Global Tax Alert (News from Transfer Pricing) | 23 September 2013

Ghana publishes Transfer Pricing Return and Practice Notes on transfer pricing regulations

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Executive summary

In July 2012, Ghana introduced new transfer pricing guidelines through Transfer Pricing Regulations, 2012 (L.I.2188 or the Regulations). The Regulations came into force on 14 September 2012. Pursuant to these Regulations, the Ghana Revenue Authority has released Practice Notes on the Regulations and published the Annual Return on Transfer Pricing Transactions.1

The Practice Notes serve to provide taxpayers with guidance on how the Commissioner-General of the Ghana Revenue Authority (GRA) shall interpret the requirements of the Regulations, in particular:

  • Procedures to be followed in determining arm's length prices, taking into account the Ghanaian business environment; and
  • The GRA's position on documentation requirements.

All Practice Notes are binding on the GRA until revoked. However, the Practice Notes indicate that they are not to be seen as prescriptive in all transfer pricing issues. Practice Notes are not binding on the taxpayer.

The Annual Return on Transfer Pricing Transactions is issued in accordance with a stipulation within Regulation 7 (3) of the Regulations that a person shall file returns in a form prescribed by the Commissioner-General:

  • These returns require the taxpayer to disclose information on the intercompany transactions undertaken during the year to which the return relates.
  • The return must be submitted as part of the annual income tax return (Form 22a or 22b) no later than four months after the company's financial year end.

Main Features of the Practice Notes on the Regulations

Interpretation of the Regulations

The Practice Notes endorse the use of the OECD Transfer Pricing Guidelines to assist in the interpretation of the transfer pricing legislation. All double taxation treaties currently in-force with Ghana are based on the OECD Model Tax Convention. The Practice Notes serve to clarify that the GRA considers the OECD Transfer Pricing Guidelines to have interpretative value irrespective of whether the parties to the transaction are located in countries with which Ghana has a double taxation treaty.

Permanent establishments

The Practice Notes reiterate the treatment of a permanent establishment as a separate and independent entity for transfer pricing purposes. On this basis, the arm's length principle applies to internal dealings between a permanent establishment and its head office or other parts of the enterprise.

Corresponding adjustments

The GRA will allow a taxpayer to claim a corresponding adjustment to taxable profit if the other party to the transaction is located in a country where an adjustment has been made and there is a Double Taxation Agreement between that country and Ghana.

Ghana has a limited treaty network. As such, taxpayers should be mindful that a claim for corresponding adjustment is unlikely to be accepted if a double taxation treaty with Ghana is not in force.

Comparability analysis

The Practice Notes follow the OECD Transfer Pricing Guidelines' recommendations on undertaking comparability analysis.

Given the limited available public data in Ghana from which comparables can be derived, taxpayers generally have to seek comparable data from locations outside of Ghana and the surrounding West African region when undertaking benchmarking analysis. The GRA does not stipulate within the Practice Notes that comparable data must be derived from any specific geographic location. The use of local comparables would generally be preferred by most tax authorities. However, it would appear that taxpayers may derive comparable data from countries outside of Ghana and the surrounding region provided there is sufficient documented support that differences in geographic location would not have a material effect on the pricing.

EY has been informed that work is underway to improve the availability of local Ghana comparables within commercially available databases. As the availability of local comparables improves, it would be expected that the GRA would

prioritize use of local comparables over Pan-European or Asian benchmarking studies.

Intra group services

Guidance on intra-group services follows closely, the principles set by the OECD Transfer Pricing Guidelines.

Interestingly, intra-group services are the only transaction type singled out for practical guidance within the Practice Notes. This may be an indication of the focus the GRA intends to place on service transactions when assessing transfer pricing risk for tax audit purposes.

Transfer pricing methodologies

The Practice Notes provide detailed guidance on the application of the transfer pricing methodologies recommended by the OECD. Of particular note, the Practice Notes provide alternative approaches for applying the profit split method to those within the OECD Transfer Pricing Guidelines. The GRA acknowledges the difficulty in practice of implementing the residual and contribution analysis and as such allows alternative approaches to splitting profit, including the use of a formula or return on capital employed.


The Practice Notes stipulate the information to be provided within the documentation. Of particular note, are the following requirements:

Information to be included

All intercompany transactions

Material intercompany transactions

Company information

General description of organizational legal and operational structure including any changes in-year


Group annual financial report


Description of group transfer pricing policy


Industry information

Economic and market information


Functional profile information

Description of functions, assets and risks of each group company that affects or is affected by intercompany transactions carried out by the taxpayer


Description of any changes to above functional, asset and risk profile in comparison to preceeding period


Economic analysis of intercompany transactions

Description of transfer pricing method used to support arm's length standard is met


Comparability analysis


Financial data for intercompany transaction demonstrating compliance with arm's length standard


The Practice Notes concur with the OECD position that transfer pricing compliance should not place an onerous burden on a taxpayer's resources. As such, GRA only expects financial and economic analysis of material intercompany transactions to be provided within the documentation.

The Practice Notes do not stipulate a threshold for materiality. However, a common ”rule of thumb” is to consider the proportion of total goods or service transactions derived from related party transactions. For example, intercompany sales transactions might have a materiality threshold of 5% of total sales.

It is clear from the information requested, that the GRA seeks such information that would afford a wider picture of the group's global activities and transfer pricing policies. This appears to address an observation made by the OECD in its recent White Paper on Transfer Pricing Documentation that documentation requirements often do not yield a complete understanding of the global business.

Points still requiring clarification

Transactions between taxpayers in an employment relationship are within the scope of the Regulations. Further guidance is not provided as to how the GRA shall seek to apply this aspect of the Regulations.

Main features of the Annual Return on Transfer Pricing

The GRA has released to the public, the transfer pricing returns that shall form part of Corporate Income Tax Returns (Form 22A and 22B) .Taxpayers are to disclose their domestic and cross-border transactions with related parties in the Return.

Information to be disclosed

The Return requires detailed information on transfer pricing to be disclosed including:

  • Name and country of residence of parent company and direct and indirect subsidiaries;
  • Particulars of related parties with whom the taxpayer has conducted any form of transaction or dealing within the year of assessment;
  • A breakdown of intercompany transactions undertaken by transaction type, the value of the transactions as well as the related parties to each transaction type;
  • A change in ownership structure;
  • Particulars of related parties with which the taxpayer has conducted any form of transaction or dealing within the year of assessment;
  • A list of entities in which the taxpayer has interest both directly or indirectly within the year of assessment.

Filing deadline

  • The annual return is required to be filed with the corporate income tax return, four months after the end of the taxpayer's financial year.

Fines and penalties

  • Taxpayers will be liable to pay any additional taxes incurred as a result of the Commissioner-General's adjustments to the value of the transactions.
  • The provision of Act 592 of the Internal Revenue Act, 2000 on fraud, failure to furnish returns, failure to maintain records, penalties for under-payment of taxes and offences are applicable to the Transfer Pricing Regulations.


1. Official release date not given.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Ghana, Accra

EYG no. CM3820