Doing Business in Africa Focus on Ghana

Transcription

1 Doing Business in Africa Focus on Ghana

2 Agenda Why this seminar? Africa Desk Doing business in Ghana Doing Business in Mozambique 2 March 2016

3 Why this seminar? 3

4 The interest in investing in Africa continues to grow rapidly Need for general as well as specific hands-on information and ability to discuss developments remains valuable 4

5 Africa Desk 5

6 Ways the Africa Desk may support you One-stop service Cape Verde Senegal Gambia Guinea Bissau Because of helicopter view, identification of other crosscountry alternatives Sierra Leone Mauritania Guinea Liberia Morocco Côte d Ivoire Mali Burkina Faso São Tomé and Príncipe offices Algeria Tunisia Benin Nigeria Togo Ghana Equatorial Guinea For services in these territories please contact a neighbouring territory Quick and coordinated responses on general and specific questions Niger Cameroon Gabon Libya Chad Central African Republic Congo Angola Namibia Democratic Republic of Congo Botswana South Africa Egypt Sudan Zambia South Sudan Uganda Rwanda Burundi Zimbabwe Tanzania Malawi Lesotho Eritrea Ethiopia Kenya Swaziland Djibouti Somalia Comoros Mayotte Seychelles Reunion Mauritius Proactively informs relevant parties on new developments Thought leadership through AfriTax newsletter, One page tax summaries per African country, country seminars, etc. 6

7 Thought leadership AfriTax newsletter 7

8 Seminars so far Angola Botswana Ethiopia Kenya Mauritius Mozambique (2x) Namibia Nigeria Rwanda Seychelles South Africa Tanzania Zambia 8

9 Upcoming event 9

10 The presence in Africa In Africa Member firms in 33 countries with over 9,000 professional staff. We have the largest footprint of professional services on the African continent. All our African firms are locally-owned. Provide a range of professional business advisory services to the public and private sectors throughout the continent. Committed to the development and prosperity of the African people and economies. Cape Verde Mauritania Senegal Gambia Guinea Bissau Guinea Sierra Leone Liberia Morocco Côte d Ivoire Mali Burkina Algeria Tunisia Niger Benin Nigeria Faso Togo Ghana São Tomé and Príncipe offices Equatorial Guinea For services in these territories please contact a neighbouring territory Cameroon Gabon Libya Chad Central African Republic Egypt Democratic Republic Congo of Congo Angola Namibia Sudan Zambia Botswana South Africa South Sudan Uganda Rwanda Burundi Zimbabwe Tanzania Eritrea Ethiopia Kenya Malawi Swaziland Lesotho Djibouti Somalia Seychelles Comoros Mayotte Reunion Mauritius 10

11 Doing business in Ghana 11

12 Fun fact Survival tip for Ghana Charley Wotey!!!! 12

13 Agenda Country context Business vehicles Legal and labour Tax framework Structuring 13

14 Country Context 1.1. General 1.2 Living and working in Ghana 1.3 Economy 1.4 Risk factors July Doing 2016 Business in Ghana 14

15 Country Context 1.1. General 1.2 Living and working in Ghana 1.3 Economy 1.4 Risk factors July Doing 2016 Business in Ghana 15

16 Country Context General Where is Ghana? Ghana, officially the Republic of Ghana, is located in West Africa along the Gulf of Guinea and Atlantic Ocean. Ghana shares borders with Ivory Coast in the west, Burkina Faso in the north, Togo in the East and the Gulf of Guinea and Atlantic Ocean in the south. It is interesting to note that Ghana s neighbours are French speaking countries. 16

17 Country Context General History Ghana, formerly known as the Gold Coast, was first a British colony. In 1957, Ghana became the first subsaharan African nation to declare independence. Ghana is a unitary presidential constitutional democracy with a parliamentary multi-party system. The current president of Ghana is John Dramani Mahama. 17

18 Country Context 1.1. General 1.2 Living and working in Ghana 1.3 Economy 1.4 Risk factors 18

19 Country Context Living and working in Ghana Country size of Ghana is 238,535 square kilometres. Population size is currently about 27 million (2014 estimate). Ghana has a tropical climate with two distinct seasons: the wet season and the dry season. Population density is people per sq km of land. Ghana is a lower middle income country. 19

20 Country Context 1.1. General 1.2 Living and working in Ghana 1.3 Economy 1.4 Risk factors 20

21 Economy General Ghana is an average natural resource enriched country possessing industrial minerals, hydrocarbons and precious metals. Ghana produces and exports hydrocarbons such as sweet crude oil and natural gas. Ghana produces high quality cocoa and is the 2nd largest producer of cocoa globally. Ghana is an emerging designated digital economy with a mixed economy hybridization. The Ghana Stock Exchange is the 5th largest on continental Africa and 3rd largest in sub-saharan Africa. Ghana is believed to have up to 5 to 7 billion of petroleum in reserves, which is the 5th largest in Africa and the 25th largest proven reserves in the world. 21

22 Economy Real sector contribution Ghana has continued to experience a shift in the structure of its economy. 19% 54% 27% Services Industry The services sector is expected to maintain its position as the largest contributor to the economy. Agriculture Source: GoG 2016 Budget 22

23 Economy Ghana & The International Monetary Fund (IMF) Ghana is under a 3 year Extended Credit Facility (ECF) which has resulted in stringent fiscal policies aimed at supporting the country s medium-term economic agenda. Priorities of the programme Pillars of the programme Restore debt sustainability Support growth with adequate capital spending Reduction in financing costs Restraining and prioritizing public expenditure Increasing tax collection Strengthening monetary policy 23

24 Economy Snapshot of the Ghanaian economy Inflation : The year-on-year inflation rate as measured by the CPI stood at 18.7% in April 2016, down from 19.2% recorded in March Interest rates : The Bank of Ghana Policy rate was increased from 21% in December 2014 to 26% in December It has been kept stable at this level to date. Exchange Rate : Currently, the selling rate for the cedi is: - GHS to US dollar - GHS to the Pound Sterling - GHS to the Euro - GHS to the Rand 24

25 Economy Macroeconomic targets for 2016 Overall GDP (including oil) - 5.4% Overall GDP (non - oil) - 5.2% End of year inflation % Overall budget deficit (% of GDP) - 5.3% Gross international reserves - Not less than 3months import cover 25

26 Economy Highlights of developmental projects Transportation Modes of transport in Ghana is accomplished by road transport (bus-based mass transit system), railway, air transport (civil aviation) and water transport (ferry). The commitment to creating an integrated and seamless transportation system includes expansion and refurbishment of the country s local airports in Tamale and Kumasi as well as the upgrade of Kotoka International Airport. 26

27 Economy Highlights of developmental projects Energy Increased in renewables due to shortages of electricity. To fix the challenges in the power sector, ongoing power projects such as the - 225MW Powership - IPP project - 250MW Ameri in Takoradi (under a Build, Own, Operate and Transfer arrangement) - the 220MW Kpone Thermal Power Project (KTPP) Feasibility studies have been conducted towards the siting of a nuclear power plant in the country. 27

28 Country Context 1.1. General 1.2 Living and working in Ghana 1.3 Economy 1.4 Risk factors 28

29 Risk factors Internal and external Inadequate supply of electricity nationwide Weak infrastructure across many sectors The impact of changes in international oil and gold prices Government bureaucracy when awarding and paying for contracts High unemployment and poverty Depreciation of the local currency High interest and inflation rate 29

30 Business vehicles 2.1. Types of entities 2.2 Establishing a subsidiary 30

31 Business vehicles 2.1. Types of entities 2.2 Establishing a subsidiary 31

32 Business vehicles Types of legal entities A B C D NB: Limited liability company Unlimited liability company Incorporated partnership Sole proprietorship External entities can be registered either as a branch or a subsidiary 32

33 Business vehicles Foreign/local investment GIPC Act The Ghana Investment Promotion Centre Act, 2013 (Act 865) ( GIPC Act ) applies to all enterprises in Ghana. Entities operating in all sectors have to comply with the GIPC Act. A wholly owned Ghanaian enterprise may register with the GIPC in order to avail itself for the incentives provided under the Act. Strategic Investment An investor may negotiate specific incentive packages for strategic investments. In monetary terms an investment of capital of about US$50 million is deemed as strategic by the GIPC. 33

34 Business vehicles Foreign/local investment Technology transfer Entities operating in all sectors need to comply with the Technology Transfer Regulations 1992 (L.I. 1547) by registering Technology 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 34

35 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) 35

36 Business vehicles Other regulatory matters Upstream Petroleum Sector Effective February 2014, all foreign entity desirous of carrying out activities in the petroleum upstream sector should have a local presence prior to forming the joint venture as required by the Petroleum (Local Content and Local Participation) Regulations, All entities forming the joint venture should obtain operating permits from the Petroleum Commission. Other requirements exists for labour, purchases of goods and services, bidding process for contracts as well as requirements to submit plans and periodic report to the Petroleum Commission. 36

37 Business vehicles Other regulatory matters Mining sector Mine support companies should be registered to exclusively provide mining related services. Limited liability company is required. Holder of a mining lease, restricted mining lease must pay royalty to the Republic at a prescribed rate and manner. Financial reporting Ghana has adopted International Financial Reporting Standards (IFRS) as the national accounting reporting framework. 37

38 Timelines for business setup Procedure Time to Complete Acquire a Tax Identification Number 2 days on average Check for availability of company name and submit company documents to obtain the certificate of incorporation 1 day A Commissioner of Oaths authenticates forms required for the certificate to commence business 1 day (simultaneous with previous procedure) Obtain from the Registrar-General Department the certificate 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 Metropolitan Authority 1 day (simultaneous with previous procedure) Apply for social security 1 day 38

39 Business vehicles Branch vs company Distinction factor Branch Company Period of time Typically short term Long(er) term Minimum capital requirement No US$ 500,000 for wholly owned foreign subsidiaries US$ 200,000 where there is local/ghanaian participation Corporate income tax 25% 25% Deductibility of expenses No deduction allowed for management fees, interest charges, royalties, etc. from head office Generally all expenses are deductible Stamp duty on issuance of equity capital n/a 0.5% of registered amount Liability Head office is liable Capped to capital contributions or value shareholding in company 39

40 Business vehicles Branch vs company Distinction factor Branch Company Audited accounts Yes Yes Flexibility Less regulations Regulations such as shareholder decisions, meetings, etc. Registration process No significant difference between branch / subsidiary Local ownership n/a Minimum of 2 shareholders, but no requirement for local shareholder 40

41 Legal and Labour 3.1 Legal system at a glance 3.2 Labour 41

42 Legal and Labour 3.1 Legal system at a glance 3.2 Labour 42

43 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. 43

44 Legal and Labour 3.1 Legal system at a glance 3.2 Labour 44

45 Labour & employment Some quick facts An investor may employ persons of different nationality to positions of management, however a citizen with similar qualification and experience shall have the first option. Abundant supply of unskilled labour / shortage of skilled local labour in some sectors such as petroleum Existing Compulsory social security costs include workers compensation, maternity leave, sick leave and death benefits The employment of expats is restricted in some instances and dependent on the investment the foreign company 45

46 Immigration General All foreigners undertaking employment in Ghana are to obtain both work and residence permits prior to undertaking the employment. Business visas can be obtained to conduct feasibility studies, conferences, meetings and similar events but not to exercise employment. Foreign entities who are registered with the GIPC can apply for Automatic Expatriate Quota (AEQ) for their expatriates which is equivalent to work permit. The total number of AEQ granted is based on paid up capital. Additional quota can be applied for if the AEQ is exhausted but this is given on discretional basis. 46

47 AEQ based on paid up capital are: 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) 47

48 Immigration update The Ghana Immigration Service (GIS) is implementing the rotators permit for the petroleum upstream sector for expatriates engaged offshore. The permit covers a period of six months subject to renewal. Application for this permit should be made via the Petroleum Commission. Automatic Expatriates Quota obtained from the GIPC for expatriates working in the petroleum upstream sector may have to be done with the consent of the Petroleum Commission. A special permit covering work and residence permit has been introduced by the GIS for short term business travellers. It is meant for all industry sectors and it covers a period up to six months. 48

49 Tax regime 49

50 Tax regime Comparing total tax rate Source: Paying Taxes

51 Tax regime Time to comply Source: Paying Taxes

52 Tax regime Number of payments Source: Paying Taxes

53 Tax regime General Income Tax Act, 2015 (Act 896) ( ITA ) was passed in Sept 2015 to replace the Internal Revenue Act, 2000 (Act 592) ( IRA ) & all other laws inconsistent with the ITA. Implementation date of the ITA was 1 January The ITA Consolidates laws on taxation of income of persons previously taxed under general fiscal regime, petroleum income tax law, Minerals royalties including taxation of public, Mutual, and Non-Profit Causes. 53

54 Basis of taxation in Ghana For resident companies, ITA now imposes tax on their worldwide income. Such foreign sourced income includes foreign permanent establishment of a resident company. Non-resident companies are taxed on incomes with a Ghanaian source and income derived from Ghanaian Permanent Establishment irrespective of the source. A tax credit will be allowed on nonghanaian sourced income for the taxes paid in a foreign country but not greater than average tax rate payable on that foreign sourced income in Ghana. Introduction of full worldwide basis of taxation for residents Worldwide Income Income derived from any business and investment whether source has ceased or brought into or received in Ghana 54

55 Taxation of companies Tax type/ Industry Corporate Income Tax General corporate income tax Export of non-traditional goods Free Zone Companies Mining and petroleum companies Hotels Income from loans advanced by financial institutions to farming business and leasing company Locational incentives for manufacturing companies Tax rate 25% 8% 0% in first 10 years followed by 15% on exports and 25% on income from domestic sales 35% 22% 20% up to 50% of income tax rate 12.5% outside regional capitals but 18.75% for those in Accra/Tema 55

56 Taxation of Companies Tax type/ Industry 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 Tax rate 8% 1% 8% 3%,5% and 7.5% respectively 15% Withholding tax-non Residents Royalties 15% Insurance premium with source in 5% Ghana Service fee with source in Ghana 20% 56

57 Taxation of Companies Tax type Tax rate Value Added Tax National Health Insurance Levy Stamp Duties Stated Capital from the issuance of new shares Transfer on the sale of property Secured loan 15% 2.5% Customs and Excise taxes* Import duties Administrative charges Export duties Excise duties 0.5% 0.25% - 1% 0.5% 0% - 20% 2.5% % Exports do not usually attract duties 2.5% - 175% of ex-factory price *Ghana has enacted the Common External Tariff ( CET ) classification system as the binding custom duty regime in

58 Taxation of individuals Resident individual tax rate ranges from 0% - 25% Non-resident individuals are taxed at a flat rate of 20% 58

59 Current Double Tax Treaty countries Ghana has in force double tax treaties with the following countries Denmark United Kingdom South Africa Netherland Germany France Belgium Switzerland Italy 59

60 Treaty tax rates Type of income France United Germany Kingdom South Africa Belgium Italy The Netherlands Switzerland Denmark % Dividends (Where recipient holds at least 10% shares) Dividends (In any other case) (5% for nonresident banks) Royalties Technical/Ma nage-ment service fees Interest

61 Transfer Pricing Transfer pricing policy Related party transactions Documentation Non-compliance 61

62 Structuring 62

63 Structuring Structuring considerations Where to locate your holding company Exit Strategy Repatriation of Funds (incl. forex) 63

64 Structuring considerations Application of double tax treaties Exit strategy regarding capital gains taxation Tax incentives available locally Tax efficient financing Exchange control compliance 64

65 Contacts 65

66 Contacts Ghana Ayesha Bedwei Partner, Ghana E: T: Christiana Baah Manager, Ghana E: T:

67 Contacts Africa Desk - Cape Town Charl du Toit T: E: charl.du.toit@za.pwc.com Asif Joosub T: E: asif.joosub@za.pwc.com 67

68 Contacts Africa Desk - Johannesburg Ibikunle Olatunji T: E: ibikunle.x.olatunji@za.pwc.com Fabio Henriquez T: E: henriquez.fabio@za.pwc.com Alan Seccombe T: E: alan.seccombe@za.pwc.com 68

69 Q&A 69

70 We are here to help you navigate Africa This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in 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 or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers (Ghana) Ltd. All rights reserved. In this document, refers to PricewaterhouseCoopers (Ghana) Ltd which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.