Parliament has approved a committee?s report containing a legislative instrument that would provide a clear and more predictable taxation regime to boost foreign direct investments in the country.

The instrument, known as the Transfer Pricing Regulations, 2012 (L.I. 2188)provides for the use of an internationally acceptable pricing principle to determine the amount of taxable profits arising from transactions between persons or entities involving multinational companies and their subsidiaries.

A report of the Committee on Subsidiary Legislation said Ghana has over the years attracted a lot of foreign direct investments from multinational enterprises but statistics indicate that about 80 per cent these multinational companies have been incorporated as subsidiaries in the country, while 20 per cent are registered as branches of foreign companies within the last five years.

It said though these enterprises contribute significantly to the country?s tax revenue, the country continues to lose substantial amount of revenue through under invoicing and tax avoidance as a result of the transactions between multinational companies and their subsidiaries.

According to the report, the absence of an extensive transfer pricing regulation has led to inadequate taxation of significant number of transactions conducted between related enterprises and thus the introduction of the Transfer Pricing Regulation, 2012 (L.I. 2188) in parliament is to therefore provide the framework for the effective  application to transfer pricing in the country.

It said significant number of transactions bring conducted between related multinational enterprises are not being adequately taxed due to the absence of a legislative instrument on transfer pricing.

?It is gratifying to note that the instrument provides the platform required by the Ghana Revenue Authority to compute the profit and losses arising from these transactions.

By Eunice Menka

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