Introduction
Ghana is globally recognized for its strong reputation, particularly as the headquarters of the African Continental Free Trade Area, offering significant opportunities for businesses to access the vast African market. Additionally, the country's democratic stability and favorable business policies make it an attractive destination for investors seeking a stable and dynamic environment to expand and grow their businesses. Despite current economic challenges, Ghana remains a preferred choice for investors looking for opportunities.
This article provides a comprehensive guide to the business incorporation process in Ghana, covering key steps such as business registration, compliance with tax and social security requirements, and the benefits of registering with relevant authorities like the Ghana Investment Promotion Centre.
Legal Framework for Business Establishment in Ghana
In Ghana, an individual aged 18 years or older can establish a business. There are various legal frameworks governing business registration depending on the type of business entity. Below is a chronological breakdown of the process and applicable laws for setting up a business in Ghana:
Types of Business Entities
In Ghana, three primary business structures are permitted:
Sole Proprietorship: Governed by the Registration of Business Names Act, 1962 (Act 151) as Amended by Registration of Business Names (Amendment) Decree, 1974 (NRCD 293). This is relevant for individuals who wish to operate a business under a name other than theirs.
Partnership: Regulated by the Incorporated Private Partnerships Act, 1962 (Act 152). This law applies to businesses established by not less than two (2) and not more than twenty-one (21) people for the purpose of making profit.
Company: Regulated by the Companies Act, 2019 (Act 992). This law focuses on the process of incorporating a company in Ghana, established the Office of the Registrar of Companies and provides for other related matters. Below are four types of companies allowed under the Act which may be private or public companies:
- Company Limited by Shares: In this type, the liability of members is limited to the unpaid amount on the shares they hold.
- Company Limited by Guarantee: The liability of members is limited to the amount they agree to contribute in the event of the company being wound up.
- Unlimited Company: This company does not limit the liability of its members.
- External Company: A company that is incorporated outside Ghana but has a branch or operations within the country.
Application Requirements for Incorporation under the Companies Act
According to Section 13 of the Companies Act, 2019 (Act 992), the following details must be included in the application for company incorporation:
- Company Name and type as required by law.
- Nature of business (if applicable).
- Address and Contact Details for the registered office and principal place of business, including telephone, postal, and digital addresses.
- Email and Website (if available).
- Details of Subscribers, Directors, Secretary and Auditor
- A statutory declaration regarding the legal history of Directors (e.g., no fraud, no criminal charges related to company management).
- Consent of Proposed Directors and Auditors to serve.
- A Tax Identification Number (TIN) obtained for the members of the company after registration with the Ghana Revenue Authority.
- Beneficial Owners of the company, including their identity, contact info, nationality, beneficial ownership details, and whether they are politically exposed persons (PEPs).
- Details of Proposed Share Capital, including the amount and number of authorized shares for each class.
- Payment of the required stamp duty and filing fees
A Certificate of Incorporation is then issued after the Registrar is satisfied with the documents provided and the payments made. The issuance of the certificate is a recognition of the company's legal personality and capability of transacting business.
Registration with the Ghana Revenue Authority (GRA)
TIN Registration
Registration with the GRA is essential for all company directors, secretaries and shareholders to obtain a TIN. This is done by completing a TIN form with a copy of any form of identification.
Tax Obligations
Companies must comply with various taxes, including:
- Corporate Income Tax (CIT)
- VAT, Customs and Excise Duties
- National Health Insurance Levy (NHIL)
- GETFund and COVID-19 levy
- Other industry-specific taxes
Tax Rates
- Generally, the CIT rate is 25% with sector-specific rates (e.g., mining and petroleum at 35%, hotel industry at 22%).
- The rate for the standard VAT rate is15%.
- The Monthly NHIL, GETFund and COVID-19 levy are charged at a rate of 2.5%, 2.5% and 1% respectively on the value of goods and services supplied to other persons or imported into Ghana.
- The Electronic Transfer Levy (E-Levy) charged on all electronic transfers of money at a rate of 1% with certain transfers excluded from the levy.
Registration with Social Security and National Insurance Trust (SSNIT)
Employee Contributions
After the company is incorporated, there is a requirement for it to be registered with the Social Security and National Insurance Trust (SSNIT) to ensure employee social security contributions are paid.
Overview of SSNIT
The Social Security and National Insurance Trust (SSNIT) is a statutory public Trust charged under the National Pensions Act, 2008 Act 766 with the administration of Ghana's Basic National Social Security Scheme.
Its mandate is to cater for the First Tier of the Three-Tier Pension Scheme. The Trust is currently the largest non-bank financial institution in Ghana.
The primary responsibility of the Trust is to replace part of lost income of workers in Ghana due to Old Age, Invalidity or Death of a member where dependents receive lump sum payment. It is also responsible for the payment of Emigration benefit to a non-Ghanaian member who is leaving Ghana permanently.
The Pension Scheme as administered by SSNIT has an active membership of over 1.8 million as at April 2023 with over 235,617 pensioners who regularly receive their monthly pensions from SSNIT.
Registration with the Data Protection Commission (DPC)
It is mandatory for companies who handle data to obtain a register from the DPC and obtain a certification to ensure compliance with data protection laws under article 18 of the 1992 Constitution of Ghana and section 18 (1) of Act 843.
Registration with Ghana Investment Promotion Centre (GIPC)
All companies with foreign ownership must register with the Ghana Investment Promotion Centre (GIPC) to obtain an Investment Certificate and other permits as reflected in section 24 of the Ghana Investment Promotion Centre Act, 2013 (Act 865).
Minimum Capital Requirements
- Foreign-owned Enterprise foreigner: US$500,000.00 in cash and/or capital goods
- Joint Venture (with Ghanaian partner): US$200,000.00 in cash and/or capital goods with a Ghanaian partner.
- Trading activity: US$1,000,000 in cash and/or capital goods
It is worth noting that these requirements do not apply to portfolio investments or export trading and manufacturing businesses.
Benefits of GIPC Registration
Registration with GIPC guarantees some benefits to the foreign shareholder, including investment guarantees, guarantees against expropriation, transfer of capital, profits, and personal remittances. Also, it affords foreign directors to qualify for automatic work and residence permit in Ghana.
Section 25 of the Act also allows for companies wholly owned by Ghanaians to register with the Centre to enjoy the benefits and incentives under the GIPC Act. It is worth mentioning that these entities are exempted from meeting the minimum requirement.
Corporate Bank Account Setup
After incorporation, businesses are allowed to open a corporate bank account. Banks require companies to provide a GIPC certificate as part of the account-opening process.
Sector-Specific Requirements
Some industries in Ghana have additional regulatory requirements before businesses can begin operations. These sector-specific requirements are essential for ensuring compliance with industry standards. The regulatory bodies in Ghana can be found here https://www.businessghana.com/site/directory/regulatory-bodies.
Conclusion
Starting a business in Ghana provides significant opportunities, especially for those looking to access the African market. By following the clear legal procedures for business registration, tax compliance, and other requirements, entrepreneurs can successfully establish their businesses. Foreign investors can benefit from GIPC registration and its associated incentives. With a stable economy and a favorable investment climate, Ghana remains a promising destination for business growth and success.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
