{"id":3794,"date":"2023-01-31T15:02:33","date_gmt":"2023-01-31T15:02:33","guid":{"rendered":"https:\/\/wtsnobisfields.com\/?p=3794"},"modified":"2023-10-23T10:47:07","modified_gmt":"2023-10-23T10:47:07","slug":"case-summary-fanmilk-ltd-v-commissioner-general-of-the-ghana-revenue-authority","status":"publish","type":"post","link":"https:\/\/wtsnobisfields.com\/blog\/2023\/01\/31\/case-summary-fanmilk-ltd-v-commissioner-general-of-the-ghana-revenue-authority\/","title":{"rendered":"Case Summary: Fanmilk Ltd V Commissioner General Of The Ghana Revenue Authority"},"content":{"rendered":"
CASE SUMMARY <\/strong><\/p>\n On 7 April 2022, the Court of Appeal dismissed an appeal brought against a judgment of the High Court, Commercial Division by Fan Milk Ghana Limited vs. Ghana Revenue Authority in respect of a tax dispute. This case is an appeal against the decision of the High Court, Commercial Division which affirmed the tax decision of the Ghana Revenue Authority (GRA) imposing a withholding tax liability of GHS 7,655,676.22 on Fan Milk Ghana Limited (Fan Milk).<\/p>\n Factual Background <\/strong><\/p>\n The accounting books of Fan Milk were audited for the period of 2014, 2015 and 2016 for tax purposes by the GRA, the statutory body for tax administration in Ghana. The GRA, based on the tax audit report imposed a tax liability of GHC 7,655,676.22 on Fan Milk for failure to withhold taxes on payments it made to independent purchasers\/contractors from 2014 to 2016. According to the GRA these payments where indeed commissions and not discounts (as claim, thus Fan Milk was enjoined, as provided by the Income Tax Act, 2015 (Act 896), to withhold tax on the various sums paid to the independent purchasers\/contractors and pay same to the GRA. Fan Milk Ghana Limited, dissatisfied with the decision of GRA objected to it and in accordance with law paid 30% of the imposed tax liability. However, the objection was dismissed by the GRA. Fan Milk dissatisfied with the decision of the GRA, appealed to the High Court, Accra for a reversal of the decision but was not successful. The High Court, Accra affirmed the decision of the Ghana Revenue Authority. Still dissatisfied, Fan Milk further appealed against the decision of the High Court, Accra.<\/p>\n Issues <\/strong><\/p>\n Despite the many grounds stated by Fan Milk in its appeal, the Court of Appeal resolved that the fundamental issue was whether the GRA was justified in its tax decision against Fan Milk, resulting from Fan Milk\u2019s failure to withhold tax on payments it made to its independent purchasers\/distributors from 2014 to 2016. The determination of this issue was dependent on how the Court would classify the payments Fan Milk made its independent purchasers\/contractor, either as commissions or discounts.<\/p>\n <\/p>\n The Case of Fan Milk <\/strong><\/p>\n Fan Milk argues that the business model between Fan Milk and the Independent purchasers or distributors was not one of principal and agent relationship but one where discounts were apportioned to the independent purchasers or distributors at the end of the month based on purchases made by them. Fan Milk further argued that discounts and not service fees were paid to the purchasers or distributors and therefore were not subject to withholding tax. Thus, the decision by the GRA to impose a withholding tax liability on Fan Milk for its failure to withhold tax at the point of making the said payments to it independent purchasers\/contractors was wrong in law.<\/p>\n <\/p>\n The Case of GRA <\/strong><\/p>\n GRA characterized the relationship between Fan Milk and its distributors as that of a principal and agent relationship. The GRA was of the view that the business model operated between Fan Milk and its agents did not provide for discounts but rather commissions. Fan Milk was therefore under a duty to impose withholding tax on those commissions. GRA audited the accounting books of Fan Milk and imposed a tax liability for their failure to withhold tax on commissions granted to its agents<\/p>\n DECISION OF THE COURT<\/p>\n The Court of Appeal affirmed the decision of the High Court and held that:<\/p>\n <\/p>\n <\/p>\n IMPLICATION AND KEY TAKEAWAYS OF THE COURT OF APPEAL\u2019S DECISION<\/strong><\/p>\n \u00a0<\/strong><\/p>\n CONCLUSION <\/strong><\/p>\n The Court of Appeal affirmed the decision of the High Court that the respondents were not wrong to impose a withholding tax liability on the Appellant for its failure to withhold tax on commissions it paid to its distributors.<\/p>\n <\/p>\n\n
\n