Recent tax disputes in Ghana’s petroleum industry highlight an important lesson for investors, contractors, service providers, and subcontractors. The key lesson is that tax exposure is often determined at the structuring and contracting stage, not at the operational or post-operational phase.

Entities operating in or supporting upstream petroleum projects should pay close attention to the following considerations:

1. Ensure tax exemptions are clearly drafted in the Petroleum Agreement

Where fiscal stabilisation or tax exemption provisions are negotiated, they must be: expressly stated; precisely drafted; and clearly extended to cover affiliates, subcontractors, service providers, and different contractual arrangements, where that is the commercial intention.

Tax exemptions are interpreted strictly in a manner analogous to the instructions Oliver Cromwell gave to his portrait artist, Sir Peter Lely: Paint me as I truly am, warts and all. A phrase which has since come to mean that his image is portrayed truthfully and unflatteringly. Thus, if an entity is not expressly covered, it will fall under the general provisions of the Income Tax Act, 2015 (Act 896), including exposure to corporate income tax, branch profit tax (BPT), withholding taxes, and related liabilities.

It is important to know that in Ghana, Petroleum Agreements (PAs) ratified by Parliament generally have the force of law, and their fiscal and tax provisions may prevail over the general provisions of the Income Tax Act, VAT Act, and other tax statutes to the extent of any inconsistency. These agreements typically contain specific tax stabilisation and exemption clauses negotiated between Ghana and the contractor, setting out the applicable tax regime for petroleum operations.

As a result, where a PA expressly grants a tax exemption or prescribes a particular tax treatment, that contractual regime will ordinarily take precedence, provided the entity seeking to rely on it falls clearly within the scope of the agreement and the exemption is unambiguously drafted. This underscores the importance of ensuring that tax exemption clauses in PAs are precise and expressly extended to affiliates, subcontractors, and relevant contractual arrangements where intended.

2.Align operational structure with fiscal provisions

The legal and operational structure, i.e. whether services are provided through a branch, subsidiary, or subcontracting arrangement, can significantly affect tax outcomes. Investors should ensure that: first, the structure adopted is consistent with the protections negotiated under the Petroleum Agreement (PA); and second, that the role of each entity is clearly defined in contractual and regulatory documentation.

3. Take the opportunity of GRA’s advance tax rulings before commencing operations

One of the most effective risk-management tools available is the advance tax ruling (ATR) under the Revenue Administration Act, 2016 (Act 915). Before mobilising equipment, deploying personnel, or providing services in Ghana, investors may seek clarity from the Ghana Revenue Authority on: Permanent establishment status; Applicable tax rates and obligations; Withholding tax treatment; and VAT implications where necessary. Obtaining certainty at the outset helps prevent disputes/litigations, unexpected assessments, and project delays.

4. Integrate tax planning into project development

Tax considerations should be addressed:
a)At the bidding and negotiation stage;
b)During drafting of petroleum agreements and subcontracts; and
c)Before operational decisions are finalised.

Tax planning after the horse has bolted, i.e. after operations begin, is often too late to prevent exposure.

Conclusion

Ghana remains an attractive destination for petroleum investment, but the fiscal and tax framework requires careful navigation. Clear drafting of tax provisions, alignment of contractual structures, and early engagement with tax authorities are essential steps to managing risk and preserving project value. Prudent structuring is not merely a compliance exercise, it is a core element of successful petroleum investment.

-

By Dr A. M. Mashood, Esq.
Attorney-at-Law (Ghana & New York, USA)
Tax Controversy and Regulatory Practice
Phone| 0244844565/+1 646-620-3233
Email | ma.abdulmumuni@gmail.com