Pistis and Associates

Economic Substance Regulation

Economic Substance Regulations in Ghana is another compliance requirement for entities registered in the Ghana

Relevant Activities under Ghana Economic Substance Regulations

  • Banking Business
  • Insurance Business
  • Investment Fund Management Business
  • Intellectual Property Business
  • Lease-Finance Business
  • Shipping Business
  • Headquarters Business
  • Holding Company Business
  • Distribution & Service Centre Business

Exempt Licensee as per Cabinet Resolution 57/2020

The Scope of Exempted Licensee as per Cabinet Resolution No. 57/2020 is extended. Following entities fall in Exempted Licensee:

  • An Investment fund
  • A licensee that is Tax Resident in a Jurisdiction other than in Ghana
  • A licensee that is wholly owned by one or more Ghana Resident and meets the following conditions:
    » An entity should not be part of MNE Group
    » An entity should carry business only in Ghana
  • A licensee that is the branch of a foreign entity the Relevant Income of which is subject to tax in a jurisdiction other than Ghana


How to meet the Economic Substance Test?

  • Check whether the entity conducts/ performs Core Income-Generating Activity (CIGA) in the State.
  • Check whether the entity is directed and managed in the State in relation to that activity.
  • Check whether the company employs an adequate number of qualified full-time employees or incurs an adequate level of operating expenditure and adequate physical assets in the state.
  • If CIGA is conducted by another entity for the relevant licensee, then check whether the Licensee has full control and is be able to monitor the activities of another entity.

Authorities as per CRN 57/2020:

I.Functions of Authorities as per ESR
  1. Regulatory Authority:
  • Collect information through Notification, Substance Report and supporting documents
  • Review the information obtained from Licensee & Exempted Licensee
  • Undertake  assessment on the determination of Exempted Licensee
  • Other functions as per Article 4 of the Cabinet Resolution 57/2020
  1. National Assessing Authority:
  • Federal Tax Authority is hereby appointed as National Assessing Authority
  • To undertake assessments to determine the Economic Substance Test
  • Impose the administrative penalties
  • Hear and decide on appeals
  • Other functions as per Article 5 of the Cabinet Resolution 57/2020
  1. Competent Authority:
  • Providing information of Licensee or Exempted Licensee that has not met Substance test to Foreign Competent Authority
  • Providing information in relation to high-Risk IP Business Licensee to Foreign Competent Authority
  • Such other functions as per the Resolution

Why is the Assessment of Activities important?

Assessing whether the Entity is engaged in Relevant Activity will determine whether the Entity is required to comply with Economic Substance Regulation in the Ghana. The substance over form approach is to be considered in assessing the activities. It is significant to note that even Passive Income from any of the activity falling within the definition of relevant activity would require an entity to comply with the regulation. Going incorrect with the Assessment may lead to the filing of inaccurate information with the Authorities. This may further lead to penalties.

ESR Notification should be filed by all Licensee and Exempted Licensee annually providing the following details:

  • Date of commencement and end of Financial Year
  • Relevant Activity being carried
  • Whether Revenue generated from such Relevant activity during relevant Financial year
  • Other information as required by the Regulatory Authority

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