Accra High Court delivers judgement on $28.3m tax liability appeal by Maersk Drillship
The Commercial Division of the Accra High Court presided by Her Ladyship Akua Sarpomaa Amoah has delivered its judgement on an appeal filed by Maersk Drillship against a $28.3m tax liability slapped it by the Ghana Revenue Authority (GRA).
In her ruling, Her Ladyship Akua Sarpomaa Amoah dismissed seven (7) reliefs sought by Maersk Drillship, gave her decisions on two reliefs but however, withheld from making a decision on two reliefs asserting the determination of the remaining reliefs will be deferred until the submission of the Auditor’s report on the matter.
DECISION
In the premises,
1. Relief (i) dismissed
2. Relief (ii) dismissed
3. Relief (iii) dismissed
4. Relief (iv) dismissed
5. Relief (v) dismissed
6. In respect of Relief (vi), it is hereby declared that the Respondent
is barred from imposing any income tax under any other tax law on the Appellant‘s income emanating from its services carried out in the Offshore Cape There Points Block under the Petroleum Agreement except under the relevant provisions of the Petroleum Income Tax Law, 1987 (PNDCL 188) and ENI‘s Petroleum Agreement (PA).
7. In respect of reliefs (vii) and (viii) it is hereby Ordered that an independent auditor to be agreed upon by the Parties in consultation with the Registrar of this Court be and is hereby appointed to reconcile of accounts between the parties in respect of the Appellants VAT/NHIL liability PAYE, and Withholding Tax figures, in order to ascertain the Appellant’s actual tax liability (if at all) The parties are hereby Ordered to furnish the Registrar of this Court with all relevant documents, within 7 days of the Auditor’s appointment for onward transmission to the Auditor to enable them commence their work. The Auditor upon being furnished with the said documents is afforded 21 days within which to complete their work. Upon such completion the Auditor is ordered to file their report at the Registry of this Court and the Registrar is to cause copies of same to be served on the parties. The Registrar is to serve Hearing Notice on Parties to appear before this Court upon submission of Auditor’s report.
9. Relief (ix) is dismissed.
10. Determination of reliefs (x) and (xi) are deferred until submission of Auditor’s report.
11. Relief (xii) is dismissed.
Maersk Drillship makes appeal against $28.3m tax liability decision by GRA
Maersk Drillship made an appeal against a $28.3m tax liability slapped it by the Ghana Revenue Authority (GRA).
The appeal made at the Commercial Division of the Accra High Court, noted the GRA in its Final Tax Audit Report dated November 20, 2020, erred in law by subjecting the company’s income to further taxes after the 5% final withholding tax adding the GRA is liable for breach of the provisions of the OCTP Agreement by assessing the Maersk Drillship to Corporate Income Tax (CIT) and Branch Profit Tax (BPT) under Act 592 and the Income Tax, 2015 (Act 896).
Maersk further asserts that the GRA wrongly imposed on it tax of $103,300.22 in respect of PAYE taxes when in fact the Appellant had a tax overpayment of $129,165.72.
“The Respondent [GRA] erred in law by rejecting some of the VAT Relief Purchase Orders (VRPOs) in the amount of $6,978,174.88 which resulted in a tax liability of $8, 44,764.18 to the Appellant [Maersk Drillship],” it added.
Background
In or about the year 2005, the Government of the Republic of Ghana, (GOG) and the Ghana National Petroleum Corporation (GNPC) of the one part and Heliconia Energy Ghana Limited (Heliconia) of the other part entered into a Petroleum Agreement (the PA) in respect of the OCTP Contract Area.
Heleconia subsequently assigned its interest in the PA to ENI Ghana Exploration and Production Limited (ENI) as a new Petroleum
Contractor under the PA, a fact which the Appellant says is known to the Respondent Pursuant to the terms of the said PA, ENI entered into a Subcontract Agreement, dated 30th January, 2015 with Maersk Rigworld Ghana Limited (Maersk Rigworld) and the Appellant herein for the provision of services at the Deepwater DP Drilling Rig for a period of 2 years.
During the period of January 2015 to December 2017 the Appellant obtained a Petroleum Commission Permit to provide services to the Upstream Petroleum Industry in Ghana. As a Petroleum Subcontractor to ENI, the Appellant used Rigs and a Rig team to operate in the OCTP block in Ghana for the period January 2015 to December 2017 and continues to use these rigs to perform work as a Subcontractor in the Petroleum Industry in Ghana.
In the year 2018, the Respondent commenced a tax audit into the affairs of the Appellant and issued a Final Tax Audit Report dated 20th November, 2020. The said Report raised an amount of Twenty-Eight Million Six Hundred and Twenty-Seven Thousand Two Hundred and Ninety-Five Dollars Fifty-Four Cents (US$ 28,627,295.54) as the total tax liability of the Appellant.
This comprised a direct tax liability of Twenty Million One Hundred and Eighty-Five Thousand Five Hundred and Thirty-One Dollars Thirty-Six Cents (USS 20,185,531.36) and an indirect tax liability of Eight Million Four Hundred and Forty-One Thousand Seven Hundred and Forty-Six Dollars Eighteen Cents (USS 8,441,746.18).
Dissatisfied with the said assessment, the Appellant attempted unsuccessfully to resolve the matter with the Respondent directly. When these attempts failed, the Appellant filed an Objection against the said tax assessment on the 15th of January, 2021.
On the 27th of September, 2021, the Respondent issued its Final Objection Decision, imposing on the Appellant a total tax liability of Twenty-Eight Million Three Hundred and Fifty-Seven Thousand and Sixty-Five Dollars Seventeen Cents (USS 28, 357,065.17) comprising a direct tax liability of Nineteen Million Nine Hundred and Fifteen Thousand Three Hundred and Eighteen Dollars Ninety-Nine Cents (USS 19,915,318.99) and an Indirect Tax Liability of Eight Million Four Hundred and Forty-One Thousand Seven Hundred and Forty Six Dollars Eighteen Cents (USS 8, 441,746.18), which was served on the Appellant on the 8th of October, 2021.
With respect to Direct Tax, the Respondent assessed the Appellant on the following items:
i. Underpayment of PAYE – One Hundred Three Thousand Three Hundred Dollars Twenty-Two Cents (US $ 103,300.22) Penalty for failure to pay PAYE on due date – Four Hundred and Twenty-Seven Dollars Seventy-Five Cents (USS 427.75)
iii. Withholding taxes – Three Hundred and Thirty-Six Thousand Seven Hundred and Eight Dollars Forty-Nine Cents (US$336, 708.49)
iv. Corporate Income Tax Liability – Two Million Three Hundred and Seventy Thousand Nine Hundred Fifty-Nine Dollars Thirty-Three Cents (US$ 2,370, 959.33) Branch Profit Tax – Seventeen Million One Hundred and Three Thousand Nine Hundred and Twenty-Three Dollars Twenty Cents (US$ 17,103,923.20).
In terms of Indirect Tax, the Respondent granted the Appellant
i) Input VAT / NHIL – Seven Hundred and Eighty-Nine Thousand Six Hundred and Ninety-Seven Dollars TwentyTwo Cents (USS 789,697.22)
ii) VAT Relief Purchase Order Fifty-One Million Five Hundred and Forty-Four Thousand Nine Hundred and One Dollars Twenty-Three Cents (USS 51,544,901.23)
iii) Output VAT NHIL – Sixty Million Seven Hundred and Seventy-Six Thousand Three Hundred and Sixty-Two Dollars Sixty-Three Cents (US$ 60,776,362.63)
vi. VAT /NHIL Liability – Eight Million Four Hundred and Forty-One Thousand Seven Hundred and Sixty-Four Dollars Eighteen Cents (USS 8,441.764.18).
