The Tax Hub

The income and capital tax treaty between the Czech Republic and Ghana was signed on 11 April 2017. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Czech tax on income of individuals and tax on income of legal persons, and covers Ghana income tax and capital gains tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel if the activities continue for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

• Dividends - 6% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
• Interest - 10%, with an exemption for interest paid: in connection with the sale on credit of any merchandise or equipment; on any loan or credit of whatever kind granted by a bank; to the Government of the other Contracting State; or to a resident of the other State in connection with any loan or credit guaranteed by the Government of the other State
• Royalties and Service Fees - 8%

Note – Service Fees for the purpose of the treaty include technical, consultancy, and managerial services unless constituting a service PE or covered by Article 14 (Income from Employment).

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State; and
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
• Gains from the alienation of shares or other interests in a company resident in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. Ghana will also allow a credit for Czech tax payable on the profits out of which dividends are paid by a Czech company to a company resident in Ghana, provided that the Ghana resident directly controls at least 10% of the paying company's capital.  

Limitation on Benefits

Article 26 (Miscellaneous Rules) includes the provision that if income or capital gains are taxed in a Contracting State by reference to the amount remitted or received in that State and not by reference to the full amount, then any relief from tax provided for by the treaty in the other State will be limited to the amount of income or gain as is remitted to or received in the first-mentioned State.

Article 26 also includes the provision that the competent authority of a Contracting State may, after consultation with the competent authority of the other State, deny the benefits of the treaty to any person, or with respect to any transaction, if in its opinion the granting of the benefits would constitute an abuse of the treaty.

Lastly, Article 26 includes the provision that persons that benefit from income tax exemption or other special tax treatment that is granted under an incentive regime in a Contracting State, including those carrying on business within free zones in that State, are not considered to be persons in relation to which the treaty applies, except for Article 24 (Exchange of Information).

MFN Clause

The final protocol to the treaty includes the provision that if Ghana signs a tax treaty or treaty protocol with a third state that provides more beneficial treatment of income from the furnishing of technical, consultancy, and managerial services, unless constituting a PE or covered by Article 14 (Income From Employment), then such treatment will automatically apply under the Czech-Ghana treaty from the date such other treaty or protocol is in effect.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.