International Tax Treaties in Ghana and its interpretation

Richard Attu
International taxation treaty is an important agreement and arrangement that countries all
over the world seek to enhance diplomatic and economic ties. A situation may arise where a
person is subject to two different tax regimes in two or more states with respect to the same
subject matter for the same period. To avoid such unpleasant occurrence some countries enter
into agreements with other countries so that their citizens who are resident and earning
income in some other countries become protected. Double taxation agreement is an
agreement which regulates the tax treatment of income or capital gains in situation where the
same taxpayer is subject to tax in two different states with respect to the same income or
capital gains. By examining the international treaty in respect of taxation as a result of cross-
border businesses and activities of international trade. In most countries like Ghana tax
treaties are impacted by both domestic law and international law which creates difficult as to
the particular rules of interpretation regime to employ when dispute over treaty provision
arise, this article look at the international treaties in respect of taxation and its interpretation
in Ghana. Ghana over the years has entered into international treaties of taxation which was
designated as double taxation agreements (DTAs). This article also seeks to explain and
examining some of the complications that arises as to the particular rules of interpretation to
apply when disputes over treaty provisions arise. Ghana has entered into double taxation
agreement with countries such as United Kingdom, France, Germany, South Africa, Belgium,
Italy, The Netherlands, Switzerland, Denmark, etc. Ghana has signed a „DTA‟ with Malaysia,
morocco which is not yet in force.

Introduction
With the increase in global business activities and trade between countries, international tax
treaties has become a major medium for enhancing economic and diplomatic ties and as a
result tax reliefs and credits are granted under such tax treaties known as double taxation
agreements. Tax is universally acclaimed as the major source of government revenue.
Revenue generated through taxation on cross-border business and trade made double taxation
agreement of international importance. Ghana‟s experience in double taxation agreement has
to do with interpretation of the provision of the tax treaties when dispute arises. The 1992
constitution of Ghana empower the government to enter into treaties and conventions with
other countries with an object of affording relief from double taxation and the prevention of
fiscal evasion

The relevance of international tax treaties in Ghana

Double taxation agreements or treaties have become an important on the international
perspective for trade and financial activities of companies outside national borders.
Contracting states have tried to make trade and investment across-borders not associated with
difficulties through double taxation agreements (DTA). Over the year Ghana as a contracting
state in most double taxation agreements increased it cross- border economic and diplomatic
ties enhancement where these is a treaty with the government of Ghana, the provision of the
income tax law apply for the treatment of all tax matters, thus tax rates applicable on various
incomes apply.

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 In Ghana, double taxation agreement is view as an international tax treaty between two
contracting states. However in Ghana double taxation agreement can be legally binding after
it is ratified by the Ghanaian parliament or by a resolution approved by the same parliament
in accordance with article 75(2) of the Ghanaian 1992 republican constitution. This indicates
that in Ghana though the double taxation agreement contracted under international law,
however the domestic law is also impacted before such tax treaties can be enforceable under
both international law and domestic law of Ghana. The domestic law in respect of
enforceability of double taxation agreement signed between Ghana and other contracting
state making the tax agreement binding. The examination of the article 75(2) of the Ghanaian
republican constitution stipulated that after Ghana as a contracting state entered into a double
taxation agreement or treaty with other countries as also contracting states of parties such tax
treaties or agreements shall come into force only after fulfillment legal requirement of the
domestic laws in Ghana. For instance the latest Double taxation agreement Ghana signed
with Malaysia and the kingdom of Morocco which is coming into force in 2018 shall be
enforceable subject to the approval of the Ghanaian parliament as part of the domestic law in
accordance with article 75(2) of the 1992 Ghanaian constitution.
In Ghana‟s 1992 constitution provides that, a treaty, agreement or convention executed by or
under the authority of the president shall be subject to ratification by –
a. Act of parliament; or
b. A resolution of parliament supported by the votes of mare them one – half of the
Member of Parliament.
Currently the notably double taxation treaties Ghana that are with the United Kingdom, France,
The Netherlands, South Africa, Italy, Belgium, Germany, Switzerland, Denmark, with the
latest of Malaysia and morocco which are not yet in force.
The significance of the double taxation agreement is that the double – tax treaties provide relief
from double taxation of income that accrues to residents of contracting states within either of
the jurisdictions covered by the treaty.

Treaty Tax Rates

With every tax treaty entered by the contracting states tax rates are applicable under the terms of
these treaties are of follows

For deepen our understanding on the types of Income and respective tax rates as provision in
the tax treaties illustrated above

United Kingdom
Taxation of income- Where dividend recipient holds at least 10% of shares. Ghana‟s tax
treaty agreement with the United Kingdom was titled as “Convention for the avoidance of
double taxation and the prevention of fiscal evasion”. The applicable tax rate where a British
Company pays dividends to tax resident company of Ghana which is the beneficial owner of
at least 10% of the shares or capital of the British company, the maximum dividend tax rate
in United Kingdom is 7.5% of the dividend received.

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Other hand dividend I any other case not limited to holding at least 10% shares attract 15%
tax rate from the recipient of the income.

Royalties
Income received as royalties under the double taxation agreement is taxed at the rate of
12.5% of the total income received as royalties. Royalties‟ payment by a British tax resident
to a Ghanaian tax resident
Technical/ Management service fees
Under the double taxation agreement tax rate applicable to Technical/ Management service
fees is at the rate of 10%. Technical/ Management service fee payment by a British tax
resident to a Ghanaian tax resident.

Interest Income: Interest income received is taxed at the rate of 12.5% from the recipient of
the income.

France
Taxation of Income where the recipient hold at least 10% shares. The Double taxation
agreement Ghana entered into with France, where a French company pays a dividend to a tax
resident company of Ghana which is a beneficial owner of at least 10% shares or capital of
the French company the maximum tax rate in France is 7.5% of the dividend received. Other
dividend in any other case not limited to holding of at least 10% shares is taxed 15% of the
dividend or income received
Royalties
The applicable tax rate under the double taxation agreement in respect of payment of
royalties is that royalties payment by French tax resident to a Ghanaian tax resident is at the
rate of 10% of the royalties received by the recipient,
Technical/ Management Service fees are taxed at the applicable tax rate of 10% as applicable
tax rate under the double taxation agreements or treaty.
Interest Income- On the part of interest income the recipient make payment of 10% of the
total interest income received as tax rate charged for interest received.

Germany
Taxation of Income where the recipient holds at least 10% shares. The double taxation
agreement Ghana entered into with Germany indicated that where a German company pays a
dividend to tax resident company of Ghana which is a beneficial owner of at least 10% shares
or capital of the German company the maximum tax rate in Germany is 5% of the dividend
received. Other dividend in any case which is not limited to holding at least 10%of the shares
is charged at the rate of 15% of the total dividend received
Royalties

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The applicable rate under the double taxation agreement Ghana had with Germany in respect
of royalties‟ payment by German tax resident to a Ghanaian tax resident is at the rate of 8%
of the royalties received.
Technical/ Management Service fees
Tax rate applicable tax treaty between Ghana and Germany for provision of technical or
management service by a tax resident is at the rate of 8%.
Interest received attract tax rate of 10% of the total interest received by a tax resident.

South Africa
Taxation of Income where the recipient holds at least 10%. Tax treaty rate applicable under
the terms of the International tax treaty between Ghana and South Africa provide that where a
South African company pays a dividend to tax resident company of Ghana which is
beneficial owner of at least 10% of shares or capital of the South African company the
maximum tax rate in South Africa is 5% of the dividend received. Other dividend in any
other case is charged at the tax rate of 15% of the total dividend received.
Royalties
For royalties payment by a South African tax resident to a Ghanaian tax resident, tax rate of
10% may be deducted in South Africa. The reduced rate of 10% does not however apply
where the beneficial owner of the royalties is a resident of Ghana.
Technical/ Management service fee. Under the double taxation agreement between Ghana
and South Africa technical and management service provision is taxed at the rate of 10% of
the total amount received by the beneficial owner of the technical or management service
provider.

Interest Income- under the terms of the international tax treaty between Ghana and South
Africa is charged at 10% tax rate and 5% for non-resident banks on the total amount on
interest income received by the recipient

Belgium
Taxation on dividend where recipient holds at least 10% shares. Tax treaty rate applicable
under the terms of the international treaty between Ghana and Belgium provide that where a
Belgium company pays a dividend to a tax resident company of Ghana which is beneficial
owner of at least 10% shares or capital of the Belgium company, the maximum tax rate in
Belgium is 10% of the total dividend received by the recipient

Royalties - Under the terms of the double taxation agreement Ghana had with Belgium in
respect of royalties is taxed at the rate of 10%

Technical/ Management service fee is charged at the rate of 10%

Interest Income is taxed at the rate of 10%. Interest accrued is attracted to a tax rate of 10%
and for non-resident bank is taxed at the rate of 5%

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The Netherlands
The Netherlands signed an international tax treaty with Ghana and the applicable rate under
the terms of the agreement. Dividends where applicable that the recipient holds at least 10%
of shares is 5% and where in any other case is 10%

Royalties
The international tax treaty between Ghana and The Netherlands provides that Royalties tax
payment at the rate of 8% of the total Royalties received by the recipient

Technical/ Management Service fees is also charged at the rate of 8%

Interest tax rate is at 8% under the terms of the agreement

Recognition and Enforcement of International Tax Treaties in Ghana

In Ghana, the enforcement of international tax treaties is regulated by the Ghanaian 1992
Republican Constitution Article 75(2) and the Internal Revenue Service Act 2000 Act 592
which was recently replaced by the Income Tax Act 2015 (Act 896) as statutory regime.
Government of Ghana is empowered by the Ghana‟s 1992 Constitution to enter into
international tax treaties or double taxation agreements with other countries with a view of
affording relief from double taxation and the prevention of fiscal evasion. Article 75(2)
Ghanaian Republican Constitution provides that:
“A treaty, agreement or convention executed by or under the authority of the President shall
be subject to ratification by-
a. Act of Parliament; or
b. A resolution of Parliament supported by the votes of more than one-half of all the
members of Parliament”. This constitutional provision indicates or stipulates that, a double
taxation agreement or international tax treaty can only be legally binding after it is ratified by
an Act of Parliament or a resolution of the same Parliament.

The statutory regime also forms part of the domestic laws of enforcing an international tax
treaty in Ghana. Section 68 and 111 of the Internal Revenue Act 2000 (Act592) which was
recently replaced by the Income Tax Act 2015 (Act 896) makes provisions for double
taxation arrangements and reliefs arising therefrom. Section 68 of Act 592 states that,
chargeable Income derived from outside Ghana shall be reduced by any tax paid on the said
income from that foreign country.
Section 111 of Act 592 makes provision for international tax arrangements for reciprocal
assistance between Ghana and other countries in the collection of taxes. The Commissioner-
General is empowered to collect taxes due and owing to another country for onward
transmission to that other country if he is so requested by a competent authority of that
country where a tax defaulter to the other country fail to pay tax, the Commissioner-General

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can enforce the recovery of such tax as if it were a tax due in accordance with the Income
Tax Act 2015(Act 896) and laws of Ghana.

Interpretation Applicable to Ghana’s Tax Legislation

The interpretations of international tax treaties have certain similarities to interpretation of
domestic tax legislation in most countries. The meanings of the words, the context in which
they are used, the purpose for which they are used are very important in interpreting both
treaties and domestic tax legislation. Two contracting states are involved in every treaty and
must have mutual intention, tax treaties addressed to large number of stakeholders than
domestic tax legislation, tax treaties are relieving in nature not imposing.
Raoul lenz(1960) is of the view that:
“International agreements for the avoidance of double taxation are bilateral treaties and thus
belong to the law of nations in the same way as any other political or economic treaty. If the
meaning of a treaty provision is not clear then the problem will be solved in the first place by
applying the usual rules governing the interpretation of international public law. However,
double taxation agreements have a purpose substantially differing from that of political or
economic treaties because they are intended to reconcile two national fiscal legislations and
to avoid the simultaneous taxation in both countries”
Interpretation of tax treaties is governed by the rules of customary international law as
embodied in the Vienna convention in the law of treaties as a codification of customary
international law.

Interpretation under the Vienna Convention on the law of Treaties

Ghana is a party to the Vienna convention of the law of treaties as rules of customary
international law governing international treaties.
Article 31(1) of the Vienna convention on the law of treaties states that “A treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be given to the terms of
the treaty in their context and in light of its object and purpose”
Article 31(4) of the Vienna convention on the law of treaties stipulates that “A special
meaning shall be given to a term if it is established that the parties intended. The convention
is enforceable in Ghana as part of customary international law.
Double taxation in Ghana and its interpretations recognized and enforced international law
with particular reference to the Vienna Convention on the law of treaties

Conclusion, International tax treaties in Ghana currently has increased as a result of cross-
border business and investment activities of Ghanaian citizens with other jurisdictions or
countries to afford tax reliefs and tax credit. Double taxation agreement as it is refers to as
international tax treaty enhancing diplomatic and economic ties between Ghana and other
contracting states. The enforcement of these treaties is regulated by the Ghana‟s 1992
Constitution and the Income Tax Act as a statutory regime and the customary international
law codification of the Vienna Convention on the law of treaties.

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Summary
The writer‟s focus on this article is on international tax treaties in Ghana and its
interpretations. That tax treaties in Ghana is governed and impacted by both domestic laws
and international law. A situation may arise where a person is subject to two different tax
regimes in two or more states with respect to the same subject matter for the same period. To
avoid such unpleasant occurrence some countries enter into agreements with other countries
so that their citizens who are resident and earning income in some other countries become
protected

References

1. Raoul L (The General Reporter) The international fiscal Association 1960.

Report on the interpretation of Double Taxation Convention.
2. Article 75(2) of 1992 Ghanaian Constitution
3. Article 31(1)(4)of the Vienna Convention on the Law of Treaties of 1980
4. Baker P (1994) Double Taxation and International Tax law. 2 edn. Sweet &
nd

Maxwell
5. Avery J.(1984) “ The interpretation of tax treaties with particular reference to
Article3(2) of the OECD Model”[ 1984] BTR 14 and 90
6. Income Tax Act 2015 (Act 896)
7. Internal Revenue Act 2000( Act 592)
8. Abdallah, A-N and Kunbuor B. (2014) Law of Taxation in Ghana 3 edn rd

9. Oppong R.F “Recognition and Enforcement of Foreign Judgments in Ghana: A

Second look at a colonial inheritance” commonwealth Law Bulletin 31, no. 4
(2006):19

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