Foreign investment
Foreigners are permitted to invest in land in Ghana, but the nature and extent of the interests that they are permitted to own is restricted. Under the 1992 Constitution, any person who is not a Ghanaian citizen may not hold a freehold or higher interest in land in Ghana.13 Any agreement that purports to convey a freehold interest to a non-citizen is void. 14 Foreigners and legal entities, whether or not wholly owned by Ghanaian citizens, may therefore only hold leaseholds and lesser interests in land.
Additionally, any person who is not a Ghanaian citizen may not hold a leasehold interest for a term of more than 50 years at any one time.15 Any such agreement, deed or conveyance that purports to confer a leasehold for a term exceeding 50 years over land in Ghana will be reduced to a 50-year term. There are no specific incentives available to investors in relation to land ownership in Ghana.
Structuring the investment
Most major real estate investments are structured using special purpose vehicles incorporated in Ghana. The entity of choice is the private company limited by shares. This entity has the advantage of limiting the liability of the investor to the investment in the company’s shares, but also the disadvantage of being tax inefficient because it has a separate legal personality for tax purposes. With corporate tax rates at around 25 per cent, this disadvantage is not insignificant; however, in the absence of any other entities often used in real estate investments around the world, such as limited partnerships, S corporations 16 or US limited liability companies, the Ghanaian limited liability company is basically all that there is. Although partnerships are in theory available, because only natural persons are permitted as partners, along with the absence of any protection from liability, this makes the partnership an unattractive option notwithstanding its relative tax efficiency. Similarly, trusts are not used very often in Ghana because the trust law is antiquated and the relative lack of legal precedent on the operation of trusts and the rights and obligations of trustees makes them unattractive from an investment standpoint.
Private limited liability companies may have no more than 50 shareholders and may be either partly or wholly foreign owned. Under the Ghana Investment Promotion Centre Act 2013 (Act 865), foreigners are required to invest certain minimum amounts of capital in limited liability companies. If the company is jointly owned by Ghanaians and foreigners, the foreigners are required to invest a minimum of US$200,000 in cash or in kind in the entity. If the entity is wholly foreign owned, the foreign owners are required to invest a minimum of US$500,000 in cash or in kind. The investment must be transferred into Ghana from abroad and, if paid in cash, must be converted into Ghana cedis. Once converted, the investment amount may be used as working capital.
Ghanaian company law permits the creation and issuance of a variety of securities by limited liability companies, but investors typically only issue ordinary shares, referred to as common shares in other jurisdictions and occasionally, preference shares. Ordinary shares are issued with no par value and different classes may be issued. Subject to certain limitations, different governance and other rights may be granted to shareholders within the same class. Interest-bearing shareholder loans are permissible and are subject to thin capitalisation and transfer pricing regulations.
Investors in limited liability companies may be natural persons or legal entities. Foreigners are permitted to act as directors; however, at least one director must be resident in Ghana.
The process of incorporation of a limited liability company takes about two weeks. All would-be shareholders and directors in a limited liability company are required to register with the Ghana Revenue Authority and be issued with tax identification numbers. Following incorporation, the company must be registered with the Ghana Investment Promotion Centre before it commences operations. This registration process typically takes no more than two weeks.
The special purpose vehicles used are typically asset holding companies that are operated by a parent, affiliate or third-party company under an asset management agreement or similar arrangement. These agreements are subject to transfer pricing regulations, and where they are entered into with a foreign asset manager, certain terms in the agreements may be subject to further regulation and registration with the Ghana Investment Promotion Centre.
Article By: Nanaama Botchway
