GhanaWeb Feature by Ernestina Serwaa Asante

Anytime multinational companies send the profits accrued from their investments back to their home countries, it is called profit repatriation. This often involves converting local profits into a major trading currency, such as the US Dollar.

For example, if a business in Ghana made several million Cedis, the owners or investors would exchange the Cedi notes for Dollars at the time of repatriation or during the weakening of the local currency.

According to research, if a company earns income in foreign currencies, the earnings are subject to foreign exchange risk.

This means that there is a high probability that the company could lose significant sums of money or make a profit depending on the strength of the currency against major trading currencies.

According to tax summaries by PricewaterhouseCoopers (PWC), a non-resident person conducting activities in Ghana through a branch pays tax at 8% on earned repatriated profits, payable within 30 days.

The portion of net profit of the resident person that corresponds to the interest of the non-resident shareholders is treated as repatriated profits.

The repatriated profit is also treated as a dividend distributed in accordance with the respective shares of the non-resident person.

Meanwhile, Section 60 of the law states that:

(1) A non-resident person who carries on business in Ghana through a permanent establishment and earns repatriated profits shall pay tax on the repatriated profits earned for a basis period ending within the year of assessment.

(2) A non-resident person who has earned repatriated profits under subsection (1) shall pay a final tax on the gross amount of the earned repatriated profits to the Commissioner-General in accordance with the prescribed rate within thirty days after the end of the basis period.

(3) For purposes of subsections (1) and (2), a person shall treat the portion of the net profit of the resident person which corresponds to the interest of the non-resident shareholders as repatriated profits and as dividends distributed in accordance with the respective shares of the non-resident person in the company.

The Foreign Exchange Act, 2006 (Act 723) prohibits the pricing, advertising, and receipt or payment for goods and services in foreign currency in Ghana.

While many people within the Ghanaian business trading commodity are against the repatriation of profits, citing the volatility of the Cedi as one of their major concerns, profit repatriation is a critical aspect of international business. This enables multinational companies to manage their global finances effectively.

However, these companies need to adhere to all regulatory and tax measures rolled out by the host nation to avoid any legal breaches.

SA/OGB

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