Transfer Pricing Audits in Ghana: Why Documentation is Now More Important Than the Tax Itself

Published: January 20, 2026 | Source: Life Pulse Daily

Transfer pricing has rapidly evolved into one of the most consequential areas of tax risk for corporate taxpayers operating in Ghana. This is particularly true for multinational enterprise (MNE) groups, companies in the extractive sector, financial institutions, and entities engaged in related-party financing or service arrangements.

While the Ghana Revenue Authority (GRA) has long possessed the statutory authority to regulate non-arm’s-length transactions, recent regulatory trends and audit practices indicate a decisive shift. Today, transfer pricing disputes are increasingly driven not by theoretical pricing debates, but by the quality, timing, and coherence of documentation.

This article examines Ghana’s current transfer pricing regime, the audit posture of the GRA, and the emerging reality that contemporaneous documentation serves as the primary evidentiary basis upon which transfer pricing tests are defended or litigated.

Introduction

In the past, transfer pricing was often viewed through a purely numerical lens—debating whether a specific margin or price fell within an acceptable range. However, the landscape in Ghana has changed. The focus has shifted from mathematical arguments to procedural compliance.

The core thesis is simple yet profound: Documentation is now more important than the tax itself. While the tax liability is the outcome, documentation is the evidence that validates the process. In a jurisdiction where judicial precedent is limited and administrative discretion is high, the absence of robust documentation can lead to immediate audit failures, regardless of the underlying commercial reality of the transactions.

Key Points

Background

To understand the current urgency, one must look at the legal framework governing transfer pricing in Ghana.

The Statutory Basis

The foundation of transfer pricing regulation in Ghana is found in:

• Section 31 and Section 124 of the Income Tax Act, 2015 (Act 896): These provisions mandate that related-party transactions be conducted at arm’s length. They empower the Commissioner-General to adjust chargeable income where this standard is not met.
• The Transfer Pricing Regulations, 2020 (L.I. 2412): This is the structural game-changer. It significantly expanded compliance, reporting, and documentation obligations, repealing the earlier 2012 regime.

Legislative Intent

L.I. 2412 represents a structural shift in Ghana’s transfer pricing legislation. It moves the regime away from a largely reactive adjustment framework toward a proactive, documentation-driven compliance model. The regulation expressly requires taxpayers to prepare and maintain contemporaneous transfer pricing records and to file annual transfer pricing returns.

Analysis

The current environment in Ghana is unique due to the interplay between strict regulations and a developing legal landscape.

The Absence of Transfer Pricing Jurisprudence

Unlike jurisdictions with mature transfer pricing litigation histories (such as the United States or South Africa), there is limited reported Ghanaian case law interpreting transfer pricing adjustments under Act 896 or L.I. 2412. In practice, this means transfer pricing enforcement is shaped primarily by administrative action rather than judicial precedent.

This reality has three critical implications:

1. Administrative Discretion: The GRA holds significant power during audits, as there is no binding case law to restrict their interpretation of “reasonableness.”
2. Shifted Burden of Proof: The evidentiary burden effectively shifts to the taxpayer. You must prove compliance; the GRA does not need to prove non-compliance if documentation is missing.
3. Documentation as Defense: Contemporaneous documentation becomes the essential safeguard against adverse adjustments.

Documentation as the Primary Audit Gateway

In current GRA practice, transfer pricing audits increasingly begin with documentation reviews. Where a taxpayer cannot produce coherent contemporaneous data, the GRA is statistically more likely to:

• Reject the taxpayer’s pricing method.
• Substitute alternative comparables or methods (often resulting in higher tax liabilities).
• Raise adjustments with significant interest and penalties.

Crucially, the dispute often arises before any detailed debate on numerical pricing results. The absence of documentation itself is treated as a compliance failure, triggering the “substitute method” penalty.

Administrative Fairness and Procedural Safeguards

From an administrative law perspective, documentation serves a dual function. It is not just a compliance liability but also a procedural safeguard against arbitrary or disproportionate assessments. When a taxpayer can demonstrate that pricing decisions were made on a reasonable, informed, and arm’s-length basis at the time of the transaction, it strengthens arguments regarding:

• The reasonableness of the tax review.
• The proper exercise of statutory discretion by the GRA.
• Fairness in penalty imposition.

This measurement is particularly important in Ghana’s system, where disputes are resolved largely within the administrative framework (objection and appeal mechanisms under the Revenue Administration Act, 2016) before any judicial review is contemplated.

Practical Advice

Based on current audit trends, taxpayers must adopt a proactive approach to transfer pricing compliance.

Common Documentation Failures in Ghanaian Audits

Many transfer pricing disputes in Ghana do not arise from aggressive tax planning, but from structural and procedural weaknesses. Avoid these common pitfalls:

• Off-the-Shelf Policies: Reliance on group transfer pricing policies prepared offshore without adequate localization for Ghanaian operations.
• Reactive Preparation: Preparing local files only after receiving an audit notice. L.I. 2412 requires contemporaneous preparation.
• Inconsistencies: Mismatches between transfer pricing returns, financial statements, and tax computations.
• Superficial Analysis: Functional analyses that fail to reflect the actual risks and decision-making authority exercised in Ghana.
• Weak Support: Inadequate substantiation for management fees, technical service fees, and shared provider allocations.

Sector-Specific Risk Areas

Oil, Gas, and Extractive Industries: Companies in this sector face heightened scrutiny due to high-value intercompany services, cost-sharing arrangements, and related-party financing. Documentation must clearly explain cost introduction and benefit assessments.

Financial Services: Financial institutions often engage in complex related-party transactions involving back-office services, risk management, and financial backing. Documentation must clearly delineate risk assumptions and controls, especially where Ghanaian entities are operationally vital.

Country-by-Country (CbC) Reporting Implications

L.I. 2412 introduces Country-by-Country (CbC) reporting obligations for qualifying international enterprises. Even if a local taxpayer is not directly subject to CbC filing, the availability of this data to the GRA implies that local documentation inconsistencies are more easily identified. Documentation must be consistent with the global narrative.

FAQ

Conclusion

Transfer pricing audits in Ghana have evolved from retrospective pricing disputes into comprehensive, evidence-based examinations of a taxpayer’s processes, business rationale, and contemporaneous documentation. In a jurisdiction where administrative enforcement is robust and judicial precedent is limited, the quality of a taxpayer’s documentation is not just supportive—it is determinative of the audit’s outcome.

For corporate taxpayers, the imperative is clear: while achieving an arm’s-length result remains the goal, the decisive factor is the ability to demonstrate contemporaneously that pricing decisions were reasonable, compliant, and commercially driven at the time they were made.

For advisors and practitioners, this reality elevates transfer pricing beyond a technical compliance exercise. It must be approached as a continuous discipline of proactive risk management and strategic dispute readiness, integrated from the inception of any related-party arrangement.