For some time now, petroleum subcontractors, especially those operating under the Tullow and ENI PAs have been confronted with the revocation of two important rulings from the Ghana Revenue Authority (GRA). These rulings affected the final tax of a subcontractor and whether the subcontractor had obligations under the general tax laws.
This article examines the legal history, interpretation, and eventual revocation of the rulings. We also discuss why the GRA treated the rulings as revoked and the position of the High Court and Court of Appeal.
We argue that based on the recent decision of the Supreme Court, the current position of the law is that the GRA was wrong to treat the rulings as revoked. Further, based on the special legislative framework of some subcontractors, these rulings will continue to apply.
Background
One of the important documents issued by the GRA is popularly called the ‘cascading ruling’. The GRA issued two of them to two different petroleum contractors. The first one was issued on 27 August 2010 to Tullow Ghana Limited. The other was issued to ENI Ghana Exploration and Production Limited on 1 October 2014. As private rulings, they set out the Commissioner-General’s interpretation of the relevant tax law.
For these two petroleum contractors, the relevant tax law was the Petroleum Income Tax Law, 1985 (PNDCL 188), specifically, section 27. The petroleum contractors wanted confirmation that after their subcontractors suffer 5% withholding tax, these subcontractors are not required to withhold tax on payments they make to entities that directly assisted them in providing the works or services to the petroleum contractors, i.e., sub-subcontractors.
The GRA confirmed this position to the petroleum contractors. For Tullow, the GRA said,
…the subcontractor is not liable, in respect of that aggregate amount, for tax under any other law in force in the Republic as provided for under Section 27 (3) of the PITL.
For ENI, the GRA said,
‘Where the Subcontractor engages any person to assist in the performance of its obligations in connection with Eni’s petroleum agreement, the Subcontractor has no obligations under Section 27 of PNDC Law 188 to withhold tax from any payments to such a person in respect of the same contract.’
In both rulings, the GRA relied on section 27(3) of the PITL to say that a subcontractor is not required to withhold tax on sub-subcontractors.
Aside the clarity provided for payments to sub-subcontractors, the cascading ruling also confirmed the position of PNDCL 188 that once the petroleum contractor withholds tax at 5% on the payments to the subcontractor, that tax is a final tax and Act 592 won’t apply to that income.
In 2010 and 2014 when the GRA was issuing these private rulings, the relevant general tax law was the Internal Revenue Act, 2000 (Act 592), together with its Regulations, Internal Revenue Regulations, 2001 (L.I. 1675). In 2016, this general tax law was replaced with the Income Tax Act, 2016 (Act 896). The Income Tax Regulations, 2016 (L.I. 2244) also revoked and replaced L.I. 1675 on 3 August 2016.
Revocation of the Cascading Rulings
On 7 October 2021, Tullow provided an update to its suppliers where it informed them that it had received some correspondence from the GRA revoking the cascading ruling. Tullow noted that the correspondence was received on 11 December 2020. Tullow also stated that it was aware the GRA had notified some subcontractors through tax audits that the cascading ruling was revoked upon the publication of L.I. 2244 on 3 August 2016. These details can be found on Tullow’s website.
The GRA maintained the same position in relation to the ENI cascading ruling. From the facts of the case Bumi Armada Ghana LTD v CG (CM/TAX/0225/2021) dated 8 February 2022, the GRA responded to Bumi’s letters on 10 January 2020 and said Act 896 and L.I. 2244 had revoked the ENI cascading ruling with effect from 2016. So, the GRA expected Bumi, a subcontractor under the ENI PA, to withhold taxes on payments it made to sub-subcontractors.
GRA’s arguments for the revocation
The GRA’s argument has been that L.I. 2244 automatically revoked any private ruling it issued. The private ruling rested on PNDCL 188, a law that was made in 1987. Although neither Act 896 nor L.I. 2244 expressly repealed PNDCL 188, there must have been an implied repeal because Regulation 27(1)(b) of L.I. 2244 contradicts section 27(3) of PNDCL 188. Whereas PNDCL 188 provided that the subcontractor has no obligation to withhold tax on a sub-subcontractor, L.I. 2244 provides that the subcontractor must withhold tax on a sub-subcontractor.
Regulation 27(1)(b) says,
where a sub-contractor under a petroleum agreement subcontracts part of the obligations under the sub-contract, the sub-contractor shall withhold tax when making payment to the sub-sub-contractor for works and services provided by the sub-sub-contractor.
For the GRA, it is this provision in L.I. 2244 that reflects the current state of the law and the practice that used to exist under PNDCL 188 came to an end on 2 August 2016.
For the second part of the cascading ruling, the GRA argued that the subcontractor must be subject to general corporate tax at 25% and the tax withheld by the petroleum contractor is no longer a final tax as was done under PNDCL 188. This change was also supposedly caused by the introduction of L.I. 2244.
Judicial endorsement
The GRA’s position is troubling on so many levels. For one, it is using an L.I. to impliedly repeal an enactment. Secondly, it is disregarding the special regime for petroleum subcontractors, specifically their rights under the PAs. The GRA convinced both the High Court and the Court of Appeal on this issue. On 8 May 2025, the Court of Appeal delivered a judgment in the case of Bumi Armada Ghana LTD v CG (H1/240/2023). This case endorsed the High Court’s decision relating to the revocation of the private ruling by L.I. 2244. Both courts however held that since Bumi had entered the agreement with ENI in 2015 at a time that L.I. 2244 was not in force, it was protected from L.I. 2244 to prevent retroactive application of L.I. 2244. We are aware that on 22 June 2023, the GRA updated its position on this matter. Its current position is that the cascading ruling remained in force until it was revoked in 2020. So, the revocation no longer occurred in 2016 with the publication of L.I. 2244, but rather in 2020.
We have a little difficulty with the GRA’s position and by implication, the courts’ position regarding the revocation of the cascading ruling. In our view, the cascading ruling cannot be revoked by L.I. 2244. Further, the Court of Appeal’s decision on 8 May 2025 does not consider the Supreme Court’s decision of 2 April 2025 in the Maersk Drillship IV Singapore PTE LTD v CG (J4/59/2024) case.
The GRA itself noted that its private rulings were based on section 27 of PNDCL 188. This means what was contained in the rulings were the interpretation of the CG. Unless the text of section 27 of PNDCL was amended, there was no reason for the rulings to be revoked. The rulings were not based on anything contained in the general tax law, i.e., Act 592 for there to be an argument that the repeal of Act 592 introduced a new legal framework.
We submit that the special framework that existed for petroleum contractors and subcontractors as provided for in PNDCL 188 and the various PAs remained in force even after the introduction of Act 896 and L.I. 2244. We begin our analysis from PNDCL 188. This law is a specific law that was passed to deal with taxation of both a petroleum contractor and a subcontractor. When this law was being made in 1987, there was a general tax law in existence, the Income Tax Act, 1975 (SMCD 5). In recognition of the fact that this general law could apply to the petroleum contractor and subcontractor, PNDCL 188 specifically contained provisions to restrict the application of the general law to petroleum operations.
For instance, section 39(2) provides that the third schedule in SMCD 5 cannot be used in taxing a petroleum contractor. This schedule contains rules on capital allowance calculation. PNDCL 188 itself contained a schedule that dealt with capital allowance calculation and so it disapplied the rules in SMCD 5. Section 27 also provides that SMCD 5 should not apply to certain contracts that the subcontractor enters and taxation of the income of the subcontractor.
That is why when the SMCD 5 was repealed and replaced by Act 592, the effect of the disapplication in PNDCL 188 continued to carry the force of law. This was the practice, which was endorsed by both the Interpretation Act, 2008 (Act 792) and its predecessor, C.A. 4. The Interpretation Acts provided that upon the repeal and re-enactment of a law, any reference to the repealed law in another law should be read as if the reference is to the re-enacted law. In any event, the transformation of PNDCL 188 from a ‘Law’ into an ‘Act’ through the work of the Law Review Commissioner took care of this reference problem.
Principles of statutory interpretation
So, at all material times. PNDCL 188 disapplied some provisions of the general laws, i.e., SMCD 5, Act 592 and Act 896. What could possibly have informed the argument that Act 896 and L.I. 2244 must start applying to subcontractors? Two principles of interpretation are relevant here. The first one is that general provisions do not derogate from specific provisions. This applies within a law where two provisions conflict with each other. This rule also applies where an Act of Parliament conflicts with another Act of Parliament. In this context, PNDCL law is a specific law and must always prevail over any conflicting provision in the general law.
The other principle of interpretation is that the law that is later in time and is conflicting with an earlier law prevails over the older law. The basis for this principle is that Parliament was aware of the old law before making the new law and hence intended the new law to apply. It appears the GRA is applying the second principle to say that since Act 896 and L.I. 2244 came in 2016, they should prevail over the 1987 law.
Neither the courts nor the GRA have explained their choice of the principle that the law which is later in time impliedly repeals the earlier law, especially when another principle can apply. In Oyoko Contractors Ltd v Starcom Broadcasting Ghana Ltd & Anor (H1/15/2019) dated 15 October 2021, the Court of Appeal had to make a choice between these two principles. In that case, there was a conflict between the Courts Act, 1993 (Act 459) and the Mortgages Act, 1972 (NRCD 96). Act 459 is a general law and NRCD 96 is a specific law. NRCD 96 is earlier in time since it came into force in 1973 while Act 459 came into force in 1993.
The conflict was about how foreclosure of a mortgage could be done. While Act 459, the newer but general law, enabled an old English law from 1860 to continue to apply with the effect that there could be private sale when the mortgagor defaults on the mortgage obligations, NRCD 96, the older but specific law, was clear that notwithstanding anything to the contrary, foreclosure could only happen through judicial sale. The court, among other reasons, said,
…the question is how … such irreconcilable two laws [can be] resolved for one to know whether the intended advertisement of the property for sale by Respondent when there had been no order for judicial sale, was lawful? … I think it is the [special-provisions-override-general-provisions] rule. Why? First the NRCD 96 is a special law made to regulate all mortgage transactions in Ghana, howsoever called. And notwithstanding the fact that it is not [later] in time, by virtue of its special provisions on mortgages it holds sway over the [later-in-time] rule… With specific law in place on that subject area even before the coming into force Act 459, the application of [later-in-time] rule becomes inapplicable in this context.
Applying only the principle above, it will mean since PNDCL 188 is a specific law, even if a new and general law is passed today, unless there is an express repeal in the new law, any conflict must favour PNDCL 188.
Supreme Court’s intervention
The Supreme Court has weighed in on this issue through its decision in the case of Maersk Drillship IV Singapore PTE LTD v CG. This case was mainly about the assessment of additional tax on Maersk, a subcontractor to ENI. The GRA assessed branch profit tax on Maersk. This tax was imposed by Act 592 and subsequently Act 896. Maersk disputed this tax, and the appeal ended up at the Supreme Court.
By a 3:2 majority, the Supreme Court held that Maersk was not required to pay this additional tax. The Court’s decision rested on the fact that Maersk is a subcontractor that has rights under the PA. In furtherance of the provisions of PNDCL 188, the PA provides the tax Maersk is required to pay. PNDCL 188 was also stabilised for the benefit of both the petroleum contractor and the subcontractor. In fact, the Court held that Acts 592 and 896 do not apply to Maersk’s operations due to the stability provisions.
The court said,
It is quite clear therefore that, the parties to the contract including the State never intended that, subsequent fiscal legislations such as Act 896 can operate to amend the Agreement. Therefore, the only applicable legislations in terms of the imposition or waiver of taxes are those specifically mentioned under the Petroleum Agreement. To that extent, I am unable to appreciate why the Learned Justices of the two lower courts having recognised that the Appellant was a privy to the Agreement, and also, a beneficiary under the stability clause still sought to apply fiscal legislations which were promulgated subsequent to the effective date of the Agreement. That in my considered view is perverse and demonstrably erroneous.
Two of the key declarations from the Court are:
- upon a true and proper interpretation of Article 12(1) and (3) of the Offshore Cape Three Points Petroleum Agreement and Sections 27 and 39(3) of the Petroleum Income Tax Act 1987 (PNDC Law 188), the Appellant’s income is exempted from further taxes after the 5% final withholding tax; and
- upon a true and proper interpretation of Article 12(1) and (3) of the Offshore Cape Three Points Petroleum Agreement and Sections 27 and 39(3) of the Petroleum Income Tax Act, 1987 (PNDCL Law 188), the provisions of the Internal Revenue Act, 2000 (Act 592) and the Income Tax Act 2015 (Act 896) is not applicable to the Appellant.
The first declaration makes the tax withheld by ENI on Maersk’s income from petroleum operations a final tax. The second declaration upholds the disapplication of the general tax laws and says Acts 592 and 896 do not apply to Maersk’s operations under the PA. This essentially restores the cascading ruling as it applied to Maersk. Indeed, as this is an interpretation of a tax law, this interpretation is not only applicable to Maersk. Firstly, it applies to all subcontractors to ENI. Further, it applies to subcontractors under other PAs that are in Maersk’s situation. This means it applies to subcontractors of Tullow. Finally, it reverses the Bumi decision that the subcontracts entered after 2016 do not benefit from the stability.
As shown above, the GRA’s entire argument hinges on Section 71 of Act 896 and Regulation 27 of L.I. 2244. Since the Supreme Court has held that the general tax laws, specifically Act 896 do not apply, the GRA’s argument for revocation of the cascading ruling collapses. Once Act 896 is inapplicable, PNDCL 188 becomes the applicable law. Section 27 of PNDCL 188 will apply to extinguish any tax liability the subcontractor had under any general law.
Conclusion
The cascading rulings issued by the GRA served a very important purpose of providing certainty to taxpayers. They did not confer any special right but only confirmed the CG’s interpretation of the law. The CG subsequently treated these rulings as revoked because of a new legislative framework.
In the CG’s analysis, the publication of L.I. 2244 especially, which was inconsistent with the cascading ruling revoked that ruling. The publication also impliedly repealed the provisions of PNDCL 188. The High Court and Court of Appeal agreed with the CG on this point in the Bumi cases. The GRA’s position was erroneous as there was no irreconcilable conflict between PNDCL 188 and L.I. 2244. Indeed, even if there was a conflict, PNDCL itself provided the way to resolve the conflict. Even without using the conflict resolution provision in PNDCL 188, general rules of statutory interpretation favour PNDCL 188.
The Supreme Court has finally brought finality to this issue. The highest court, in the Maersk judgment, clarified that due to the stability provisions in the PAs, a subcontractor that is stabilised under PNDCL 188 is not exposed to the general tax laws, i.e., Acts 592 and 896. Since this general tax law does not apply to the subcontractor, it means the terms of the cascading must continue to apply based on the strength off the stability provisions in the PAs. Those terms, as captured in section 27 of PNDCL 188, are that the subcontractor is subject to final withhold tax of 5% and that they are not required to withhold tax when they make payments to sub-subcontractors.
Contractors and subcontractors who were affected by the GRA’s decision to treat the cascading rulings as revoked are entitled to revisit this issue. They may take steps to recover any taxes paid or positions taken pursuant to the GRA’s erroneous position.
