taxation of mining companies in ghana

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TAX BRIEF IN THE MINING SECTOR OF GHANA

1.0Introduction
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. 1.1Legal 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.

2.0Mining Operations in Ghana
2.1Capitalisation 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. 2.2Acquisition 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.

2.3Stability 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 2.4Transferability 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

3.0Taxation 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: 3.1Corporate 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%. 3.2Quarterly 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:...
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