CHARTERED INSTITUTE OF TAXATION (GHANA)

PROFESSIONAL EXAMINATIONS
FEBRUARY, 2015 EXAMINATION
FINAL 1: PAPER 9 – INTERNATIONAL TAXATION

TIME ALLOWED: THREE (3) HOURS

ATTEMPT ALL QUESTIONS

Question 1

Starkest Limited is a United Kingdom company. The company sent Mr. Billy Fry to work
in its branch office in Accra, Ghana for five months, from 1 st June, 2014 to 31st October,
2014. During that time, Starkest Limited paid 20% of his salary to his Swiss bank
accounts, and the other 80% is paid to him in Ghana. He is provided with an apartment
in Accra arranged by Starkest Limited. His salary was invoiced and charged to the
branch in Accra.

On completion of his assignment on 31st October, 2014 in Ghana, Mr. Billy Fry took his
annual leave during which he stayed on in Accra to spend all his holidays. He left Accra
on the 18th December, 2014 to London to resume his duties.

Required

What are the Ghana tax implications of the activities of Mr. Billy Fry and his employers?
(18 Marks)
Question 2

Professional Anagli is a distinguished professor of wireless technology at the Kwame

Nkrumah University of Science and Technology in Kumasi. He received an invitation
from Oxford University in England to conduct research in wireless communication in
2010 for two years. He was paid for the two years he conducted the research by the
Oxford University. After the initial two years of research, Professor Anagli was asked to
stay on by the Oxford University for further one year of research. The extra one year
was funded by Edacs Electronics PLC, an electronics giant.

On the completion of the research project he published a book on his research entitled’
Wireless Communications industry. He earns considerable amount of royalties from the
sale of his book.

Required

What is the implication of Professor Anagli’s activities at the Oxford University and the
subsequent book publishing, within the context of Ghana/United Kingdom Double
Taxation Agreement?
(18 marks)
Question 3

Western Minerals Limited, a Ghanaian resident company, and Gold Resources

International, a South African resident company, are 100% owned by Mineral
Investments, a multinational company resident in Mauritius. Western Minerals Limited
mines gold in the Western and Ashanti regions of Ghana. Gold Resources International
refines gold at its gold refinery in Johannesburg, South Africa. Western Minerals Limited
sells the unrefined gold mined in Ghana to Gold Resources International. Gold
Resources International refined the gold and trades the refined gold on the spot markets
and forward exchanges. Besides, Gold resources International buys unrefined gold from
other unrelated gold mining companies in South America.

Western Minerals Limited have reported losses for the last five years and, therefore,
paid no corporate tax to Ghana Revenue Authority for those of tax assessment. With
the promulgation of the Transfer Pricing Regulation. L.I. 2188, the management of
Western Minerals Limited decided to engage a Transfer Pricing Specialist to advise
them on how to determine the transfer price of the unrefined gold they sell to Gold
Resources International.

As a transfer pricing specialist you have been engaged by Western Minerals Limited to
advise them on transfer pricing issues. The term of your engagement requires that you
prepare a preliminary transfer pricing report on how to determine the transfer price of
the unrefined gold the company sells to Gold Resources International. This preliminary
report must be submitted to the management of Western Minerals Limited within one
week of your engagement.

Required
Prepare the preliminary transfer pricing report on how to determine the transfer price of
the unrefined gold Western Minerals Limited sells to Gold Resources International.

(24 marks)
Question 4
The interpretation of international treaties such as Double Taxation Agreements is
specifically governed by the Vienna Convention on the Law of Treaties of 23 rd May,
1969. The Convention provides for the status of international agreements in relation to
domestic laws. The article 31 (1) of the Convention contains three basic principles that
provide the framework for interpreting international treaties such as Double Taxation
Agreements.

Required

a. What is the status of Double Taxation Agreements that Ghana has with other
countries in relation to the Internal Revenue Act 2000, Act 592?

b. State and explain the three basic principles within which international treaties
such as Double Taxation Agreements should be interpreted? (9 marks)
Question 5
Casting International is a multinational enterprise that develops, manufactures and sells
electronic product. The multinational head office, Casting International PLC, is in
London. All the subsidiaries are 100% owned by Casting International PLC.

The electronic products are manufactured in China by Casting Asia. There are three
regional logistics management subsidiaries around the world including Casting Europe
in Liechtenstein. There is a sales centre and supply-chain management company,
Casting South Africa in Pretoria, South Africa.

Ghana Revenue Authority receives information that Casting Europe is operating a

branch office in Accra. As a response to a query, the branch office claimed that they
arrange for delivery of goods to customers on behalf of Casting South Africa. As such,
their activities are preparatory and auxiliary’ within the Ghana /South Africa Double
Taxation Agreement. Casting Europe has no office on Liechtenstein. The Chief
Financial Officer and the company secretary of Casting Europe who lives in
Liechtenstein work from their own private residence and videoconference in for board
meetings from their homes.

All exchanges of information among the directors are done by emails, except the
videoconference meetings. The directors have never met physically in Liechtenstein or
in Ghana. The branch office management claimed that the Chief Financial Officer run
the day to day affairs of the branch. However, the Ghana Revenue Authority found out
that the Chief Executive Officer of Casting Europe makes all the key decisions for the
day to day running of the business and updates the other Directors on those decisions
during the videoconferences.

In Ghana, three directors of Casting Europe including the Chief Executive Officer have
their own offices in the same building with the other branch staff. They use the branch
office’s office equipment. Sixty people work in the branch office in Ghana. There is
neither an office nor an employee in Casting Europe, Liechtenstein, except the two
Directors, the company secretary and the Chief Financial Officer. The branch staff
negotiates with customers on issues such as reduction of price and schedules for
payment.

When the customer is ready to make a purchase, he/she is asked to phone the call-
centre in South Africa to confirm. Casting South Africa then issues the relevant invoices
for the customer to authenticate and return to Casting South Africa. Casting South
Africa then instructs the branch in Accra to supply the products to the customer. They
key terms of the sales contracts are agreed between the branch staff and customers.
The branch also designs advertisement and directs the advertising campaigns.

Required
Determine whether

a. Casting Europe and Casting South Africa has permanent establishment in

Ghana. (12 marks)

b. Casting Europe and Casting South Africa are resident companies in Ghana for
tax purposes. Provide reasons for your answer. (13 marks)