Case Brief - GRA vs Maersk Drillship, 2025

Written By Michael Siaw Larbi

The Commissioner General, Ghana Revenue Authority v. Maersk Drillship IV Singapore Pte Ltd. - Supreme Court Ruling (April 2025)

Civil Appeal No. J4/59/2024 - April 2025

Adjudicating Body

The Supreme Court of Ghana, Accra

Litigants

  • Appellant: Maersk Drillship IV Singapore Pte Ltd. (hereinafter "Maersk"), a Singaporean corporate entity registered in Ghana as an External Company, and the original recipient of the contested tax assessment.

  • Respondent: The Commissioner General, Ghana Revenue Authority (hereinafter "GRA"), the statutory head of the agency responsible for tax administration and collection in Ghana.

Factual Background

In 2005, the Government of Ghana (GoG) and the Ghana National Petroleum Corporation (GNPC) entered into a Petroleum Agreement (PA) with Heliconia Energy Ghana Limited concerning the Offshore Cape Three Points (OCTP) area. Parliament ratified this PA on March 15, 2006. Heliconia later assigned its PA rights and obligations to ENI Ghana Exploration and Production Limited (ENI), which became the "Contractor."

On January 30, 2015, ENI subcontracted Maersk to provide drilling services for ENI's OCTP oil operations from July 2015 to December 2017.

Following these operations, the GRA audited Maersk for 2015-2018, issuing a Final Tax Audit Report in November 2020 assessing a total tax liability of USD 28.627m. Maersk objected, and the GRA′s Final Objection Decision on September 27, 2021, revised the liability to USD 28.357m. This comprised direct taxes (P.A.Y.E underpayments, penalties, Withholding Tax, Corporate Income Tax (CIT), Branch Profit Tax (BPT)) of USD 19.915m, and indirect taxes (VAT/NHIL) of USD 8.441m.

Maersk contended that under the PA, particularly its stabilization clause (Article 26.2) and tax articles (Article 12), its income from petroleum operations was solely subject to a 5% final withholding tax, as per the PA and the Petroleum Income Tax Law, 1987 (PNDCL 188). Maersk argued it was not liable for additional taxes imposed by the GRA under later general tax laws (Internal Revenue Act, 2000 (Act 592); Income Tax Act, 2015 (Act 896)) for income from its PA-related contractual obligations. The dispute centered on the PA's specific fiscal regime versus later general tax laws.

Procedural History

  • High Court Proceedings: Maersk appealed the GRA's Final Objection Decision. The High Court largely affirmed the GRA's position, finding Maersk had a permanent establishment in Ghana and its repatriated profits were taxable under Act 896, with the PA not precluding Branch Profit Tax. However, it granted Maersk limited relief, proscribing income tax on revenue Maersk specifically earned from services directly under the PA within the OCTP block, unless explicitly permitted by ENI's PA. This left substantial portions of the GRA's assessment intact.

  • Court of Appeal Proceedings: Both parties appealed. On October 19, 2023, the Court of Appeal dismissed Maersk's appeal. It reasoned that Maersk's Ghanaian Permanent Establishment (PE) was a distinct legal entity. While PA exemptions might cover the PE's business income, profits repatriated from the PE to Maersk (parent) were deemed taxable investment income (Branch Profit Tax under Act 896) not shielded by PA clauses concerning the parent. The Court of Appeal partly allowed GRA's cross-appeal, affirming Maersk (parent) was not the direct subcontractor for full PA protection regarding these repatriated profits, distinguishing its status from its Ghana PE.

  • Supreme Court Proceedings: Maersk escalated the matter to the Supreme Court for a final determination.

Legal Issues Before the Supreme Court

The primary legal question was:

  • Whether the PA's fiscal stabilization clause and tax provisions exempted Maersk (as the subcontracting entity) from Branch Profit Tax and additional Corporate Income Tax levied by the GRA under later general tax laws (Act 592, Act 896) for income from PA petroleum operations, beyond the 5% withholding tax stipulated in the PA and PNDCL 188. This required balancing state taxing powers with contractual undertakings in ratified international agreements.

Subsidiary issues included:

  • Maersk's eligibility, as the contracting subcontractor, to benefit from the PA's stabilization clause, considering its operational presence in Ghana via an external company.

  • The correct interpretation and application of PNDCL 188, Act 592, and Act 896 to Maersk's income from PA operations, including income channelled via its Ghanaian Permanent Establishment, under the PA versus general tax law.

  • Whether the lower courts, particularly the Court of Appeal, erred in applying general tax laws to a party under a specific, stabilized PA, and in construing the relationship between a non-resident entity and its local establishment for PA benefit eligibility. This involved scrutinizing the Court of Appeal's rationale for differentiating the tax treatment of the PE's operational income from profits remitted to the parent.

Holdings of the Supreme Court (Majority Decision)

The Supreme Court, by a majority, allowed Maersk's appeal, holding that:

  • Maersk's income directly derived from PA-stipulated Petroleum Operations is exempt from further taxation after payment of the 5% final withholding tax, per Articles 12(1) and (3) of the PA and relevant PNDCL 188 sections. This protection extends to Maersk as the contracting subcontractor, irrespective of its operation through a Ghanaian Permanent Establishment for such PA-related activities; the PA-derived operational income's character remained paramount.

  • The general tax statutes (Act 592 and Act 896) are not applicable for imposing additional taxes on Maersk for income directly generated from PA-covered oil operations. The PA's specific fiscal regime prevailed.

  • Consequently, the assessed Branch Profit Tax and additional Corporate Income Tax on Maersk's income from PA-covered petroleum operations were declared legally inapplicable and extinguished.

Reasoning of the Supreme Court (Majority Opinion by Justice Tanko Amadu, with Justice Asiedu Concurring)

  • Primacy of the Ratified Petroleum Agreement: The Supreme Court underscored that the Parliament-ratified PA (2006) has significant, binding legal force. The State is bound by its terms, especially Article 26.2's "freezing" fiscal stability clause, designed to preserve the fiscal framework as at ratification. This means the tax regime for parties (including covered subcontractors) is primarily governed by the PA and referenced laws like PNDCL 188, insulating the agreement from unilateral alteration by subsequent general fiscal legislation not specifically intended to amend such PAs.

  • Maersk's Beneficiary Status: Articles 12.1 and 12.3 of the PA explicitly designate "Subcontractors" as beneficiaries of tax limitations for Petroleum Operations. The Supreme Court found Maersk, as the entity subcontracted by ENI for PA-defined petroleum operations, unequivocally qualified as an intended beneficiary of these protections, including the stability clause, for all income directly from those operations. This corrected the Court of Appeal's more restrictive view on benefits for the parent entity concerning profits channelled via its Ghanaian PE.

  • Specific Tax Regime for PA Operations (PA & PNDCL 188):

    • Article 12.1 PA limits taxation for PA activities to what is specified in Article 12.

    • Article 12.3 PA, with Section 27(1) PNDCL 188, establishes a 5% withholding tax for subcontractors. Section 27(3) PNDCL 188 states that after this tax, the subcontractor "is not liable, in respect of that aggregate amount, for tax under any other law in force in the Republic," establishing this 5% tax's finality for PA-derived income.

    • Sections 27(4) and (5) PNDCL 188 explicitly precluded Act 592's application to petroleum operation contracts and profit calculations for non-resident subcontractors like Maersk under PAs, indicating legislative intent to ring-fence PA operations under PNDCL 188.

  • Inapplicability of Subsequent General Tax Laws to PA-Derived Income: Given the ratified PA's supremacy and specific fiscal regime, subsequent general tax laws (Act 592, Act 896) cannot be validly applied by GRA to impose additional taxes (like BPT or further CIT) on Maersk's income directly from PA-covered petroleum operations. The PA's specific provisions, fortified by the stability clause, prevailed.

  • Vested Rights and Non-Retroactivity: The Court invoked vested rights, suggesting the PA conferred fiscal rights on Maersk not unilaterally abrogable by subsequent legislation without express retroactive intent. This was supported by constitutional safeguards (Article 107(b), 1992 Constitution) against retrospective laws imposing new burdens, protecting Maersk from new tax laws altering the PA's guaranteed fiscal regime for its operational income.

  • Errors of the Lower Courts (Particularly the Court of Appeal): The Supreme Court found a fundamental error in the Court of Appeal's distinction between Maersk (parent/subcontractor) and its Ghanaian PE for PA fiscal protection purposes concerning income from subcontracted petroleum operations. The majority clarified Maersk, as the contracting subcontractor, was the direct beneficiary of PA tax limitations and stability for all income directly from PA-specified operations. The Supreme Court rejected the CoA's rationale that such operational earnings, by passing through the PE or being termed "repatriated," became separately taxable "investment income" for the parent, falling outside PA protection for subcontracting income. Thus, the lower courts' application of Act 592 and Act 896 to impose taxes (like BPT on PA operational income) not contemplated by the PA and PNDCL 188 for such income was deemed legally erroneous.

  • Justice Asiedu's Concurring Opinion: Justice Asiedu reinforced that the 5% withholding tax under PA/PNDCL 188 was final for the subcontractor's PA-derived income. He criticized the CoA's separation of Maersk's Ghanaian establishment from its Singaporean parent for tax purposes regarding income earned directly under the PA, arguing such income was fundamentally PA-protected business income, its character unchanged by the operational medium or remittance.

Dissenting Opinion (Chief Justice Sackey Torkornoo, with Justice Darko Asare Concurring):

The dissenting Justices opined Maersk's appeal should be dismissed, largely affirming the Court of Appeal. Their key arguments were:

  • The PA's stability clause did not grant Maersk a blanket exemption from all taxes beyond the 5% withholding tax, especially for income distinct from direct operational earnings (e.g., investment returns, dividends).

  • A distinction was appropriate between Maersk's direct subcontracting income (subject to 5% WHT) and income construable as repatriated profits or dividends from investment in a Ghanaian entity (its PE or shareholding in Maersk Rigworld Ghana Ltd.). Such repatriated profits were deemed taxable under general laws (e.g., BPT under Act 896) and not shielded by PA subcontractor clauses applicable to operational income.

  • Article 12(2) PA subjects the main Contractor (ENI) to various taxes, including Income Tax; broader exemptions for subcontractors on all derived value would be anomalous compared to the main contractor's obligations.

  • Section 39(3) PNDCL 188 (re: historical dividend exemptions under repealed SMCD 5) was "spent" by 2005 due to Act 592 repealing SMCD 5 and altering dividend taxation.

  • Section 27(3) PNDCL 188 was interpreted narrowly, primarily to prevent double taxation on the specific aggregate income already subjected to 5% WHT, not as a comprehensive exemption from all other taxes on different income characterizations.

Final Judgment and Orders of the Supreme Court (Majority Decision):

  1. Maersk's appeal was formally allowed.

  2. The prior concurrent judgments of the High Court and Court of Appeal were set aside.

  3. The Supreme Court issued the following binding declarations:

    • Maersk's income directly from PA-defined petroleum operations is exempt from further taxation after payment of the 5% final withholding tax (per PA and PNDCL 188).

    • Act 592 and Act 896 are not applicable for imposing additional taxes on Maersk for these specific PA-covered operations.

    • Assessed Branch Profit Tax and additional Corporate Income Tax on Maersk's PA-covered operational income are legally inapplicable and extinguished.

    • The GRA erred in law in its initial assessment of additional Corporate Income Tax on Maersk's PA-derived income.

  4. The GRA was directed to:

    • Issue a revised tax assessment for Maersk (2015-2017) consistent with the Court's declarations, recognizing the 5% WHT's finality for PA operational income and excluding erroneously applied additional taxes.

    • Refund to Maersk any excess tax previously paid based on the overturned assessments (determined from the revised assessment) within thirty (30) days from the Judgment date.

Michael Siaw Larbi