Moses Yidana, Head of Transfer Pricing Unit at the Ghana Revenue Authority (GRA), has revealed that the Authority is exploring the deployment of a mobile portal to enable taxpayers submit their transfer pricing (TP) documentations via mobile phones.

Last year, the GRA introduced an online portal that allowed taxpayers to file their transfer pricing returns from anywhere, thus simplifying the process and eliminating manual submissions at GRA offices.

Speaking during a UK- Ghana Chamber of Commerce (UKGCC) and PwC Ghana webinar on “Taxing Multinational Enterprises (MNEs) Through Effective Transfer Pricing”, Mr. Yidana remarked that these measures are aimed at reducing the level of burden on taxpayers and supporting businesses to thrive.

Other measures the GRA has instituted to reduce the burden on taxpayers when filing TP returns include No Value-Added transactions. Here, taxpayers may not be required to submit certain documents such as local and master files, if mark ups on fees charged are not more than 3 percent. Furthermore, local and master files need not be submitted if transactional values are below the Cedi equivalent of USD 200,000.00.

Mr. Yidana also revealed during the webinar that efforts are far advanced in the country’s bid to join the Organisation for Economic Corporation and Development (OECD) multilateral agreement platform for the purposes of Country-By-Country Reporting (CBCR) data sharing.

What is Transfer Pricing?

According to Kingsley Owusu-Ewli, a Partner in the Tax Line of Service at PwC Ghana, and a speaker at the webinar, transfer pricing is not a tax, but exists to ensure that there is fair and equitable attribution of income to the country or jurisdiction where the economic activities are taking place.

Every country has territorial sovereignty and a taxing right over that territory. Therefore, the government of Ghana, through the GRA, has the right to tax these economic activities.

Transfer pricing covers transactions on the transfer of properties, provision of goods, and services.

"With Globalisation, companies or multinational enterprises trade across countries. Each country has different tax rates, so with these differences in tax rates and tax laws, there is that incentive or motivation to sometimes price arrangements in a way that may distort the true economic activities or contributions of one state or country versus the other. Hence, the introduction of transfer pricing is a means to ensure that whatever trading or dealings that occur between persons who are in controlled relationships, are done at a price using terms that will ordinarily prevail between independent parties."

Moses Yidana added that so far as Ghana’s transfer pricing regulation is concerned, the rules of transfer pricing is applicable to both cross border and domestic transactions.

According to him, “if you have a Ghanaian company and you have different entities or businesses, once they begin to deal with each other, the requirement of the law is that such transactions ought to comply with the arm’s length principle”, which means pricing should be fair or at the market price.

Complying with TP disclosures

The speakers remarked that the law requires businesses engaged in controlled relationships to disclose to the GRA, the related parties they dealt with in their financial year. The document must also disclose the nature of transactions and the total amount, the pricing method used, and other documentations which include local and master files of transactions, and a country-by-country. 

These documents must be submitted on or 4 months before the end of a business’ financial year.  In cases where the taxpayer is unable to file within the stipulated time, they are permitted to apply for an extension and if approved, can be given up to 60 days within which to comply.

According to Mr. Yidana, impacts of non-compliance include huge penalties and reputational damage.

For instance, failure to file transfer pricing returns, in general, attracts a GHC 500 penalty on the first day and GHC 10 daily afterwards, in line with the Revenue Administration Act (Act 915).

“For failure to maintain documentations, you may be penalised, say 75 percent of the tax for that period, depending on the situation. Or, it may even go up to 200 percent depending on the circumstance,” under section 72 of the Revenue Administration Act, he added.

Mr. Yidana lamented that documentation has been one of the GRA’s biggest challenges, as businesses usually wait till the last minute to compile their documents. He appealed to taxpayers to “try as much as possible to comply with the law”.

“We are recommending that taxpayers should ensure that they maintain contemporaneous documentation such that when we come for an audit, we do not have a lot of issues.”

He also urged taxpayers to consult tax experts to compile and submit TP documents, and write to the GRA Commissioner should they require clarity on TP-related issues.

The webinar discussed more pertinent issues, such as the Arm’s Length Pricing standard, the transfer pricing methods acceptable to the GRA, how taxpayers can get guidance on transfer pricing, the data sources the GRA uses, and their preference, Thin Capitalisation as a pricing method, and double taxation treaties.

Abeku Gyan-Quansah, a Partner at PwC Ghana, moderated the webinar, the second in UKGCC/PwC Ghana’s Quarterly Tax Dialogue Series 2023.