- 10 Marks
Question
XYZ Parks Ltd, an Italian Company, had a contract for the construction of a fuel depot in Ghana. It was clear from the contract agreement that the production and fabrication costing $500,000 would be carried out outside Ghana. The installation works in Ghana and related services would cost $200,000 and GH¢2,400,000 respectively.
XYZ Parks Ltd has asked of your professional advice on the above transaction.
Required:
i) What is the tax implication of trading in Ghana and trading with Ghana? (4 marks)
ii) What will be your professional advice to XYZ Parks Ltd on the tax implication of other contract? (6 marks)
Answer
i) Tax implication of trading in Ghana and trading with Ghana:
Trading in Ghana is having presence in Ghana, doing business in Ghana and making profits in Ghana. Trading in Ghana is taxable in Ghana while trading with Ghana is not having presence in Ghana and not doing business in Ghana. Trading with Ghana is not taxable in Ghana.
ii) Tax implication of XYZ Park Co contract for fuel depot in Ghana:
Production and Fabrication works – $500,000. This work is to be carried out outside Ghana. Therefore, permanent establishment cannot be established in Ghana. The income therefore not liable to tax in Ghana.
Installation Work and related service $200,000 and GH¢2,400,000 respectively.
- Installation site is in Ghana. This will serve as a permanent establishment for the performance of the work in Ghana.
- Related services will also be performed in Ghana and therefore will constitute a permanent establishment for XYZ Park in Ghana.
- If there is double tax agreement (i.e. tax treaty) between Ghana and the country of residence of XYZ Park, Ghana tax will apply to both the installation works and related service and appropriate relief provided.
- Topic: International taxation
- Series: MAY 2020
- Uploader: Theophilus