The 2004 Ghana‑South Africa Double Taxation Agreement (DTA), which entered force on 23 April 2007 and became effective on 1 January 2008, has become a focal point for discussions on revenue mobilisation in developing countries. The treaty, designed to prevent the same income from being taxed twice, sets out reduced withholding rates on dividends, interest, royalties and management fees between the two states.
Under the agreement, dividends to a shareholder holding at least 10 % of the paying company’s capital are subject to a 5 % withholding tax, while other shareholders face a 15 % rate. Interest paid to a resident bank is capped at 5 %, and to other residents at 10 %. Royalties are limited to 10 % of the gross amount, and management fees may be taxed in the source state but are capped at 1 %.
While these concessions aim to attract investment and provide certainty for cross‑border businesses, critics argue that they also curtail Ghana’s ability to tax income that would otherwise be taxable under domestic law. The OECD’s Base‑Erosion and Profit‑Shifting (BEPS) initiative and the African Tax Administration Forum (ATAF) have highlighted the risk of treaty abuse and profit shifting, prompting many African states to reassess their treaty networks.
Ghana’s Income Tax Act, 2015 (Act 896), offers foreign tax credits and exemption relief, but the DTA’s lower withholding rates effectively reduce the tax base for dividends, interest, royalties and service fees. The treaty also includes standard provisions on information exchange, dispute resolution and non‑discrimination, yet the fiscal impact remains a concern for policymakers focused on revenue mobilisation.
As Ghana continues to pursue economic growth, the balance between encouraging foreign direct investment and preserving domestic revenue streams is delicate. The debate over the DTA’s concessions reflects a broader trend among developing countries to tighten treaty terms in line with BEPS recommendations.
