Naa Lamle Orleans-Lindsay, Head of the Legal Department at the Ghana Investment Promotion Centre (GIPC), has called on Ghanaian businesses to ensure that their technology transfer agreements (TTAs) are registered with the GIPC in compliance with the Technology Transfer Regulations (L.I 1547) and the GIPC Act, 2013 (Act 865).
Speaking during a UK-Ghana Chamber of Commerce (UKGCC) and PwC Ghana webinar on “Technology Transfer and Tax: The Role of the GIPC and GRA,” Mrs. Orleans-Lindsay remarked that there are serious consequences for not registering a TTA with the GIPC.
“The first is that if a TTA is not registered with the GIPC, that TTA is unenforceable. This means that in times of disputes, the company would be held liable, and there are actually cases pending in court where parties did not register their agreements, disputes have arisen, and the document they are relying on is unenforceable and never came into effect.
“The second is that under the GIPC Act, you cannot transfer funds under unregistered agreements. If a document is unregistered and perhaps the Ghana Revenue Authority (GRA) deducts the relevant taxes, the banks and Bank of Ghana may not allow you to pay those fees to the person who provided you with the services because the document is unregistered”.
Mrs. Orleans-Lindsay stressed that the GRA’s deduction of tax on an unregistered TTA is one issue, but businesses should be minded that there are other repercussions for non-registrability of TTAs.
Businesses, TTAs and the Law
According to Act 865, TTAs are entered into between enterprises in Ghana (referred to as the Transferee) and enterprises outside Ghana (referred to as the Transferor) for the provision of services to the Transferee. The transferee receives these services for a fee, the terms of which are covered in a TTA. The services are specifically on the transfer of technology, industrial property services (patents, trademarks, etc.), know-how and the provision of technical expertise, and management services.
The duration of the Agreement must be between eighteen (18) months and ten (10) years. For renewal applications, the duration of a technology transfer agreement must not exceed five (5) years. Act 865 requires that a copy of the agreement, an application form, and other specified documents be submitted to the GIPC for registration.
Compliance with the Act applies to all companies in Ghana irrespective of the sector of operation. TTAs apply to services and not goods.
The GRA’s Safe Harbour Provisions
Safe harbour provisions, a tool which relieves businesses of some of the burdens associated with complying with Transfer Pricing Regulations, can save businesses valuable time and financial resources.
According to Moses Yidana, Head of the Transfer Pricing Unit at GRA, businesses keen on accessing the provisions must be registered with the GIPC. Additionally, the amount being charged for royalties, know-how, and management and technical services should not be more than 2% of the businesses net profit.
“You must also write to the Commissioner General of the GRA to elect to benefit under the safe harbour provision. Once you satisfy these requirements, you’ll only be required to file a simple disclosure document”, Mr. Yidana said.
Key Elements of a TTA
Michael Klobodu, Senior Manager with the Tax Line of Service of PwC Ghana, remarked that every TTA must contain certain mandatory elements as specified in Act 865 and L.I 1547. These include a commencement date on which the agreement will take effect. In cases where the agreement is operational before a TTA is registered, then the said date of commencement should conform to the date of registration with the stipulated duration in Act 865.
Mr. Klobodu further remarked that a detailed description of the service must be provided to enable the GIPC to evaluate and determine whether the registration qualifies for a TTA. A detailed description is also needed to determine whether the service would require a third party to execute it.
Another requirement necessary for the registration of a TTA is the provision for taxes.
“Once the registration is approved and fees are to be paid, whoever is receiving the payment has to pay a withholding tax which has to be stated in the agreement.”
Other requirements include the governing law- the law of Ghana; a detailed training programme, in the case of the transfer of know-how; and a dispute resolution clause.
Avoiding TTA Registration Delays/Denials
Businesses often experience delays or are denied outright when registering their TTAs.
According to Mrs. Orleans-Lindsay, this is because “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”.
She urged businesses to engage consultants such as lawyers, accountants, auditors, consultants, etc. to assist the registration process, submit their documents timeously, and involve the GIPC at every stage of the registration process to avoid unnecessary delays.
Mrs. Orleans-Lindsay assured businesses of the GIPC’s commitment to assisting them comply with TTA laws to streamline the registration process.
The webinar, which featured Kingsley Owusu-Ewli, Tax Partner at PwC Ghana, as a speaker and Abeku Gyan-Quansah, a Tax Partner at PwC Ghana, as moderator also discussed a range of issues such as transfer pricing (TP) regulations and their impact on TTAs, TTA fee range, double taxation agreements and their impact on TTA fees that can be charged, and the perceived conflict between the GIPC and GRA laws on TTAs and TPs.