Case Brief: Maersk Drillship IV Singapore PTE LTD v. The Commissioner-General
Link: https://ghtaxclub.com/wp-content/uploads/2026/02/Maersk-v-CG-High-Court.pdf
Flynote
Taxation – Upstream Petroleum Industry – Petroleum Subcontractor – Fiscal Stability Clauses – Whether 5% withholding tax under Section 27 of PNDCL 188 and Article 12 of a Petroleum Agreement (PA) constitutes a final tax on a subcontractor’s entire income – Applicability of general tax laws (Act 592 and Act 896) to a Permanent Establishment – Distinction between income derived from specific Petroleum Operations and general business activities in Ghana.
Case Information
- Suit No: CM/TAX/0100/2022
- Court: High Court (Commercial Division), Accra
- Date of Judgment: July 8, 2022
- Judge: Her Ladyship Akua Sarpomaa Amoah J. (Mrs.)
Factual Background
The Appellant, a Singaporean company registered in Ghana as an external company, provided services as a petroleum subcontractor to ENI Ghana Exploration and Production Limited (ENI) in the Offshore Cape Three Points (OCTP) contract area. A Petroleum Agreement (PA) existed between the Government of Ghana, GNPC, and ENI. In 2018, the Respondent (GRA) audited the Appellant and assessed total tax liabilities of approximately US$ 28.36 million, including Corporate Income Tax (CIT), Branch Profit Tax (BPT), PAYE, and VAT/NHIL.
The Appellant challenged the assessment, arguing that its income was subject only to a 5% final withholding tax as per the fiscal stability clauses in the PA and PNDCL 188, creating a “fiscal enclave” that ousted general tax laws.
Relevant Legal Provisions Considered
- Petroleum Income Tax Law, 1987 (PNDCL 188):
- Section 27(1) & (2): Mandates a 5% withholding tax for subcontractors and provides that such subcontractors shall not be liable for tax under any other law in respect of that specific aggregate amount.
- Section 39(5): Vested power in the Respondent to apply general tax laws in addition to PNDCL 188 unless specifically exempted.
- Income Tax Act, 2015 (Act 896):
- Section 135: Preserves fiscal stability clauses in existing PAs until the agreement ends or is altered.
- Section 3: Defines assessable income for non-resident persons and those with a Ghanaian permanent establishment.
- Offshore Cape Three Points Petroleum Agreement (OCTP PA):
- Article 12(1) & (3): Restrictions on imposing taxes other than those specified, specifically mentioning the 5% withholding tax for subcontractors.
- Article 26: Guarantees fiscal stability and prevents the state from taking actions that impede rights under the PA.
- Contracts Act, 1960 (Act 25), Section 5: Allows intended third-party beneficiaries (like subcontractors) to rely on contractual provisions.
Issues for Determination
- Whether the 5% withholding tax applied to all income earned by the Appellant in Ghana or only to income specifically derived from services under the PA.
- Whether the Appellant, as a Permanent Establishment, was subject to general tax laws (CIT and BPT) for income unrelated to the PA.
Holding & Decision
The Court held that the 5% withholding tax is final only regarding income earned specifically from work or services provided under the PA.
- Fiscal Enclave: The Court agreed that a fiscal stability regime exists, but it only applies when the subcontractor “wears the garb” of a subcontractor for that specific project.
- General Liability: As a Permanent Establishment, any income accruing to the Appellant unrelated to its activity under the PA remains subject to general tax laws, including CIT and BPT.
- Procedural Orders: The Court dismissed reliefs seeking total annulment but ordered a reconciliation of figures for PAYE, withholding tax, and VAT/NHIL by an independent auditor.
