Ghana presents a compelling economic landscape with a youthful and digitally connected population of 31 million. This dynamic demographic positions Ghana as the third-largest U.S. export market in Sub-Saharan Africa, offering significant opportunities beyond its established pillars of agriculture and mining. Notably, emerging sectors like digital services, finance, construction, education, and franchising are fueling Ghana’s economic diversification and propelling its growth trajectory.
As the host to the African Continental Free Trade Area Secretariat, Ghana is at the heart of Africa’s transformative regional integration. It is a good place to launch your business strategy for the African continent.
Entering the exciting Ghanaian market as a foreign investor or conglomerate requires navigating the intricacies of company registration. While the process may seem daunting, fret not! This guide provides a practical roadmap, steering you through the necessary steps and requirements.
Choosing the Right Company Type and Structure
Regardless of your business type or industry, every journey begins with the Ghana Investment Promotion Centre (GIPC). This pivotal organization acts as your gateway to the Ghanaian market, guiding you through the registration process and issuing essential investment certificates and permits. Before you step inside the GIPC doors, be prepared to demonstrate your financial commitment.
You will need to prove you possess the minimum investment amount, payable in cash, capital goods, or a strategic combination of both. This initial hurdle ensures that your venture holds both promise and potential for Ghana’s economic growth.
Now, let’s delve into the specific investment thresholds. Two main pathways emerge for foreign entrepreneurs: venturing solo or joining forces with a Ghanaian partner.
1. Wholly Owned Foreign Enterprise
This path is ideal for entrepreneurs with a clear vision and the resources to back it. If your sights are set on service industries like construction or civil works, you’ll need to demonstrate a minimum investment of $500,000 (equivalent Cedi at the prevailing bank rate).
However, if you’re aiming for the bustling world of trade, the bar is raised to $1 million, accompanied by an additional commitment to employing at least 20 skilled Ghanaian workers. Remember, both options come with a 1% stamp duty applied to your stated capital.
2. Joint Venture with Ghanaian Participation: Sharing Expertise and Success
For those seeking to tap into local market knowledge and build synergistic partnerships, a joint venture with a Ghanaian partner presents a strategic route. In the service industry, your foreign investment of US$200,000 needs to be accompanied by a minimum 10% equity share from your Ghanaian partner.
In the trading sector, the foreign investment requirement remains at US$1 million, regardless of your partnership status, with the same 10% minimum equity share for your Ghanaian counterpart. Remember, the 1% stamp duty on stated capital applies here as well.
Merchant of Record as a Strategy for Expansion
In today’s globalized marketplace, scaling your business often involves navigating complex regulations and financial hurdles. Partnering with a merchant of record (MoR) can be a powerful growth strategy, freeing you to focus on your core strengths while they handle the nitty-gritty of international payments and compliance. Imagine selling your software seamlessly to customers worldwide, without worrying about local tax laws, currency conversions, or PCI compliance. An MoR takes on these burdens, allowing you to expand your reach and revenue streams effortlessly.
Beyond administrative simplification, MoRs unlock valuable data and insights. They process all payments and customer interactions, providing detailed reports on buyer behaviour and spending patterns. This data goldmine enables you to refine your target market, optimize pricing strategies, and personalize customer experiences – all critical factors for sustained growth. Partnering with an MoR can be like getting a financial rocket pack for your business – you’ll reach new heights faster and smoother, while leaving the technical complexities to the experts. If you’re ready to conquer new markets and take your growth to the next level, contact us for more details on MoR.
Regulatory Compliance Checklist for Ghanaian Companies
After the registration process, some companies encounter non-compliance problems because they are unaware of the need to adhere to the regulatory compliance of the country they operate in. Here’s a checklist of compliance obligations to comply with as a Ghanaian business.
1. Annual Returns Filing
For Ghanaian businesses, this regulatory compliance is essential as it serves as a way for companies to inform the appropriate regulators of their present condition. Since it also denotes a renewal of registration, it is consequently regarded as necessary. It has to be submitted annually. The Office of the Registrar of Companies (ORC) is the main agency that is in charge of this compliance, and it requires every company both indigenous and foreign to file its annual returns once every year latest by 31st December. Other agencies like the Ghana Immigration Service (GIS) and Ghana Revenue Authority (GRA) require companies to file annual returns for updating the status of the number of foreign workers at the company and for tax-related information respectively.
The Companies Act, 2019, Section 126(7), provides that “where a company defaults in complying with the filing of Annual Returns and Financial Statements, the company and every officer of the company that is in default is liable to pay to the Registrar, an administrative penalty of 25 penalty units for each day during which the default continues.” The ORC will fully implement this provision as of 1st June 2023.
2. Company’s Income Tax Return
This is a direct tax that all registered entities that engage in taxable activity and generate money are required to pay. Every company must register with GRA as a taxpayer and submit this filing; this is done upon the incorporation of the company.
The standard rate of corporate income tax is 25%. However, current rates vary according to the type of business a company conducts, where it is located, and the industry in which it works. All taxpayers are obligated to submit their year-end tax returns and pay any unpaid taxes, the final return and tax are due four months after the end of the fiscal year. Every three months, every business must present an anticipated self-assessment. A provisional self-assessment that can be amended upwards or downwards until the last day of the company’s base period must be included with the yearly returns. Four quarterly instalments of the self-assessment payment should be made on the last day of each quarter (i.e., March, June, September, and December).
If tax is not paid by the deadline, a penalty equal to 125% of the statutory rate is applied to the amount owing at the beginning of the term. The penalty is compounded each month.
3. Value Added Tax (VAT)
VAT is applied on all goods and services rendered in Ghana and imported into the country, except for some goods and services that are exempted. The standard rate for VAT is 15%. A Ghana Education Trust Fund Levy and Covid-19 Health Recovery Levy are also paid alongside VAT on a monthly basis.
The payment is made to GRA, and any default in payment leads to a fine being levied on the company. Avoid this by registering with Norebase, we expedite the tax filing process and ensure that your company is in compliance.
4. Social Security and National Insurance Trust (SSNIT)
This payment compensates for a portion of the income lost by workers in Ghana due to incapacity, aging, or death of a family member, where dependents receive a lump-sum payout. In addition to paying pensions and other benefits, it is also used to award emigration benefits to non-Ghanaian members who are permanently relocating elsewhere.
Registration and payment monthly for SSNIT is mandatory for all companies, both local and foreign, for or on behalf of their Ghanaian employees. The contribution plan is divided into three tiers, the last one is voluntary while the first two are mandatory. The needed contribution is 5.5% from the employee and 13% from the company. 13.5% of the 18.5% total contribution goes to the first tier schemes, while 5% goes to the second-tier schemes.
5. Pay as You Earn
In Ghana, employers are required to deduct tax from an employee’s salary and other bonuses, on a monthly basis. The highest rate is 30% for tax-resident employees. Non-resident employees’ salaries and other remuneration are subject to a flat rate of 25%. By the fifteenth day of the next month, employers are required to pay the GRA the deducted taxes. Employers must also submit yearly employee returns by 30 April of the year after the return-related year.
Overall, startups should seek legal counsel and other expert guidance to make sure they are adhering to all legal and regulatory standards in order to follow the compliance checklist for Ghanaian firms.
At Norebase, we are happy to assist companies in navigating their compliance requirements. Autocomply automates the process of tax filing, obligation discovery, timely notifications of due filings, and much more.
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