Transfer Pricing in Ghana (Part II) – The Taxpayer’s Obligations
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Transfer Pricing in Ghana (Part II) – The Taxpayer’s Obligations

Types of transactions that often give rise to Transfer Pricing issues

The regulation provides that in determining the transfer price in transactions between persons in a controlled relationship; or taxpayers in a controlled or in an employer/employee relationship, the transaction will include any of the following;

  • The purchase and sale of goods;
  • The purchase, sale, lease or use of tangible and intangible assets;
  • Provision of management, technical and other intra group services;
  • Provision of finance and other financial arrangements;
  • Rent and hire charges; and
  • Any other transaction that may affect the profit or loss of the entity.


Application of transfer pricing rules to intangible property

In the case of transactions involving intangible properties, the Regulations outlines factors which must be considered. In applying the comparability test in such transactions, there is a requirement to consider the following;

  • Price to be paid by a comparable independent person to be considered together with other factors from the perspective of both parties; and
  • Usefulness of the intangible property to the business of the transferee.


Key methods for determining Arm’s Length Price

In determining the arm’s length price of transactions between parties in a controlled relationship, five methods have been prescribed within the law, in line with Chapter II of Organization for Economic Corporation and Development (“OECD”) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrators.

They are:

  • Comparable Uncontrolled Price (CUP) method.
  • Cost Plus (CP) method.
  • Resale Price (RP) method.
  • Transactional Profit Split (PS) method.
  • Transactional Net Margin Method (TNMM)


The Commissioner-General is however at liberty to use a method other than the approved methods if a decision is taken that, the arm’s length price cannot be determined by any of the prescribed methods under the law.

Alternatively, a person, with prior permission of the Commissioner-General, may use a method other than those prescribed, in circumstances where the nature of the transaction does not allow for the determination of the arm’s length price otherwise.


Record Keeping to comply with the Regulations

Under the transfer pricing rules, it is mandatory for a taxpayer to prepare and provide contemporaneous documentation to support the transfer pricing method selected, upon request. The purpose for this requirement is twofold: to enhance transparency and to provide tax administrators the necessary information to conduct an informed transfer pricing risk assessment and audit of the transfer price.

Contemporaneous documentation must include the following:

  • Enterprise-related documents such as shareholding structure, business activity profile and industry analysis;
  • Transaction-specific documents such as details of international transaction; comparability analysis of the taxpayer and its related enterprises and record of all uncontrolled transactions; and
  • Computation-related documents such as the nature of each related party transaction and the rationale for selecting a particular Transfer Pricing method for each cross-border transaction with a computation of the arm’s length price.

With a transfer pricing transaction, the documentation kept must be sufficient to enable the taxpayer file an accurate and complete transfer pricing return.


Auditing and Penalties

The Commissioner-General, upon the filing of the taxpayer’s transfer pricing return, has the power to audit the transfer pricing method used to verify whether the pricing of a transaction between the related parties, complies with the arm’s length price. The Commissioner-General in the exercise of its audit powers, may adjust the amounts charged or credited to the final account in respect of a transaction.

An adjustment made by the Commissioner-General, will result in the relevant taxpayer being liable to pay the tax due and unpaid, deemed to be an additional tax.

Part I and II of the Transfer pricing Blog Post serves as an overview of the subject matter. It provides a summary of the relevant issues, but it is not intended to give specific legal advice. If you require legal advice, please speak to a qualified person, which may include a member of our legal team at B & P ASSOCIATES.