1. 0 Introduction The mining sector is one of the major extractive industries in Ghana. It is estimated that the sector contributes about 41% of total export earnings and 5% of Ghana’s GDP. The sector is dominant with Foreign Direct Investment (“FDI”) with little local participation. 1. 1 Legal Framework The Fiscal Regimes that regulate the sector in Ghana are: •The Minerals and Mining Act, 2006 (Act 703) as amended •The Internal Revenue Service Act,2000 (Act 592) as amended •The Internal Revenue Regulation, 2001 (L. I. 1675) •The Value Added Tax Act, 1998 (Act546) as amended.
Conducting mining activities in Ghana requires that the investor to establishes a business presence in Ghana through incorporation or branch registration in Ghana in accordance with the Companies Act, 1963 (Act 179). Other registration requirements are registration with the Ghana Revenue Authority (“GRA”) for the Taxpayer Registration Number (TIN) and the Minerals’ Commission for Mineral Right and Mining Lease Licenses. 2. 0 Mining Operations in Ghana 2.
1 Capitalisation of Expenditure In the conduct of mining business, a mining enterprise shall be entitled to capitalisation of all expenditure on reconnaissance and prospecting that are wholly, exclusively and necessarily for the conduct of mining business. 2. 2 Acquisition of Carried Interest The government shall acquire ten percent free carried interest in the rights and obligations of the mineral operations in respect of which financial contribution shall not be paid by Government. This does not preclude the Government from any other or further participation in mineral operations that may be agreed with the operator.
2. 3 Stability Clause Mining enterprises that are granted mining lease license may enter into a stability agreement with the government of Ghana where such entity shall not: I. FOR A PERIOD NOT EXCEEDING FIFTEEN YEARS FROM THE DATE OF THE AGREEMENT, BE ADVERSELY affected by any new or changes to an existing enactment, order instrument or other action that existed at the time of the agreement, that have the effect or purport to have the effect of imposing obligations upon the mining enterprise II.
BE ADVERSELY AFFECTED BY SUBSEQUENT CHANGES TO •the level of and payment of customs or other duties relating to the entry materials, goods, equipment and any other inputs necessary to the mining operations or project, •the level of and payment of royalties, taxes, fees and other fiscal imports, and •laws relating to exchange control, transfer of capital and dividend remittance 2.
4 Transferability of capital A mining enterprise may be permitted by the Bank of Ghana to open and retain in an account, an amount not less than twenty five percent of the foreign exchange for I. THE ACQUISITION OF SPARE PARTS, RAW MATERIALS, AND MACHINERY AND EQUIPMENT, II. DEBT SERVICING AND DIVIDEND PAYMENT, III. REMITTANCE IN RESPECT OF QUOTAS FOR EXPATRIATE PERSONNEL, AND IV. THE TRANSFER OF CAPITAL IN THE EVENT OF A SALE OR LIQUIDATION OF THE MINING.
3. 0 Taxation of the Mining sector All mining enterprises in the mining sector shall be required to pay taxes on all income accruing from their mining operations in Ghana. The required taxes are as follows: 3. 1 Corporate Income Tax A mining enterprise engaged in mining operations in Ghana shall be required under Act 592 to pay tax on its chargeable income annually. The current income tax rate is 35%. 3. 2 Quarterly Payment of income tax Mining enterprises are required to make quarterly tax payment within thirty days after the end of each quarter.
The payment is based on their estimated chargeable income for the year per their self-assessment or provisional assessment submitted. In arriving at the chargeable income, a mining enterprise shall be allowed the following deductible expenses where they are wholly, exclusively and necessarily incurred in mining operations: • Capital allowance; • Bad debt; • Tax losses brought forward from previous years; • Rental and royalties; • Contribution to a pension or provident fund. • Training and education of Ghanaian citizens and nationals in approved institutions. Expenditure that are not wholly, exclusively and necessary incurred for business shall not be deductible for tax purposes. Such expenditures include but not limited to the following:
• Personal or domestic expenditure; • Interest, charges, fees on borrowed amount in excess of commercial rate; • Capital expenditure; • Expenditure recoverable under an insurance contract; • Any income tax or profit tax or similar tax; and • Depreciation. 3. 3 Royalty A holder of a mining lease shall pay royalty in respect of minerals obtained from its mining operation to the Government of Ghana. The rate is 5% of the total value of minerals won. 3. 4 Other Levies A mining enterprise shall pay the following levies: 3.
4. 1 Mineral Right Fee A mining enterprise shall be required to make payment to the Minerals Commission in respect of annual mineral right fee. 3. 4. 2 Annual Grounds Rent A mining enterprise shall pay annual grounds rent to the owners of the land or their successors by an operator in respect of mining operations. 4. 0 Taxation of Mining Employees 4. 1 Individual Income Tax band The table shows the annual current income tax band for employees who are resident for tax purposes. Income Tax Rate Tax Charged Cumulativ e Income Cu mul ativ e Tax es First 1,584. 00 0% 0. 00 1,584. 00 0. 00 Next 792. 00 5% 39.
60 2,376. 00 39. 6 0 Next 1,104. 00 10% 110. 40 3,480. 00 150. 00 Next 28,200. 0 0 17. 50% 4,935. 00 31,680. 00 5,08 5. 00 Exceeding 31,680. 0 025% *Effective 23 rd May, 2013 **Monthly Tax table is obtained by dividing the annual figures by 12 months. 4. 2 Contributions to retirement benefit schemes Mining enterprises are required by law to contribute to a mandatory Social Security Scheme for all employees. The employer is required to make 13% contribution of the employee’s basic salary and further deduct 5. 5% from the employee’s basic salary for the month. The employer is then required to remit 13.
5% of the total deductions to the Social Security and National Insurance Trust and 5% to an approved pension scheme in Ghana by the 14th day of the following month. The employer’s contribution to the Scheme is tax deductible. 4. 3 Non-Resident Individuals Expatriate employees of mining enterprises who are non-resident for tax purposes shall be liable to tax at a rate of 15% on any income earned in Ghana. 5. 0 Withholding Taxes Act 592 requires mining enterprises to withhold tax on payments made to suppliers for goods and services and pay over to the GRA on or before the 15th day after the month in which the deduction was made.
The rate applicable is based on the residency of the supplier and the nature of transaction. The current applicable withholding tax rates related to mining operations are as follows: INCOME RATE (%) COMMENTS RESIDENT PERSONS Interest (excluding individuals & resident financial institutions) 8 Not final tax Dividend 8 Final Tax Rent (for individuals and as investment income) 8 Final Tax Supply of goods and services exceeding GH? 500 5 Not final tax NON-RESIDENT PERSONS Dividend 8 Final Tax Royalties, natural resources payments and rents 10 Final Tax
Management, consulting and technical service fees and endorsement fees 15 Final Tax Repatriated Branch after tax profits 10 Final Tax Interest income 8 Final Tax Short term insurance premium 5 Final Tax 6. 0 Value Added Tax Mining enterprises are required to register for and charge VAT at zero rate (0%) on all export of supplies or at standard rate of 15% (12. 5% VAT and 2. 5% NHIL) on local supplies. Where the entity incurs input VAT credit, it shall be credited or refunded to the mining entity after three 3 months on application to the CG. 7. 0 Furnishing of Returns 7. 1 Furnishing of annual returns of income.
Mining enterprises are required to file return on income with the Ghana Revenue Authority within 4 months after the end of the year of assessment. The return should include the audited Financial Statements of entities mining operations for the year of assessment, income tax computation, capital allowance computation, statement of addition to fixed assets and the estimated tax chargeable. 7. 2 Furnishing of quarterly return on income Fling of quarterly return with the GRA is required by all mining enterprises within thirty days after the end of each quarterly period. The return should include an estimate of tax due for the period.
7. 3 Self Assessment Act 592 requires all mining enterprises to make assessment on and file their estimated chargeable income to be derived by the enterprise for a year of assessment and the tax payable thereon at the beginning of every basis period. 8. 0 Concessions in the Mining Sector 8. 1 Carry Forward of Tax Losses. Losses arising in any tax year may be carried forward for deduction against income in the subsequent 5 years. The loss must be deducted in the order in which it occurred. 8. 2 Carry Forward of Capital Allowance A mining enterprise may carry forward unutilised accumulated capital allowance indefinitely.
Capital Allowance is granted at a flat rate of 20% on the cost base of a qualifying depreciable asset 8. 3 Double taxation reliefs Ghana tax regime provides for the relief from double taxation under which entities and employees of countries that have signed Double Taxation Agreements with Ghana are relieved from the payment of double taxes on the same income. 8. 4 Exemption from payment of customs import duty Mining enterprises are exempted from payment of customs import duty in respect of plant, machinery, equipment and accessories imported specifically and exclusively for the mineral operations.
The Minerals’ and Mining Act exempts staff of mining entities from the payment of income tax on furnished accommodation at the mine site. Mining entities in Ghana also enjoy immigration quota in respect of the approval for the number of expatriate employees in Ghana. The Mineral and Mining Act provides for personal remittance quota for expatriate personnel free from tax imposed by an enactment regulating the transfer of money out of the country. The Mineral and Mining Act provides for immigration quota in respect of the approved number of expatriate personnel. 9. 0 Offences and Penalties
The following penalties and offences apply for non-compliance with the laws. DIRECT TAXES TAX TYPE TAX RATE DUE DATE PENALTY Company Income Tax 35% on Adjusted Profit Four months after the company’s accounting year a. Failure to pay up to 3 months – 10% of the unpaid amount b. Failure to pay exceeding 3 months – 20% of the unpaid amount Pay As You Earn Marginal Tax Rate Not later than 15 days after the month to which the tax relates a. Failure to pay up to 3 months – 20% of the unpaid amount b. Failure to pay exceeding 3 months – 30% of the unpaid amount Withholding Tax 5% on the Gross Amount to Resident.
15% on the Gross Amount to Non-Resident Not later than 15 days after the month to which the tax relates Personal liability to pay to the Commissioner of DTRD of GRA the tax due but not withheld Failure to furnish Return ———— Four months after the company’s accounting year (a) Four Currency points for companies (b) Two currency points for self employed Capital Gains Tax 15% of the Gain 30 days after realization of asset. Personal liability to pay to the Commissioner (DTRD) tax due but not withheld Dividend Tax 8% of Gross Amount.
On declaration of dividend Personal liability to pay to the Commissioner (DTRD) tax due but not paid Tax on Interest Received 8% of Gross Amount On payment of interest Personal liability to pay to the Commissioner (DTRD) the tax due but not paid Rent Tax 8% of Gross Amount On payment of rent toLandlord/lady Personal liability to pay to the Commissioner (DTRD) the tax due but not paid INDIRECT TAXES VAT 15% / 3% Not later than the last working day of the month to which the tax relates General penalty is three times the tax involved and/or other specified penalties in relation to the offence. Failure to submit Not later than GHC 100. 00 for each month.