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The GFA, IRS and Ghana’s Double Taxation Agreements

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Following a Daily Graphic report Tuesday July 13, 2010 which said the Internal Revenue  Service (IRS) was demanding that the Ghana Football Association (GFA) pays taxes on the earnings of the country’s national team, the Black Stars from the 2010 World Cup in South Africa, a debate has ensued on the matter.

While the IRS is insisting that the players pay an amount of $349,000, which is 10% tax on their publicly known taxable bonuses, the GFA chairman, Kwesi Nyantekyi holds a contrary view.

Nyantekyi told the Daily Graphic that the earnings of the players are not subject to taxation in Ghana, but in South Africa. He was quoted as saying “It is the bonuses that are taxable, but even that they are liable to South African tax laws and the taxes are usually deducted at source and paid to the playing body, without the GFA having anything to do with it.”

He however, did not clarify in all his arguments whether indeed, the South African tax authorities have taken the taxes. His remarks only say something to the effect that the taxes should have been paid locally where the money was earned and in this particular case, South Africa which has a double taxation agreement with Ghana.

He even alluded to the issue of double taxation. Indeed, Ghana has double taxation agreements (DTAs) with seven countries. The countries are Switzerland, France, UK, Belgium, Italy, Germany and South Africa, according to information on the website of the Ghana Investment Promotion Centre (GIPC).

And Ghana uses the instrumentality of DTAs to rationalize the tax obligations of investors who come from global tax sourced jurisdictions with a view to saving the affected investors from the incidence of double taxation by both their home governments and the host country, the GIPC says.

The DTAs save investors in the participating countries money, because they are not liable to pay taxes in both countries. For instance, if an investor from South Africa who invests directly into Ghana pays taxes in South Africa, he is not liable to pay taxes on the same investment in Ghana.

Clearly therefore, the DTAs are to facilitate trade; unless, perhaps the World Cup or international football competitions also fall into the category of trade and investment.

While we are at it, the GFA and the Ministry of Sports should clarify whether indeed, the taxes have been paid in South Africa. So far, only suggestions of such payment are being made.

By Emmanuel K. Dogbevi

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One comment

  1. This is incisive except to say that, double taxation agreements do not provide a total shield in respect of individuals/persons duty of tax payment. The fact is that there must be a comparison of taxes payable on the same income assuming that amount was earned, in the two countries seperately. if the tax payable in the foreign country were greater than will pertain in Ghana, then a relief of the foreign tax is granted. If the reverse is true, then that income is grossed up at the average rate of tax in Ghana and the tax is recomputed. The difference between the recomputed tax and that which is paid in the foreign country shall be paid to the IRS.