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Naa Lamle Orleans-Lindsay, Head of the Legal Department at the Ghana Investment Promotion Centre (GIPC), has emphasized the importance of Ghanaian businesses ensuring the registration of their technology transfer agreements (TTAs) with the GIPC in accordance with the Technology Transfer Regulations (L.I 1547) and the GIPC Act, 2013 (Act 865).
Speaking during a webinar organized by the UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana on “Technology Transfer and Tax: The Role of the GIPC and GRA,” Mrs. Orleans-Lindsay highlighted the serious consequences of failing to register a TTA with the GIPC.
She explained that non-registration renders a TTA unenforceable, meaning that in the event of disputes, companies may be held liable. Some cases have already surfaced in which parties did not register their agreements, resulting in unenforceable documents.
Additionally, the GIPC Act prohibits the transfer of funds under unregistered agreements. If a document remains unregistered and the Ghana Revenue Authority (GRA) deducts relevant taxes, financial institutions and the Bank of Ghana may not permit payment of these fees to service providers, given the unregistered status of the document.
Mrs. Orleans-Lindsay underscored that while the GRA’s deduction of tax on an unregistered TTA presents one issue, businesses should be aware of other repercussions stemming from non-registration.
Under Act 865, TTAs are contracts between Ghanaian enterprises (referred to as the Transferee) and foreign enterprises (referred to as the Transferor) for the provision of services to the Transferee. These services involve the transfer of technology, industrial property services (such as patents and trademarks), know-how, technical expertise, and management services for a fee. The duration of such agreements must fall between eighteen (18) months and ten (10) years, with renewals not exceeding five (5) years. Act 865 mandates the submission of an agreement copy, an application form, and specified documents to the GIPC for registration.
It is crucial to note that compliance with this Act applies to all companies operating in Ghana, regardless of their sector. TTAs pertain to services and not goods.
The webinar also addressed safe harbor provisions, which alleviate some of the compliance burdens associated with Transfer Pricing Regulations and can help businesses save valuable time and financial resources.
Moses Yidana, Head of the Transfer Pricing Unit at GRA, stated that businesses wishing to access these provisions must be registered with the GIPC. Furthermore, the charges for royalties, know-how, and management and technical services should not exceed 2% of the business’s net profit.
To benefit from the safe harbor provision, businesses are required to write to the Commissioner General of the GRA and meet the specified criteria. Compliant businesses will only need to file a simplified disclosure document.
Michael Klobodu, Senior Manager with the Tax Line of Service at PwC Ghana, explained that every TTA must include mandatory elements as specified in Act 865 and L.I 1547. These elements encompass the commencement date when the agreement becomes effective.
In cases where the agreement is operational before registration, the commencement date should align with the registration date and adhere to Act 865’s stipulated duration.
Mr. Klobodu highlighted the importance of providing a detailed service description to enable the GIPC to evaluate and determine if the registration qualifies as a TTA. A comprehensive description is also necessary to ascertain whether the service requires third-party execution.
Another critical requirement for TTA registration is tax provisions. Mr. Klobodu noted that once registration is approved, the party receiving payment must pay a withholding tax, a detail that must be stipulated in the agreement.
Other prerequisites include specifying Ghana’s governing law, a comprehensive training program for know-how transfer, and a dispute resolution clause.
Many businesses encounter delays or denials when registering TTAs. Mrs. Orleans-Lindsay attributed this to the fact that “Over 90% of documents received (by the GIPC) do not have all the key elements that the law states that they should have. If the documents provide the required information, approving registrations will take mere weeks.”
To streamline the registration process, she encouraged businesses to engage consultants such as lawyers, accountants, auditors, and consultants. Timely submission of documents and active involvement of the GIPC at all registration stages can help prevent unnecessary delays.
Mrs. Orleans-Lindsay assured businesses of the GIPC’s commitment to assisting them in adhering to TTA laws and simplifying the registration process.
The webinar, featuring Kingsley Owusu-Ewli, Tax Partner at PwC Ghana, as a speaker and Abeku Gyan-Quansah, a Tax Partner at PwC Ghana, as a moderator, also addressed various topics, including transfer pricing regulations, their impact on TTAs, TTA fee ranges, double taxation agreements, and their effects on TTA fees. Additionally, the discussion explored potential conflicts between GIPC and GRA laws concerning TTAs and transfer pricing.
About the UKGCC:
The UK-Ghana Chamber of Commerce (UKGCC), founded in 2016, is dedicated to promoting trade between the UK and Ghana. It stands as the primary UK business support organization in Ghana, offering exceptional support by facilitating knowledge sharing, networking opportunities, and government and agency linkages. The UKGCC envisions Ghana becoming a significant economic partner for the UK in terms of exports, imports, and investments. Its mission is to advance the business interests of its members in both countries and foster increased business opportunities. The Chamber enjoys support from the British and Ghanaian Governments, the UK-Ghana Business Council, the British Chambers of Commerce in the UK, and is a Strategic Partner of the Africa Scotland Business Network.
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