A Branch Operation Exposes You To Unpredictable Taxes

Under the Ghana Companies Act 2019, Act 992 a branch is “a body corporate formed or incorporated outside Ghana but has established a place of business in the country”. Simply put, a branch is a foreign company that has created a presence in Ghana to do business.

The income earned by the branch from its business in Ghana is subject to Ghana’s income tax.

Purpose of Branch Operations

Many branch operations in Ghana are liaison offices set up to do marketing for their parents. Others have been setup to perform one-off projects or contracts in the country.

Changing Posture of GRA

The liaison offices do not take orders or handle goods or services. They do not generate revenue. Their income statements will show mostly cost and no revenue. In the past, the GRA accepted the argument that they do not earn income in Ghana, so they paid no tax.

We acted on behalf of our clients in two recent tax audits. Both clients are branch operations. Our experience shows the GRA has changed its position on branch entities. Its position now is that such branches generate income directly and indirectly, and that income is subject to Ghana tax. As a result, liaison offices face unexpected taxes.

We summarize the outcome of the two cases below.

Case One–imputing Revenue to the Branch

Client A is a liaison office of D, a foreign company. It does marketing in the sub-region for the D. It does not take orders or deliver goods.

In an audit of A, GRA rejected the claim that it has not earned income in Ghana. GRA’s maintains its activities generate income for the parent, and that the profit or loss declared for tax is misleading.

D performed a transfer pricing analysis that informed its operations and tax computation. The GRA did not accept their markup for estimating profits from their marketing operations. Instead, it used its best judgement to determine income and related taxes.

GRA used a markup of 10% of operating cost to determine income which was taxed the branch tax rate of 8%. GRA also imputed VAT on the imputed revenue.

The audit exercise landed the branch with a significant tax liability.

Case two–revenue Source from Ghana

Client B is a branch of C, a foreign company. C won a contract to provide services to the Government of Ghana and setup B to manage the contract. C carried out the bulk of the work at its home office.

C also decided, based on its transfer pricing analysis, that allocating a profit of 10% markup on cost to B for its work is fair.

In an audit of B, GRA rejected the revenue allocated to B. It held that all the revenue from the contract has a source from Ghana, hence all the income from the contract is taxable in Ghana.

The GRA assessed a significant tax on B.


  • The GRA’s has changed its posture towards branches. It will establish a maximum revenue and income connection to the branch in Ghana.
  • The liaison office is designed as a cost center that does not produce revenue. It escaped taxation in the past, but it may no longer escape taxation.
  • The GRA has issued no guidelines on how it will determine income in case of branch that are designed cost centers. This poses a considerable tax risk to such branches.
  • With B, it has a direct connection to the revenue produced. While C had done a transfer pricing analysis, it seemed not to have grasped the practical implication of the law on sources of revenue.
  • GRA must provide clarity on the application of TP rules as the issues in a transfer pricing dispute are difficult. This should help taxpayers to plan their taxes. We believe the independent Tax Appeals Board (ITAB) will help to decide such cases and bring clarity to the application of transfer pricing rules.
  • A transfer pricing analysis is a basis for negotiation with the GRA. GRA is not obliged to accept the taxpayer’s transfer pricing analysis. So entities in such situation must back their transfer pricing analysis with data and negotiate with GRA to arrive at a reasonable outcome.
  • Branch offices must carefully assess their tax exposure. We recommend they get professional tax advisors to help them mitigate their tax exposure.

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