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- 4 Marks
Question
Tax administration allows for cross-border transactions. To this end, entities conduct businesses across countries as a way of increasing their competitiveness and international appeal and consequently their profits.
Required:
Discuss how a non-resident person would be taxed in Ghana if they:
i) Have a permanent establishment.
ii) Do not have a permanent establishment.
(4 marks)
Answer
i) With a Permanent Establishment:
A non-resident person with a permanent establishment in Ghana is taxed on the profits derived from their business activities in Ghana. The permanent establishment is required to file tax returns and comply with tax laws, just as if it were a distinct and separate person engaged in similar activities under similar conditions, dealing independently with the rest of the non-resident’s business.
(2 marks)
ii) Without a Permanent Establishment:
A non-resident person without a permanent establishment in Ghana is taxed on specific income, such as dividends, interest, royalties, or fees, through withholding taxes. These taxes are typically withheld at source, and the withholding tax is considered final. In cases where the income forms part of the business income of the non-resident person, it may be exempt from withholding tax under a double taxation treaty.
(2 marks)
- Tags: Non-resident taxation, Permanent Establishment, Withholding Tax
- Level: Level 3
- Topic: International taxation, Permanent establishment
- Series: MAY 2018
- Uploader: Cheoli