
  b) Under Act 896
  a. The registration requirement and tax regime as prescribed by Act 592 above, are relevant under Act 896.
  b. BP will suffer $3 %$, or $7.5 %$ withholding tax on payments received from ECG depending on whether the goods, or services are supplied to GEC. The final corporate tax rate is $25 %$. Withholding tax of $20 %$ will apply if BP operates as a non-registered non-resident entity.
  c. Filing of returns: Returns as enumerated above under Filing of returns still apply.
  c) VAT Act 546 and Act 870
  If BP is a resident PE, Luton should be VAT registered to charge VAT to GEC all this while. Where BP trades in Ghana as non-registered non-resident entity, BP would have no responsibility to charge or register to operate the VAT scheme. GEC has the mandate to charge the VAT on itself and pay the VAT so charged to the GRA.

Conclusion
We submit the above to you for your kind attention. Please revert to the person who has signed this document if you will require any further explanation or clarification to the issues raised in this letter.

Yours faithfully
Yaw Manu