On 14th March, 2024, the Ghana Revenue Authority issued this Practice Note on how taxpayers can obtain double taxation treaty benefits. One of the requirements to enjoy the treaty benefit was for the non-resident person to apply to the GRA for approval to use the treaty. After obtaining the approval, the non-resident person is supposed to submit the approval to the resident withholding agent for implementation.
When it was introduced, the Practice Note was at best an administrative recommendation. Withholding agents faced no direct statutory compulsion under any tax legislation to demand or await an official GRA directive before fulfilling their legal obligation to withhold tax. Practice Notes, by their nature, are not law and only contain the GRA’s interpretation of the law. The positions taken by the GRA are not binding on taxpayers.
The GRA has, however, taken its Practice Note a step further by implementing its provisions through the new Integrated Tax Administration System (ITAS). This new tax platform, which is being rolled out in phases, will fully replace the current taxpayers’ portal. The ITAS platform requires taxpayers to attach evidence of obtaining approval from the GRA before a treaty withholding rate is applied. This article examines where the GRA derives such power to compel taxpayers to adhere to this administrative procedure.
GRA’s power to administer tax laws
The GRA is empowered to administer tax laws by the Ghana Revenue Authority Act, 2009 (Act 791) and the Revenue Administration Act, 2016 (Act 915). Under Act 915, it has power to issue directives for the implementation of tax laws. When it comes to determining the tax to be paid, the GRA’s powers are exercised through assessments. Act 915 provides two main ways of determining a taxpayer’s tax liability. Either the taxpayer performs a self-assessment or the GRA makes the assessment.
Self-assessment: The general rule is that every taxpayer is supposed to determine their own tax obligations. They determine when to file a return or make a payment, and how much to pay. Taxpayers simply have to ensure they understand the requirements of the law and implement them. Once the law specifies when the taxpayer should file a return and when the tax should be paid, there is a self-assessment system.
GRA’s assessment: This applies where there is no self-assessment and the law gives limited powers to the GRA to make an original assessment under specific conditions. It also covers situations where there is a self-assessment and the GRA adjusts the assessment. To make an original assessment, the taxpayer should have failed to file their return.
For withholding taxes, Act 915 provides that an assessment is made when the taxpayer files the return. Act 915 does not give the GRA any power to raise an original assessment for withholding taxes when the return is not due unless the conditions exist for a pre-emptive assessment. Pre-emptive assessments are reserved for situations where there is a risk to tax revenue. They are:
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Insolvency, bankruptcy, or liquidation proceedings.
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Reasonable belief that the taxpayer is about to permanently exit Ghana or close operations.
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Suspected commission of a tax offence.
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Failure to maintain adequate documentation.
- It is appropriate to require filing of the tax return before the due date.
Pre-emptive assessment is also allowed if the taxpayer has committed a tax offence or does not maintain adequate documentation, and if the GRA considers it appropriate.
Withholding mechanism excludes the GRA
The main sections covering withholding of income taxes are in sections 114, 115 and 116. In each of these sections, the law gives clear instruction to the withholding agent on what to withhold tax on and when to pay that tax to the GRA. The law does not invite the GRA at any point to give any instruction on what a withholding agent should do.
The GRA is directly connected with the withholding mechanism in two ways. Firstly, the GRA can exempt a person from suffering withholding taxes on specific contracts. Whether based on an application or on the GRA’s own volition, it can write to a taxpayer that it is comfortable for taxes not to be withheld on that taxpayer’s income. Secondly, the law requires a withholding agent that is required to withhold 20% tax on non-resident persons to notify the GRA about the nature of the contract made with the non-resident person. This is merely a notification and does not require the GRA to issue any directive following the notification. In any case, by the time the GRA is being notified, the relevant tax should have been deducted.
The law does not create any space for the GRA to tell any withholding agent what tax rate to use when discharging their withholding obligations. The withholding system leaves the agent a free hand to operate. That is why the law punishes any withholding agent who fails to withhold tax at all or withholds the tax wrongly. So, even if the GRA is concerned taxpayers may use the wrong withholding rates, there is nothing it can do before the due date of the return because the law fully places the responsibility on the withholding agent.
Pre-approval of the treaty benefits is good, but…
The GRA’s main concern is that withholding tax agents may abuse tax treaty benefits. Double tax treaties contain qualification requirements for persons who can benefit from them. The primary condition is that the non-resident person must be a resident of the other country with which Ghana has the treaty. Some non-resident persons pretend to be residents of those countries just to benefit from the treaty. The GRA wants to exclude these persons, which is understandable. Even if the foreigner is resident in the other country, the GRA wants to ensure that the person is the true owner of the income and is not receiving it on behalf of another person resident in a third country. This is also understandable. However, why does the GRA believe it is the only one who can make such a determination?
The GRA expects a certificate of residency from the tax authority of the foreigner’s country. This will certify that the foreigner is indeed resident in the treaty partner’s country. The GRA will also inspect the document giving rise to the income from Ghana. That is, a loan agreement, contract or shareholder certificate. All these verifications can be done by the withholding agent. Even if the GRA confers with the foreign tax authority, it does not change the fact that a person’s residency can be determined in various ways. Withholding agents ordinarily perform due diligence on the persons they are contracting with and check incorporation documents and other regulatory matters.
Ghana is not the first country to introduce this pre-approval system for treaty benefits. However, if Ghana wants to implement this system well, it first requires a change to the legal framework. The law must be explicit that when it comes to withholding tax rates contained in active double tax treaties, the withholding agent cannot automatically apply them. The agent must rely on an instruction from the GRA first. Non-resident persons should be able to make the application to the GRA directly online. Any overpayment from a wrongful use of the local tax rate should be promptly refunded to the non-resident person directly.
Lessons from the United Kingdom
A look at the United Kingdom’s handling of cross-border withholding tax relief illustrates how a legally grounded pre-approval system operates and why many relevant jurisdictions are actually moving away from it.
In the UK, withholding agents are required to withhold tax when making payments for interest and royalty. For royalty, there is a self-assessment system where the withholding agent is free to apply the treaty rate. The rules are different for interest. The general rule is that the local withholding tax rate applies to interest even if there is a lower rate in a treaty, unless the withholding agent receives a Direction from the HMRC. The non-resident person is supposed to apply to HMRC to benefit from the treaty. If satisfied, HMRC will issue this Direction to the withholding agent instructing the agent to apply the treaty rate.
These rules are provided for in The Double Taxation Relief (Taxes on Income) (General) Regulations 1970 issued by the HMRC pursuant to powers conferred on it by Taxation (International and Other Provisions) Act 2010 (and its predecessor). So, there is a clear legislative support for the pre-approval system in the UK. Even if there is any delay in issuing the Direction and the local tax rate is applied, refunds are quickly processed for the non-resident person. The Direction is usually valid for five years if the loan conditions do not change.
Even with its streamlined process to ensure the Direction is not required every time interest is to be paid, and this pre-approval process only applies to interest payments, the HMRC is considering changing this system. It is actively exploring ways to apply the self-assessment system to interest and to scrap this process. On 13th July, 2026, it published a Consultation paper seeking views from the public on how to change this system. The problems identified include administrative burden and cost with the process.
Conclusion
We submit that the GRA doesn’t have any power to determine what withholding tax rate a withholding agent should apply before the deadline for filing the withholding tax return. Determination of the tax rate to use is an assessment. The tax law fully reserves the power for making that decision with the taxpayer. The GRA is entitled to challenge s the taxpayer’s position through an adjusted assessment but not when the taxpayer is in the process of making a self-assessment.
The GRA’s additional administrative procedure is unnecessary because it does not protect the GRA in any way. Tax revenue is not in any jeopardy in the first place. If a withholding agent carelessly applies a treaty rate, the GRA does not have to chase the non-resident person. The law requires the GRA to recover the lost tax revenue with interest from the withholding agent. The GRA is entitled to check any abuse of the tax treaty. We disagree with the time the GRA is checking if there is an abuse. In our view, withholding agents must continue the self-assessment regime even with treaty benefits. We urge the GRA to reconsider its position on this matter. We are confident an application for judicial review of this decision will be successful.
