Company Formation in Ghana
Why choose Ghana to start a Company?
Over the last two decades, Ghana has enjoyed increasingly stable and deepening democratic governance. Seven successful elections have strengthened the effectiveness of key national institutions, enhanced investor confidence and anchored the economy in an environment for positive growth. Today, Ghana is not only the best place to start a company in West Africa, but the fastest growing economy in the world according to the World Bank’s Ease of Doing Business Report 2019.
Forms of Business Entities
Sole proprietorship:
A sole proprietorship is an unincorporated business that is owned and controlled by one person as the sole owner responsible for all the liabilities of the business. Essentially, the business and its owner are the same person.
If you are running your sole proprietor business with your own name, you do not have to register it. However, if you are running the business under a name that is different from your name (a business name), you must register the business name.
If you are running your sole proprietor business with your own name, you do not have to register it. However, if you are running the business under a name that is different from your name (a business name), you must register the business name.
Partnership
Where two or more people (up to a maximum of 20) decide to go into business for the generation of profit together, they may decide to do so through an incorporated partnership registered at the Registrar Generals Department. There is no protection of a partner’s personal assets in an incorporated partnership. The acts of one partner binds the whole partnership.
Companies
A company is an incorporated entity which is separate from the people who form the entity and is run by directors.
Limited Liability Company (LLC)
A Ghanaian LLC can be formed by a single shareholder but minimum two directors. All shareholders can be foreigners but, one of the directors must be ordinarily resident in Ghana.
The minimum paid-up share capital requirements are as follows:
- Wholly Foreign Shareholding companies:
a) Service Industry: Minimum of five hundred thousand US Dollars (USD 500,000) in equity
b) Trading Industry: Minimum of One Million US Dollars(USD 1,000,000)in equity
- With Foreign Participation:
a) Service Industry: Minimum of Two hundred thousand US Dollars (USD 200,000) (Stated Capital) investment by Foreign participant and minimum of 10% Ghanaian investment.
b) Trading Industry: Minimum of one million 1,000,000 US Dollars (USD 1,000,000) in equity by Foreign participant and minimum of 10% Ghanaian investment. Ghana limited liability companies must appoint a company secretary as well as a licensed Ghanaian auditor.
Also, Ghanaian LLC must have a registered office in Ghana with a post office box and must maintain accounts and records at such registered office.
The minimum paid-up share capital requirements are as follows:
- Wholly Foreign Shareholding companies:
a) Service Industry: Minimum of five hundred thousand US Dollars (USD 500,000) in equity
b) Trading Industry: Minimum of One Million US Dollars(USD 1,000,000)in equity
- With Foreign Participation:
a) Service Industry: Minimum of Two hundred thousand US Dollars (USD 200,000) (Stated Capital) investment by Foreign participant and minimum of 10% Ghanaian investment.
b) Trading Industry: Minimum of one million 1,000,000 US Dollars (USD 1,000,000) in equity by Foreign participant and minimum of 10% Ghanaian investment. Ghana limited liability companies must appoint a company secretary as well as a licensed Ghanaian auditor.
Also, Ghanaian LLC must have a registered office in Ghana with a post office box and must maintain accounts and records at such registered office.
Company Limited by Guarantee
This is a company set up for non-profit, social, or charitable purposes. It is not allowed to create or issue shares. The personal liability of the members of a company limited by guarantee is limited to the amount that the individual members pledge to contribute to the assets of the company if the company has to be wound up.
Free Zone Companies
Investors may also opt to establish an entity in Ghana free zone. A Ghana free zone company may be 100% foreign owned and does not require a resident director for incorporation process to be complete. Investors must register with Ghana Free Zone Board (GFZB).
Total exemption from payment of Income Tax on profits for 10 years and 15% post 10 years. Total exemption from payment of withholding tax on dividends arising out of Free Zone Investment.
Total exemption from payment of Income Tax on profits for 10 years and 15% post 10 years. Total exemption from payment of withholding tax on dividends arising out of Free Zone Investment.
Unlimited Liability Company
These Company have the same composition as a limited liability company but the liabilities of their owners are unlimited. These are usually preferred by professional body such as Law firms, Auditing and Architectural firms.
Foreign entities in Ghana
All enterprises in the Country with Foreign participation are required to register with the Ghana Investment Promotion Centre (GIPC) for an Investment Cert and other permits.
Subsidiary company
The Ghana subsidiary setup process also varies by entity. One can incorporate as one of several types of entities, including a limited liability company (LLC), public limited company, branch office, or free zone company. An LLC is the most popular option since it provides the flexibility and freedom to work in Ghana like
a resident company.
a resident company.
External Company (Branch office)
It is branch of an existing company usually registered by a Local Manger on behalf of the company registered outside the jurisdiction of Ghana, who wants to own a branch or place of business in Ghana. Note that the Local Manager must at all times be resident in Ghana and all supporting documents of the External Company has to be in English Language and notarized by a notary Public in the Country of Ghana.
An external company is subject to Ghanaian tax laws (income & corporate tax).
An external company is subject to Ghanaian tax laws (income & corporate tax).
Taxation in Ghana
Corporate Income Tax is a tax charged on a company’s total income sources at the end of the company’s accounting income year.
Companies pay tax on their business and investment income also known as gains and profits, which does not include expenses made to obtain the income.
Ghana taxes corporate income made internationally in the same way that earned inside the country. The average corporate tax rate is 25%, which differs on the basis of industry, area and nature of business. The country does not have known exemptions to transfer in foreign earned profits.
Companies pay tax on their business and investment income also known as gains and profits, which does not include expenses made to obtain the income.
Ghana taxes corporate income made internationally in the same way that earned inside the country. The average corporate tax rate is 25%, which differs on the basis of industry, area and nature of business. The country does not have known exemptions to transfer in foreign earned profits.
Value Added Tax
VAT is a tax applied on the value added to goods and services at each stage in the production and distribution chain. The valued added tax rate in GH is 15.00%, which ranks Ghana as 98th overall in terms of VAT taxation rate internationally.
Withholding tax
The dividends withholding tax rate is 8% This means that the tax authorities expect relevant legal entities to automatically withhold 8% of dividend payments.
There is no known tax on wealth in Ghana. There are no known inheritance and transfer taxes in GH.
There is no known tax on wealth in Ghana. There are no known inheritance and transfer taxes in GH.
Distinction between Branch office and Subsidiary company
Basis | Branch office | Subsidiary company |
|---|---|---|
Structure | It is branch of an existing company usually registered by a Local Manger on behalf of the company registered outside the jurisdiction of Ghana | Subsidiary is an independent business form which operates under the regulations imposed by the Ghana authorities. |
Dependency | Branch is operationally dependent on the parent company. | Subsidiary has a higher degree of independence and is allowed to complete other activities than the parent company. |
Liability | Branch offices have unlimited liability. | Subsidiary company have limited liability. |
Directors | Minimum one director is required. | Minimum two directors are required. |
Resident Company secretary | There is no requirement of resident company secretary in branch office. | In case of subsidiary resident company secretary is required. |
Corporate Shareholders | Branch offices can have corporate shareholders. | Subsidiary companies cannot have corporate shareholders. |
Statutory audit | Not required. | Mandatory. |
FAQs
Qu. What is TIN in business registration in Ghana?
Ans –The full meaning of TIN is Taxpayer Identification Number. It is a requirement for registration of all businesses in Ghana. Ghana Revenue Authority is the agency mandated to issue TIN.
Qu.Can a foreigner register a sole proprietor business d in Ghana?
Ans –The law does not permit foreigners to own sole proprietor businesses. It is solely for Ghanaians.
Qu. Must all the directors of a company be resident in Ghana?
Ans –Either all directors or at least one should be resident in Ghana.
Qu. Must the local manager of an external company be resident in Ghana?
Ans –To register an external company, the law demands that the local manager of the company be resident in Ghana. Therefore, the address of the local manager should be in Ghana.
Qu. Can one person act as director and also as a Company Secretary of a company in Ghana?
Ans –With a director doubling as a Company Secretary, the Companies Code 1963 (Act 179) permitted it. However, under the new Companies Act 2019 (Act 922) a director can only act in the capacity of a Company Secretary if he meets the qualifications so specified, if not the service of a qualified
person or company would be required by the company.
Qu. When do companies need to file for annual returns?
Ans –Every registered company is required to file for the first annual returns after 18 months of registration. However, is mandatory to file at end of every other year, and or Limited Liability Companies, not later than 30th April of the preceding year and should be filed together with the signed audited accounts approved at an Annual General Meeting.
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