Ghana is a viable place for doing business and the fastest-growing economy in the world. With its sound and stable political system, Ghana has become a linchpin for individuals seeking to launch their company into the West African sub-region.
Ghana remains a strategic pivot for investment for foreign entities seeking new growth and opportunities. Therefore, it is not out of place for foreign established entities to seek to do business in Ghana by registering as an external company.
To be successful, an entity seeking to do business via an external company must meet the established legal framework in the Republic of Ghana. Understanding the provisions spelt out in the Companies Act and meticulously adhering to its terms and dictates is a significant step in getting an external company registered in Ghana.
What Is An External Company?
External Companies as defined in Section 329 of the Companies Act, 2019 (Act 992) are body corporates formed outside Ghana, which has an established place of business in Ghana.
Section 329 (1) of the Companies Act, 2019 (Act 992) defines external company as,
“An External Company is a body corporate formed outside the Republic which, has an established place of business in the country. The expression “established place of business” means a branch, management, share, transfer, or registration office, factory, mine, or any other fixed place of business, but does not include an agency unless the agent has, and habitually exercises etc.”
Documents Required for Registration of External Company
Section 330 of Act 992 identifies the documents required for the registration of an external company in Ghana. It requires an external company which establishes a place of business in the country, to within one month of the establishment of the place of business, deliver to the Registrar for registration the following documents:
1. A copy of the Certificate of Incorporation and where applicable a copy of the Constitution, Charter, Statutes, Regulations, Memorandum and Articles, or any other instrument constituting or defining the constitution of the company. All documents must be translated into the English language and notarized.
2. The name and objects of the company have to be the same as the one incorporated in the country of origin.
3. The present forename and surname and a former forename or surname, and the address of one person or more persons, referred to as the local manager, authorized to manage the business in Ghana.
4. If the company (parent company) has shares, the authorized shares, issued shares, the amount paid up thereon and the amount remaining payable thereon, distinguishing between the amounts paid and payable in cash and the amount paid and payable otherwise than in cash.
5. The address of its registered or principal office or website in the country of its incorporation.
6. The address of its principal place of business in Ghana including an electronic mail address, digital address, post office box number and the contact numbers.
7. The name and address in Ghana of a person referred to as a process agent, authorized by the company to accept service of process and other documents on its behalf.
8. The particulars, and copies, of the charges on property of the company that are required to be delivered for registration in accordance with section 337 of Act 992, or, if there are no charges, a statement in the prescribed form to that effect.
The Registrar shall register the document in the register of external companies and publish the particulars contained in the statement in the companies Bulletin.
Notice of Alteration of Registered Particulars
Where an alteration is made in the certificate of incorporation and where applicable a copy of the constitution, charter, statutes, regulations, memorandum and articles, or any other instructment used for registertering the external company is altered, the company shall deliver to the Registrar for registration, notice in the prescribed form giving details of the alteration within a specified period as defined under the Act.
Local Manager
An external company may appoint a person as the local manager of the external company in a statement or notice delivered to the Registrar. A person is eligible to be appointment as a local manger of an external company if that person is eligigible to be appointed a director of a company incorporated in Ghana under Act 992.
The acts of a person registered as the local manager of an external company while carrying on the business in the Republic of that company shall bind the company unless the local manager does not have authority so to act, and the person with whom the local manager was dealing had actual knowledge of the absence of authority, or, having regard to the position of the local manager with or relationship to the company, ought to have known of the absence of authority.
In any case, the scope of the authority of the local manager should be filed with the Registrar.
Financial Statements of External Company
An external company shall once in every year, at interval, of not more than fifteen months, make out and deliver to the Regsitrar for registration, a statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows, in the form containing the particulars of financial statements which the directors would have been required to send to the members and debenture holders of the company if it were a company formed in Ghana.
Registration of The Company With The Ghana Investment Promotion Centre (GIPC)
Once the adequate formality for the registration of an external company is complete, the company is reasonably expected to register with the Ghana Investment Promotion Centre.
The Ghana Investment Promotion Centre Act, 2013 (Act 865) prescribes the minimum capital threshold for companies with foreign equity participation.
Under Act 865, foreign investors are required to comply with the minimum equity requirements. This can be either in cash or in capital goods relevant to the investment; or a combination of both.
The minimum foreign equity requirement is as follows:
-US$200,000 for Joint Venture with a Ghanaian partner having not less than 10% equity participation
-US$500,000 for 100% foreign ownership
-US$1,000,000 for Trading Activity with a minimum of 20 skilled Ghanaians employed by such an enterprise.
Exceptions to The Minimum Capital Requirement:
• Manufacturing, export trading (locally manufactured goods) and portfolio investment businesses are exempted from meeting the minimum capital requirement.
• Foreign spouses and Ghanaians with dual nationality are also exempt from the minimum equity requirement.
Incentives and Benefits Under The GIPC Act
The GIPC Act provides for automatic incentives and benefits as follows:
1. Customs Import Duty Exemptions (Subject to some conditions).
2. Various Tax benefits (Subject to some conditions).
3. Investment Guarantees (Free Transferability of Capital, Profits and Dividends and immigrant quotas depending on the amount of paid-up capital of the enterprise.
4. Automatic expatriate quotas (subject to some conditions). For instance, a company with a paid-up capital of up to $200,000 shall be entitled to one (1) automatic work quota, whiles a company with a paid-up capital of up to $500,000 shall be entitled to two (2) automatic work quota.
5. Registration with the GIPC entitles a corporate entity to cafeteria Dispute Resolution Mechanism, including arbitration under UNCITRAL arbitration rules. Also, where there is any bilateral and multilateral investment protection agreement to which Ghana and the investor’s home country are parties, the established dispute resolution mechanism shall be available to the investment. The dispute mechanism could include Investor Treaty Arbitration under ICSID Convention. The GIPC Act also afford parties recourse to any other national or international machinery for the settlement of investment dispute agreed to by the parties.
Other Mandatory Institutions
Once a business successfully undertakes the above-stipulated steps, it acquires the legal status to operate as a corporate entity in Ghana. Be it as it may be, the established corporate entity is by law mandated to register with other institutions.
The Ghana Revenue Authority
All incorporated companies are by law demanded to register with the Ghana Revenue Authority. The registration is essential for the payment of taxes. On registration, the company shall be issued with a tax clearance certificate.
Register With Social Security And National Insurance Trust (SSNIT)
The Social Security and National Insurance Trust (SSNIT) is a statutory public Trust charged under the National Pensions Act, 2008 Act 766 with the administration of Ghana’s Basic National Social Security Scheme. Its mandate is to cater for the First Tier of the Three-Tier Pension Scheme. The Trust is currently the largest non-bank financial institution in Ghana. The law demands all incorporated entities to register and make a contribution for their employees towards their retirement. It is a mandatory act.
An entity seeking to register with SSNIT must provide the institution with the following information.
o Tax Identification Number for the company/ business entities
o Profile of Directors or Local Managers
o Copies of the Directors’ or Local Manager’s valid ID (e.g. Voter’s ID, passport, driver’s license)
o Directions to Taxpayer’s Premises using the Ghana Post (GPS).
o List of employees with their SSNIT numbers, basic salaries, and contributions.
Once satisfied, SSNIT will issue a confirmation letter with the company’s registration number and a certificate of membership to signify registration.
Register With Environmental Protection Agency (EPA) For Environmental Impact Assessment Certificate.
The law demands entities whose activities have adverse environmental effects must apply for an environmental impact assessment certificate from the Environmental Protection Agency (EPA). For instance, in the Mining Industry, the Environmental Protection Agency (EPA) is responsible for ensuring that mineral rights holders observe environmental safety precautions during the mining phase. The EPA was established under the EPA Act. In accordance with Section 18 of the Minerals and Mining Act and the Environmental Assessment Regulations 1999 (LI 1652), the holder of a mineral right requires an environmental permit from the EPA in order to undertake any mineral operations. The Environmental Assessment Regulation sets out the main legal framework used by the EPA to regulate and monitor mineral operations.
The regulation requires the applicant to prepare a scoping report setting out the scope or extent of the environmental impact assessment to be carried out and includes a draft term of reference that indicates the essential issues to be addressed in the environmental impact statement. The holder of a mineral right granted an environmental permit must submit an annual environmental report in respect of the mineral operations to the EPA.
Apply For Business Operating Permit From The Metropolitan, Municipal or District Assembly.
The law demands incorporated companies to pay and obtain permits from the District, Municipal or Metropolitan Assembly where the activity of the corporate entity is centered or situated. This is a mandatory act.
The processes for registration with the Metropolitan, Municipal or District Assembly include the following.
• Purchase of application form from the Cash Offices of the Metropolitan, Municipal or District Assembly
• Completion of the application form and submitting it to the Revenue Mobilization Officer (RMO) at the Assembly.
• A copy of the certificate of incorporation must be attached.
• Registration Certificate from other recognized bodies as may be applicable.
• Tax clearance certificate from Ghana Revenue Authority (GRA).
Once the completed forms are submitted, a joint team from Finance Department, Environmental Health Division and City Engineer’s outfit will inspect the premises of the applicant within 5 business days of submission of application. The inspection team shall subsequently make recommendations to the Assembly within 2 business days from the day of their inspection. Upon approval by the Assembly, the license shall be issued to the applicant at a prescribed fee.
Special Licenses
The corporate entity shall be required to apply and obtain a license from the regulatory authority in that field where the corporate entity seeks to undertake regulated activity. For instance, if a corporate entity undertakes to pursue the business of banking, it shall be mandated to obtain a banking license from the Bank of Ghana. The entity shall be mandated to fulfil other requirements aside from meeting the established laid down needs herein in that vein. It is, therefore, advisable to have industry knowledge in the specific sector you want to operate before the commencement of the registration of the corporate entity.
Open a Business Account
An incorporated entity that has to meet the minimum capital requirement and issued with the GIPC Certificate shall have the right to operate a corporate account and enjoy all the benefits that come with it, including transfer of funds out of the jurisdiction. The opening of the accounts requires completing the accounts opening pack and attaching to it the registered documents of the company including the GIPC Certificate.
Register With The Data Protection Commission
The Data Protection Commission (DPC) is an independent statutory body established under the Data Protection Act, 2012 (Act 843) to protect individual and personal data privacy by regulating the processing of personal information. The Commission provides for the process to obtain, hold, use, or disclose personal information and other related issues bordering on personal data protection. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them. The Data Protection Act 2012 established the Data Protection Commission (DPC) to protect individual and personal data privacy. The DPC’s statutory powers, functions and duties derive from the Data Protection Act 2012 (Act 843) and the Constitution of Ghana 1992. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them.
Tax Liabilities for Doing Business In Ghana.
It is crucial for every start-up business to understand Ghana’s tax structure to aid them in fulfilling their obligation to the government.
The Ghana Revenue Authority (GRA) is the mandatory and regulatory body for assessing and collecting taxes on behalf of the Government. The Ministry of Finance (MOF) oversee the activities of GRA.
A start-up business, either a sole proprietorship, partnership or a limited liability company, should bear in mind that there are taxes on what you earn, taxes on what you buy, and taxes on what you own. In Ghana, taxes consist of Direct and Indirect Taxes. An example of direct tax is the income tax, and an example of indirect taxes are the consumption taxes/goods and service, customs and excise duties.
Direct Taxes are the taxes on what you earn which comprises the examples below.
• Individual/Personal Income Taxes: This is levied on the wages, salaries, investments or other forms of income an individual earns. Example include Pay As You Earn (PAYE) tax.
• Company/Corporate Tax: A corporate income tax (CIT) is levied on business profits unless exempted explicitly in the law, companies (both resident and non-resident) are required to pay tax on income relating to business and investment, derived from, accrued in, brought into or received in Ghana after the necessary adjustment are made.
In Ghana, companies have to file returns four months after their accounting year, and it is also required that they make quarterly tax payment on the current year’s income based on provisional assessment.
Depending on the sector, the following corporate tax are imposed by the government on some sectors.
Mining: 35%
Petroleum: 35%
Hospitality: 22%
General Corporate Business: 25%
• Capital Gains Taxes: This is a tax on the profit or gains realized on the sale or disposal of an asset either than trading inventory. Companies are required to pay tax on gains made on the realization of chargeable assets. Chargeable assets include land (which is not for agriculture in Ghana), buildings, shares, goodwill, and business assets.
Indirect Taxes are taxes levied on goods and services rather than on income or profit.
• Goods & Services/Consumption Taxes are taxes on what you buy, or services rendered to you and are taxes levied on retail sales of goods and services. It is known as the Value Added Tax (VAT), which are indirect taxes paid by consumers on some goods and services to the state through registered individuals or businesses. The current rate is 12.5%, excluding the National Health Insurance Levy (NHIL) of 2.5%, Ghana Education Trust Fund (GETFUND) levy of 2.5% and Covid – 19 Health Recovery Levies of 1%.
• Customs and Excise Duties are imposed on the importation of goods at the port of entry and certain manufactured goods produced or imported into Ghana.
Conclusion
Registering an external company in Ghana is a challenging task, but the country’s business-friendly environment, robust infrastructure, and stable governance system make it an attractive destination for foreign entities.
To successfully navigate the legal intricacies and nuances, it is crucial to engage qualified professionals who can provide innovative and superior service, ensuring a successful registration process.
Legal Notice
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon. Legal advice about your particular circumstances should always be sought separately before taking action based on this publication.
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