The extractive industry remains a cornerstone of Ghana’s economy, contributing significantly to foreign exchange earnings and government revenue. However, its cross-border nature and high-value transactions make it particularly vulnerable to transfer pricing (TP) risks. As multinational enterprises (MNEs) in the mining, oil, and gas sectors expand their operations, the need for robust TP compliance and monitoring becomes increasingly critical to safeguard Ghana’s tax base.
Transfer pricing in the extractive sector largely revolves around how related entities within a multinational group price transactions involving commodities, services, intellectual property, and intercompany financing. In Ghana, these are governed by Section 31 of the Income Tax Act, 2015 (Act 896) and the Transfer Pricing Regulations, 2020 (L.I. 2412), which require that all related-party transactions be conducted at arm’s length, that is, priced as if the entities were unrelated and operating under market conditions.
One of the major TP challenges in the extractive industry is commodity pricing. The export of gold, bauxite, crude oil, and other minerals often involves sales between related entities, where prices may deviate from prevailing market rates. To curb potential mispricing, Ghana’s TP regulations adopt the sixth method, which allows the Ghana Revenue Authority (GRA) to reference quoted prices on recognised commodity exchanges as a benchmark for determining arm’s length values. This approach enhances transparency and ensures that export revenues accurately reflect market conditions, reducing the risk of profit shifting through manipulated pricing.
Another growing area of concern is intercompany financing. Extractive operations are capital-intensive, and funding often flows through related-party loans, guarantees, or group cash-pooling arrangements. Improperly priced interest rates, excessive debt levels, or unsupported service charges can lead to base erosion and profit shifting. Ghana’s regulations require that financing transactions reflect commercial realities, interest rates must align with the borrower’s credit profile, loan terms must be justifiable, and the overall debt structure must be consistent with the company’s ability to repay. The GRA has intensified its scrutiny of such transactions, particularly where interest charged between related parties is excessive.
As Ghana continues to attract investment into its extractive industries, balancing investor incentives with tax integrity remains essential. Companies must adopt proactive TP policies, supported by robust documentation and defensible benchmarking analyses. Collaborative engagement between taxpayers and the GRA, through mechanisms such as Advance Pricing Agreements (APAs), can also help reduce disputes and promote certainty.
Ultimately, effective transfer pricing governance is not only a compliance matter but a developmental imperative. By ensuring that the value generated from Ghana’s natural resources is appropriately taxed, the country can secure sustainable revenues to support infrastructure, education, and social development, transforming its resource wealth into long-term economic resilience.