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A free zone is a designated area in which companies are taxed at highly reduced rates or nothing at all in order to encourage investments and increased economic activity within the economy. 

The creation of free zones also has the effect of generally regarding import and customs duties of goods imported by free zone companies as being outside the customs territory and thus exempt from tax. Free Zones basically are “outside jurisdiction” for all transactions with Customs.

Free Zones in Ghana

The Ghana Free Zones Authority (GFZA) was set up to enable the creation of free zones in Ghana and to regulate free zones activities within the country. The legislation governing the GFZA creates an attractive environment through the provision of very attractive incentives to free zone companies.

In Ghana, companies registered under the Ghana
Free Zones Authority (GFZA) are taxed at a rate of 1% for the first ten (10)
years of their operation, and thereafter at a rate of 15% on Income.

A free zone company is required to export at least
seventy (70) percent of its annual production. Further, sales to the local
market is prohibited from exceeding 30% of annual output. It must be noted that
sales to the local market falls within the Ghanaian customs jurisdiction and
are therefore taxable.

A licensed free zone
entity, has the right to produce any type of goods or services for export
provided that it is not environmentally hazardous.

However, note that a company must be registered as a body corporate under the Companies Act 1963 (Act 179) or a partnership under the Private Partnership Act 1962 (Act 152) to qualify for registration under the free zones scheme.

Incentives of Free Zone
Enterprises

A major
incentive of free zone enterprises is that the laws relating to import and
export of goods and services (other than consumer goods for commercial
purposes) do not to apply to imports to a free zone company or the dispatch of
goods for export from a free zone.

Other
incentives available to free zone companies are:

  • 100% exemption from payment
    of direct and indirect duties and levies on all imports for production and
    exports from free zones;
  • 100% exemption from payment of
    income tax on profits for 10 years from the date of commencement of operation
    and income tax thereafter shall not exceed 8%;
  • Total exemption from payment of
    withholding taxes from dividends arising out of free zone investments;
  • Relief from double taxation for
    foreign investors and employees where Ghana has a double taxation agreement;
  • No import licensing
    requirements;
  • Minimal customs formalities;
  • 100% ownership of shares by any
    investor, foreign or national, in a free zone enterprise is allowed;
  • There are no conditions or
    restrictions on the repatriation of dividends or net profit, payments for
    foreign loan servicing, payments of fees and charges for technology transfer
    agreements and remittance of proceeds from sale of any interest in a free zone
    investment; and
  • Ability to operate foreign
    currency accounts with banks in Ghana.

Free Zone investments are guaranteed protection
against nationalisation and expropriation.

Free Zones in Ghana – Licensing Requirements

A license to establish a free zone company may
be granted to a company or partnership incorporated in Ghana.

An application to establish a free zone company
must;

  • be in writing
  • be submitted to the secretariat
    of the Board of the Ghana Free Zones Authority (“the Board”)
  • specify the zone, trade or
    industry in which the applicant  wishes
    to trade
  • any other requirements as may
    be specified by the Board.

Free Zones in Ghana – Priority Sectors

The Ghana Free Zone
Authority has identified 11 areas that are regarded as priority sectors for
Free Zones Investment. These priority sectors are :

  • Information and Communication
    Technology [ICT]
  • Textile/apparel Manufacturing
  • Agro-food Processing
  • Seafood Processing
  • Jewellery/Handicraft Production
  • Metal/Hand Tool Fabrication
  • Floriculture
  • Light Industry/Assembling Plant
  • Ceramic Tiles Manufacturing
  • Pharmaceuticals
  • Ethnic Beauty Products

Therefore if your business is export oriented and falls within any of the above listed sectors, what are you waiting for? The right time to consider registering under the Free Zones Act to fully take advantage of all the available incentives is now.   

Audrey Naa Dei Kotey, Audreygrey, ghanatalksbusiness.com
Audrey Naa Dei Kotey, Managing Partner AudreyGrey.

Author’s Profile

Audrey is a qualified lawyer, and the managing partner of AudreyGrey, a legal, tax and compliance firm in Accra. A member of the Ghana Bar Association, her areas of expertise are corporate and commercial law, taxation, labour and insolvency law. She has previously worked as an associate at PricewaterhouseCoopers (Gh) Ltd and a law firm N Dowuona and Co in Accra. She is a member of and serves as the legal advisor to the Ghana Association of Restructuring and Insolvency Advisors (GARIA) where she assisted with drafting and policy formulation for the new Companies Act and Corporate Insolvency Bill. She is also an experienced Chartered Accountant and a member of the Association of Chartered Certified Accountants, ACCA (UK) and the Institute of Chartered Accountants, Ghana (ICAG). She is currently pursuing the Chartered Institute of Taxation (CIT) certification. 
Contact Information
Mobile: 0244631938
Email : [email protected]
Web : www.audreygrey.co

The post All you need to know about Free zones in Ghana appeared first on Ghana Talks Business.

Ghana Talks Business

Source of original article: African Media Agency (www.africanmediaagency.com).
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