In a GH19 million tax obligation action taken against the Ghana Revenue Authority by Scancom PLC, the owners of MTN Ghana, the Commercial Division of the High Court in Accra found in favour of the authority.

Scancom PLC had taken GRA to court, claiming that the authority had made a legal error and behaved arbitrarily in issuing the tax responsibility order on the firm from January 2014 to December 2017.

The Ghana Revenue Authority launched a comprehensive tax examination of MTN Ghana from January 2014 to December 2018.

The audit covered all parts of MTN’s operations, including Input Value Added Tax claims for products and services acquired by MTN Ghana, Value Added Tax on services imported by the firm, and Input Value Added Tax claims for office premises built by the telecom giant.

MTN Ghana, which thinks it has fulfilled all of its tax duties, filed to court to have the GRA judgement annulled.

As a result, the business requested the following reliefs:

a. An order overturning the Respondent’s decision to levy an extra GHS8,793,598.00 in Value Added Tax and a penalty and interest of GHS10,933,119 on imported services used by the Appellant in its telecommunications company.

b. An order overturning the Respondent’s decision to levy an extra GHC6,379,483.00 Ghana Education Trust Fund Levy and National Health Insurance Levy, as well as a penalty and interest of GHC2,566,124.00 on imported services used by the Appellant for its company.

c. An order quashing the sections of the Current Tax Assessment related to the headings “Disputed Assessment” and reversing Respondent’s Objection Decision in relation to those parts.

d. Any further order(s) required by the justice of the case.

Judgement 

The court presided over by Her Ladyship Justice Afi Agbanu Kudomor on November 9, 2023, ruled that GRA did not commit an error in imposing the tax duty on MTN Ghana.

Below are excerpts of the judgement:

Because of the combined impact of the aforementioned provisions of the Value Added Tax Act, 2013 (Act 870) for imported services, Value Added Tax will not apply unless the imported services were used to make Taxable supply (telecommunication company). However, Value Added Tax will apply if the imported services are used to make an Exempt supply (mobile money business).

Respondent was thus correct in applying the definition in section 65 of the Value Added Tax Act, 2013 (Act 870) to the transactions in question in determining the total cost of imported services and allocating the contribution to total revenue between Exempt and Taxable Supplies.

Respondent did not err in law and did not behave arbitrarily in imposing Value Added Tax liability on the Appellant for Imported Services from January 2014 to December 2017 due to the Appellant’s position as a Partial Exempt Trader during the assessment period.

The terms of the two revised statutes clearly show that the National Health Insurance (Amendment) Act, 2018 (Act 971) and the Ghana Education Trust Fund Act, 2018 (Act 972) are distinct from the Value Added Tax Act, 2018 (Act 870).

As a result, the two statutes impose a tax on the import of services that are not entitled to input tax deduction.

The two statutes impose a tax or charge on the importation of services that are not entitled to input tax deduction, regardless of what the imported service was intended to be utilised for during the review period.

The Value Added Tax rate of 12.5% was inapplicable to the Appellant for the relevant periods in 2018 (August 2018 to December 2018), but the Ghana Educational Trust Fund Levy and National Health Insurance Levy, each of 2.5%, were applicable on the imported services by Appellant, regardless of whether these imported services were used to produce Taxable or Exempt supplies.

As a result, the Respondent did not commit a legal error when it imposed the National Health Insurance Levy and the Ghana Education Trust Fund Levy (along with interest and penalties) on the Appellant’s Imported Services from August 2018 to December 2018, regardless of whether they were applied to Taxable or Exempt services. For these grounds, the current Tax Appeal fails. There will be no cost hierarchy. Each party is responsible for its own expenses.

Click here to read the full judgement on the MTN Ghana vs GRA case