Duties, royalties and taxes

Duties, royalties and taxes payable by private parties

What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?

Private parties carrying on mining activities are required to pay royalties and taxes to the government together with other taxes including corporate tax, rental charges with respect to the area to which the mining right relates, stamp duty (on instruments and documents) and business operating levies and property rates (to local government authorities in areas of operation).

In 2012, corporate taxes were increased from 25 to 35 per cent for mining companies and a uniform regime for capital allowances of 20 per cent for five years for the mining sector. A 10 per cent windfall tax levy on mining companies was announced in 2012, but is yet to be passed into law.

The royalties’ payments are revenue-based (fixed at 5 per cent of total revenue obtained from mining operations), but corporate taxes are profit-based. A holder of a mineral right is required to pay an annual ground rent to the owner of the land or successors and assigns of the owner except in the case of annual ground rent in respect of mineral rights over stool lands, which should be paid to the Office of the Administrator of Stool Lands.

With effect from 2013, the annual ground rent has been increased from about US$0.25/km2 to US$18.57/acre, which is equivalent to US$4,590.99/km2.

Tax advantages and incentives

What tax advantages and incentives are available to private parties carrying on mining activities?

The tax advantages and incentives available to private parties carrying on mining activities include the following:

  • reduced customs import duties in respect of plant, machinery, equipment and accessories imported specifically and exclusively for mineral operations (items named in the Mining List);
  • transferability of capital;
  • transferability of dividends, or deferment of stamp duty;
  • immigration quotas in respect of the approved number of expatriate personnel;
  • personal remittance quotas for expatriate personnel free from any tax imposed by any enactment for the transfer of external currency out of Ghana; and
  • alternative dispute resolution provisions.
Tax stablisation

Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?

The Minister of Lands and Natural Resources may, as a part of a mining lease, enter into a stability agreement with the holder of the mining lease (subject to the ratification of Parliament), to ensure that the holder will not, for a period not exceeding 15 years from the date of the agreement, be adversely affected by a new enactment, order, instrument or other action made under a new enactment or changes to an enactment, order, instrument that existed at the time of the stability agreement and subsequently be adversely affected by subsequent changes to the level and payment of royalties, taxes, fees and other fiscal imports, as well as laws relating to exchange control, transfer of capital and dividend remittance.

The Minister of Lands and Natural Resources on the advice of the Minerals Commission may enter into a development agreement under a mining lease with a person where the proposed investment by the person exceeds US$500 million. A development agreement may contain provisions relating to the mineral right or operations to be conducted under the mining lease, the circumstance or manner in which the Minister of Lands and Natural Resources will exercise a discretion conferred by the Minerals and Mining Act on tax stabilisation as indicated above, and environmental issues and obligations of the holder to safeguard the environment in accordance with any enactment and dealing with the settlement of disputes. A development agreement is subject to ratification by Parliament.

Carried interest

Is the government entitled to a carried interest, or a free carried interest in mining projects?

The government is entitled to a 10 per cent free carried interest in the rights and obligations of the mineral operations where the mineral right is for mining or the exploitation of minerals for which the government is not required to make any financial contribution. The government is not precluded from any other or further participation in mineral operation subject to the agreement of the holder.

Transfer taxes and capital gains

Are there any transfer taxes or capital gains imposed regarding the transfer of licences?

Any gain made on the assignment or other disposal of an interest in a mining right is included in ascertaining the income of a mining company from a mining operation, which is taxed at a rate of 35 per cent, computed by an operation-to-operation basis.

Also, an instrument transferring a mineral right is required to be stamped. And, stamp duty is charged on the consideration paid for the transfer, at a rate of up to one per cent, depending on the term transferred.

Distinction between domestic parties and foreign parties

Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?

There is no distinction between duties, royalties and taxes payable by domestic parties and those payable by foreign parties. However, specific mining companies have stability, development or investment agreements, which protect those mining companies against adverse effects from changes in laws including those regarding the fiscal regime.

The government has established a seven-member stability agreement renegotiation committee with the aim of renegotiating some of the terms of these agreements and to have standard agreements across the industry.