BEIERSDORF GHANA LIMITED v. THE COMMISSIONER GENERAL, GHANA REVENUE AUTHORITY
July 13, 2018
HIGH COURT
GHANA
CORAM
- Samuel K. A. Asiedu
Areas of Law
- Tax Law
- Commercial Law
- Civil Procedure
- Evidence Law
- Intellectual Property Law
July 13, 2018
HIGH COURT
GHANA
CORAM
AI Generated Summary
The case concerns a Ghana Revenue Authority audit of the Ghana distributor of Nivea products for the 201432016 accounting periods. The taxpayer had a Distribution License Agreement with Beiersdorf AG (BDF) of Germany and paid significant royalties for use of the Nivea trademark. GRA disallowed the royalties as deductible costs, characterizing them as profits due to non-registration of the agreement with the Ghana Investment Promotion Centre (GIPC). The taxpayer appealed, also disputing withholding tax liabilities on reimbursements paid to distributors for tradesmens services and the disallowance of trade discounts. The court held the agreement was a technology transfer arrangement under Act 865 requiring GIPC registration, that payments routed through distributors for services attract withholding tax, and that trade discounts must be evidenced on VAT invoices. Critically, the court found no proof of the mandatory prepayment under Order 54 rule 4, deemed the appeal not properly before the court, and dismissed it with costs of GH2,10,000.
JUDGMENT
This appeal stems from an audit undertaken by the respondent herein into the tax returns of the appellant herein for the accounting period of 2014, 2015 and 2016. After the said audit exercise, the respondent assessed the tax liability of the appellant at an amount of GH₵1, 689,149.34 and thereafter, requested the appellant to pay the said tax liability within a period of thirty (30) days.
After notification of the tax liability, the appellant objected to the assessment and after further examination by the respondent, the liability was reviewed to an amount of GH₵1,085,392.36 after the appellant had brought to the notice of the respondent evidence of new tax credit payments claimed and also taking into consideration the payment of an amount of GH₵506,744.80 after notification of the tax liability. The Notice of Appeal, which was filed on the 8th January 2018, is brought upon, basically, three main grounds which are that:
The finding of CGRA that royalty payments made by the Appellant to Beiersdorf AG (BDF) pursuant to an agreement between Appellant and BDF for the use of the Nivea brand should not be allowed as a legitimate business cost because of the failure of the Appellant to comply with prior registration of the Royalty Agreement with the Ghana Investment Promotion Center is wrong in law.
The finding of CGRA imposing liabilities with respect to withholding tax is wrong in law.
i. The decision of the CGRA to characterize reimbursements paid to the distributor of Appellant for work done by third party vendors as sales commission paid to the distributors for which a withholding tax of 10% should apply is wrong in law.
ii. The decision of the CGRA to disallow Trade Discount and to treat Trade Discounts offered to the distributors of the Appellant as commission payment which should attract a withholding tax of 10% is wrong in law.
The appellant also attached to the notice of appeal, particulars in support of grounds of appeal together with various exhibits which the appellant seeks to rely upon to prosecute the appeal. After service of the processes filed, the respondent filed a Reply and also attached, thereto, various exhibits it seeks to rely upon. Thereafter, the parties were ordered to file their statements of case.
In respect of the first ground of appeal, the appellant says that its main line of business is the import and distribution of Nivea products from a company based in Germany called BDF whose registered trade mark is Nivea.