Maersk Drillship IV Singapore Pte Ltd v Commissioner-General, Ghana Revenue Authority

Judgment

p. 1Source page 1. . fN TH E SUP E RIOR C O UR T OF JUDI CA TURE IN TH E HIGH C O U RT OF JU STICE (COMM E R C IAL DIVI SIO N) ACC RA HELD FRID A Y TH E sn• DAY OF JU LY , 2022 BE FOR E BER LADY SHIP AK UA SARPOM AA AMOAH J. (MR S.) JUS TICE OF TH E HIG H C O U RT SU IT N O .: C M ffAX/0100/2022 M AE RSK DRJLLSHTP IV SIN GAPOR E PT E LTD .... A PPLI CAN T vs. THE C OMMI SSSJO NE R G ENE RAL R ES PO N D ENT PARTI ES: O SMAN K WAKU ETUAFUL R E P RESENT ING A P PELLAN T PRESENT RE S PONDENT - AB SE NT C O UNS EL: B ENE DICT ASARE WITH OR . NANA GYAME RA A FF UL R OL OL NG BRIE F F OR DR. AB D AL L A H A LI-NAKYEA FO R A PP ELLANT - P RE S E NT MO H AMME D IBRA HIM H OL DING BRLEF FO R CE P HAS O DART EY LAM PT EY FOR R ES PO N D .ENT - PRE SE NT J U DGM E NT Introduction This is an Appeal from the Final Objection D ecision of the Com missioner G eneral of the Ghana R evenue Aut hority (GRA) dated the 27th September, 202 1. The Appellant, M" ersk Drillship IV Si11g"pore PTE LTD (M" ersk Drillship) rests its Appea l on the following grounds: TRUE COP\ ¢) ••••••••• REGISTRA~ COURT Page 1 of 32 OMMER CIAL DIVISION. LCC-4CCR> SUIT NO .: O f/rA)(IOJIIM011 M Afi:RSK DR/lLS /1/P IV SINGAPORfi: PTfi: LTD VS T:IEC0MM ISSI0N£ R-Gfi:f'o'£RAI. www.GhTaxClub.com

p. 2Source page 2i) The Respondent wrongly construed Articles 12(1), 12(3) and 26 of the Offshore Cape Three Points Petroleum Agreement (OCTP) and Sections 27 and 39 (3) of the Petroleum lnco111e ll Tllx Lllw, 1987 (PNDCL 188) by llpplying the provisions of the Internal Revenue Act, 2000 (Act 592) and the Income Tax Act, 2015 (Act 896) to the Appellant ii) The Respondent erred in law by subjecting the Appellant's inco,ne to further taxes after the 5% final withholding ta.x iii) The Respondent is Liable for breach of the provisions of the OCTP Agreement by assessing the Appellant to Corporate Income Tax (CIT) and Branch Profit Ta.x (BPT) under Act 592 and the Jnco111e Tllx, 2015 (Act 896) iv) The Respondent wrongly imposed tax of US $I03,300.22 on the Appellant in respect of PAYE ftL'(eS when in fllct the Appellllnt had a ta.x overpayment of$ 129,165. 72. v) The Respondent erred in lllw by rejecting some of the VAT Relief Purchase Orders (VRPOs) in the amount of US$ 6, 978,174.88 which resultetl in a ta.x liability of US$ 8, 44,764.18 to the Appellant vi) The Respondent erred in the reconciliation of the figures for which reason the Appellant demllnds a proper reconciliation of the figures in issue herein. Page 2 of 32 SU /T/\'0 .: CM/TA X /010012011 M AE RS K DRIL LS /UP IV S INGA PO RE PTI:: LTD VS TIIEC0 MM/S SJ01'\'E fl..G£/1l£fUI. .. www.GhTaxClub.com

p. 3Source page 3FACT UA L BACKGROU N D A factual background of the dispute leading the Appellant to approach this Court pursuant to Section 44 of the R evenu e At/ministration Act, 2016 (Act 915) and Order 54 of the High Co urt (Civil Procedure) Rules (CJ 47) will be necessary to put the arguments canvassed by both sides into proper perspective and context. The Appellant is a company incorporated under the laws of Singapore and registered under the laws of Ghana as an External Co mpan y. It is engaged in the business of providing services to the Upstream Petroleum Industry in Ghana. Appellant brings the instant Appeal per its lawful Attorney, Jorgen Schaffer who is the Appellant's Resident Local Manager. The Respond ent on the other hand is the head of the Gha na Revenue Authority (GRA) , the state entity responsible for tax administration and revenue collection in Ghana. In or about the year 2005 , the Government of the Republic of Ghana, (GoG) and the Ghana National Petroleum Co rporation (GNPC) of the one part and Heliconia Energy Ghana Lim ited (Heliconia) of the other part entered into a Petroleum Agreement (the PA) in respect of the OCTP Contract Area. He leconia subsequently assigned its interest in the PA to ENI Ghana Ex ploration and Production Limited (ENI) as a new Petroleum Page 3 of 32 SU IT N O .: C Mfl'AXIOJOOll011 MA£RSK DRILI.S IIIP IV SINGAPORE PT£ /,TV 1-'S THE C OMMt S..S/0:Vl::R..(,,'£ /'tl£RAl www.GhTaxClub.com

p. 4Source page 4Co ntractor under the PA, a fact which the Appellant says is known to the R espondent. Pursuant to the term s of the said PA, EN] entered into a Subcontract Agreement, dated 30th January, 20 15 with M aersk Rigworld Ghana Limited (Ma ersk Rigwo rld) and the Appellant herein for the provision of services at the Deepwater DP Drilling Rig for a period of 2 years. During the period of January 20 15 to December 20 I 7 the Appellant obtained a Petroleum Commissio n Permit to provide services to the Upstream Petroleum Industry in Ghana. As a Petroleum Subcontractor to E I, the Appellant used Rigs and a Rig team to operate in the O C TP block in Ghana for the period January 2015 to D ecember 2017 and continues to use these rigs to perform work as a Subcontractor in the Petroleum Industry in Ghana . In the year 2018 , the R espondent com m enced a tax audit into the affairs of the Appe llant and issued a Final Tax Audit R eport dated 20th Nove mb er, 2020. The said Report raised an amo unt of Twenty-Eight 1l1illio11 Six Hundr ed (llld Tw enty-Seven Thou sand Two Hundr ed (Ind Ninety-Five Dol/(lrs Fifty-Four Ce nts (US$ 28,627,295.54) as the total tax liability of the Appellant. T his comp rised a direct tax liability of Twenty Million On e Hundr ed and Eigi,ty-F ive TJ,ousand Five Hun,Jred (Ind Thirty-One D ol/(lrs 11,irty-Six Cents (US$ 20,185,531.36) and an indirect tax liability of Eight Million F our Hutu/re,/ and Forty-One Thou sand Seven Hun ,Jred and Forty-SL'( D ollars E ighteen C ents (US$ 8,441,746.18). Page 4 of 32 SU IT NO .: C M lfAl'<IOJOO n o11 MAERSK DRllLSI/Jf' IVS/NGAPO RF. PT& lTI) vs 111£ C0.'1MJSSIONE R-G£N£/UL www.GhTaxClub.com

p. 5Source page 5. . Dissatisfied with the said assessment, the Appellant attempted unsuccessfully to resolve the matter w ith the Re spondent directly. When these attempts failed, the Appe llant filed an Objection against the said tax assessment on the 15th of January, 2021. On the 27th of September, 2021, the R espondent issued its Final Objection Decision, imposing on the Appellant a total tax liability of Twenty-Eig ht Million Tltree Hundr ed an,! Fifty-Seven Tltousand and Sixty-Five Dollars Seventeen Cents (US$ 28, 357,065. I 7) compr ising a direct tax liability of Nineteen Million N ine flundred and Fifteen Tltousand Tltree Hundred and Eighteen D ollars Ninety-N ine Ce nts (US$ 19,915,318.99) and an Indirect Ta x L iability of Eight Million Four Hundr ed and Forty-One Th ousand Seven Hundr ed and Forty­ Sb: Dollars Eigltteen Cents (US $ 8,441,746.18), w hich was served on the Appellant on the 8th of Octob er, 202 l. With respect to Direct Tax, the Respondent assessed the Appe llant on the following items: t. U nderpay,nent of PA YE - One Hundr ed Three Thousand Three Hundr ed D ollars Twenty-Two Ce nts (US $ 103,300.22) ii. Penalty for failure to pay PAY E on due date- Four Hundr ed an,/ Tw enty-Seven Dollars Seventy-Five Ce nts (US$ 42 7. 75) Page 5 of 32 S U IT NO.: CMflAXAJ J0{J/]02] MAE RS K DR IU ,$/1/P II/SINGAPORE PTI:: I.TD 1.-:,s' rue CO M .4IISS ION£R.<,.£ NE RAt www.GhTaxClub.com

p. 6Source page 6111. Witltltolding taxes - Tltree Hundr ed find Tltirty-Six Tltousand Seven Hundr ed and Eigltt Dollars Forty-Nine Ce nts (US$336 , 708.49) ,v. Corporate /11com e Tax liability - T wo Million Tltree H11ndred and Seventy Tlto11sand N ine Hundr ed Fifty-Nine D ollars Tltirty-Tltree Cents (US$ 2,370, 959.33) v. Branclt Profit Tax - Seventeen Million One Hundr ed and Tltree Tltousand N ine Hu ndretl and Twenty-Three Dollars Tw enty Cents (US$ 17,103,923.20). In terms of Indirect Tax, the Respondent granted the Appellant i) Input VA T I N Hll - Seven Hu,ulretl and Eighty-Nine Tltousa11d Six Hundr ed and Ninety-Seven D ollars Twenty­ Two Ce nts (US$ 789,697.22) ii) VAT Relief Purchase Order Fifty-One Million Five Hundr ed a111J F orty-Four Thou sand Nine f/11ndred and On e Dollars Twenty-Three Cents (USS 51,544,901.23) iii) O11tput VAT N HIL - Sixty Million Seven Hundr ed and Seve11ty-Sl'I: Th ousa111J Three Hundr ed and Sixty-Two Dollars Sixty-Three Cents (US$ 60,776,362.63) vi. VAT INHIL liability - Eight Million Four Hundr ed and Forty-On e Th o11sand Seven H1111dretl and Sixty-Four D ollars Eighteen Cents (USS 8,441.764.18). U nderpavme11t of Pa v As You E arn (P.A. Y.E.) Page 6 of 32 ~tUIT.VO.: C.\lnAXl(JJOll/10)1 M A ifRSI( DR/U.Sl/11' IVS/NGA P O R.E PT E lTI) VS T/1£ COMMISSIONER -GE N ERAi. www.GhTaxClub.com

p. 7Source page 7Appellant comp lains about the Respondent's imposition of a tax liability of One Hundred and Three Thousand Three Hundred Dollars Twenty-Two Cents (US $103,300.22) as underpayment of P. A.Y E . Appellant says that the said amount arose from the failure of the Respondent to recognize rwo tax receipts in the respective amounts of Four Thousand Nine Hu11dred a11d Twenty-Seve11 Dollars Thirty­ Eight Ce11ts (US$ 4,927.38}, Twenty Thousand Six Hundred and Fifty-Five Gha11a Cedis Nineteen Pesewas (G H Q; 20,655.19) and Two Hundred a11d Twe11ty-Seven Thou sand N ine Hu,u/re,I an,/ Sixty-SL,. Dollars Thirty-Two Cents (US$ 227,966.32), On e Million Ghana Cedis (GH(J; 1,000,000.00). Had the said receipts been recognized, argues the Appellant, it would have been put in a tax credit of an amount of One Hu11dred and Twenty-Nin e Thousand One Hundred and Sixty-Five Dollars Seve11ty-Two Cents ( US$ 129,165.72). Withholding Tax The Appellant further takes issue w ith Respondent's imposition of an amount of Three Hu11dred and Thirty-Sir: Thousand Seven Hundred and Eight Dollars Forty-Nine Cents (US $ 336,708.49) as Withholding Tax and prays for an order for reconciliation of figures to ascertain its actual liability. POINTS OF LAW C .J. T. liability and B.P. T tax Page 7 of 32 SUI T NO .: C.M/T',,cX/0100/2011 M AE R S K DRIU .,$11/P IV SIN(;A PO RE PT£ 1,n> vs Tl/£ C O .'1MISS /ONE R 0 Gt1W }HAI. www.GhTaxClub.com

p. 8Source page 8T he Appe llant argues that in terms of Article 12. I and 12.3 of the PA and S ection 27.1 and 27.3 of the Petroleum lnco111e Tax La w, 1987 (PtV D C L 188,) the R espondent erred in law w hen h e raised an assessm ent of Two Mi llion Three Hund retl and S eventy Th ousand N ine H undred anti F ifty-N ine D ollars Thirty-Three Cents (USS 2,370,959.33) as CIT and Seventeen Mi llio11 O ne Hundr ed and Three Thousand N ine Hu ndred and T wenty-Three D ollars T w enty Ce nts (USS I 7,103,923.20) as BP T on the Appellant. Acc ording to the Appe llant the com bined effect of the said provisions is to create a fiscal enclave for EN I and its subcontractors (including the Appe llant) by wh ich the jurisdiction of the general tax laws of Ghana is ousted as far as EN I and its Subcontractors (including the Appellant) is concerned. Conse q uently, only the provisions of PN D C L 188 shou ld apply in determining w hether or not the Appellant as Subcontractor is entitled to the fiscal stability regime under the PA. These provisions have however been disregarded by the R espondent in assessing the Appe llant to C IT and BPT. indirect Tax Ap pellant contends on the basis of Section 48 of the V alue Adde d Tax A ct, 2013 (Act 870) that: "A taxable person is allowed to deduct the output tax due.for the period tax on goods and services purchased in the couno y and Page 8 of 32 Sl/lTNO.; C ,11/rAJ<Alfl(Jl'}#U MAERSK DR/I.LSI/IP II' Sh"CAP0 R£ PTE LTD v.f TJl£COMMISS /ONER -G£1"£RAL www.GhTaxClub.com

p. 9Source page 9goods imported by that person and used w holly exclusively and necessarily in the course of the taxable activity of that person". Respondent howe ver claims he relied on VAT /NH JL invoices and the ledger of Applicant to increase the revenue of the Appel lant and by extension, the tax liability of the Appellant. The R espondent also had no legal basis for rejecting the Vat Relief Purchase Ord ers (V RPOS) to the tune of Six Million Nine Hundred and Seventy-Eight Thou sand One Hundred and Seventy-Four Dollars Eighty-Eight Cents (US$ 6,978,174.88) issued to the Appellant by ENI Appellant therefore seeks the following reliefs: i) A tleclaration that upon a true anti proper interpretation of Article 12(1) anti (3) of the OCTP Agreetnent and S ections 27 anti 39(3) of the Act 188, the Appellant's income is exempted from further taxes after the 5% withholding tax ii) A declaration that, upon a true and proper interpretation of Article 12( 1) anti (3) of the OCTP Agree111e11t anti Sections 27 and 39(3) of PNDCL 188, the provisions of the Internal Revenue Act, (Act 592), anti the lnco,ne Tax Act, ( Act 896) is not applicable to the Appellant iii) A declaration that the assessed BPT of US$ 17,103,923.20 is not applicable to the Appellant anti therefore the assessment is extinguished Page 9 of 32 SU IT NO .: CM ffAX/0/00/1011 MA€RS K DR/1.J.SIIIP 111 S IN(;APOR£ PT£ /,TD v.\' Tl(£ CO MMI SSIO.VER-GH NE RAI, www.GhTaxClub.com

p. 10Source page 10iv) A declaration tlrat tire ad,litional Co rporate Incom e Tax assess111ent of US$ 2,370,959.33 is inapplicable to tire Appellant and tlrerefore tire assessm ent is extinguis/red v) A declaration t/rat tire Respondent is erred i11 law w/ren Ire unjustifiably assessed tire Appellant to additional Corporate Incom e Ta.x in tire amount of US$ 2,370,959.33 vi) A ,Jeclaration t/rat tire R espo11de11t is barred from imposing any income tax under any tax law 011 tire Appellant's income emanating fro,11 its services carried out i,, tire OCTP block under tire PA except under tire tax provisions of tire £Ni's P etroleum Agreeme11l vii) A declaration tlrat tire Respondent erred i11 law by rejecting tlte VAT R elief Purclrase Orders i11 tire a111ou11t of US$ 6, 978,I 74.88 and wrongly il11posing a VAT / N HJL tax liability of US$ 8,441, 764 . .l 8 011 tire Appel/a11t viii) An order for reco11ciliatio11 of tire figures in respect of tire fig ures in respect of tire PA YE , wit/rlrolding tax, VAT / N HIL figures by an independent Co urt Appointed Auditor or tire Clrartered Institute of Taxation ix) An Order for tire a1111ulme11t of tire w/role tax liability assessed in tire Final Objection of tire Appellant x) A n order for tire Respondent to issue a revised tax assess1ne11t of tlte Appellant for 2015 to 2017 years of assessment taking into consideration all tlte reliefs granted by t/ris Court Page 10 of 32 .\'U IT N O.: C U ffAXIO/OfJl1011 M Al;,~RS K ORII.I .. S IJII> IV SJN(iA PQR,£ P1'1J L Th VST/1£ C OMM ISS ION£ R--G£f\t'F.RAI, www.GhTaxClub.com

p. 11Source page 11xi) An order for the refund of monies (if any) previously paid by Appellant to the Respond ent based on tlte annulm ent of the Final Tax Objection Decision xii) General Da11iages for breach of tlte provision of the OCTP Agreement xiii) Costs In my considered opinion, the present Appeal revolves mainly around the correct interpretation to be placed upon certain provisions of the PA entered into between the GoG, GNPC and EN1, the repealed P N DCL 188, as well as Act 896, the Income Tax Law currently in force. rN m y view, the specific provisions in so far as are relevant to this appeal are Sections 27(1) and (2) of PNDCL 188, Articles 12(1) and 12(3) and 26 of the PA and Sections 135 (I) (2) and (3) o f Act 896. It will howeve r be helpful to note as a starting point that neither party disputes the fact that despite the repeal of PN DCL 188, Section I 35 of Act 896 preserves certain provisions of the repealed law which seek to modify the manner in which tax is imposed, in so far as they relate to a concluded Agreement between the GoG and a person, until the earlier occurrence of the events set out under Section 135 (2) of Act 896. What has divided the Parties from the date of the Respondent's assessment and continues to divide them before this Co urt, is whether or not the Appellant is or should be a beneficiary of those provisions wh ich are otherwise referred to in Section 135 (5) of Act 896 as fiscal stability clauses. Page 11 of 32 SU IT/\'O.: CMffAXAJ I00/1011 MA£RSK l)R/LLSII/P IVS/N(iA P()RI; PT£ l.TO VS TH EC OMMISS IONE R 4 G'ENER.A I. www.GhTaxClub.com

p. 12Source page 12Ha ving set the scene by stating the background of the dispute, l now proceed to consider the A ppellant's grounds of Appea l. I propose to consider with G rounds (i) and (ii) together because they deal essentially with the question as to w hether by law, the R espondent erred in subjecting the Appellant's incom e to further taxes after the 5% w ithholding tax. I. Grou nds (i) and (ii) i) Wr ong{ullv construing A rticles 12(1). 12(3) and 26 of the Offshore C ape Three Points P etroleu,n Agreement (OCTP) and S ections 27 and 39 (3) o(the P etroleum Incom e a Tax La w, 1987 ( PN D C L 188) and sub;ecting the Appellant's incom e to further taxes afier the 5% final withholding tax Now, Section 27(1) of PN DL 188 states that: "( I) Where under the terms of a contract, any a1no1111t due to a subcontractor in respect of work or services for or in co1111ection with a P etroleum Agree111e11t, the person liable under that contract to 11,ake pay111ent to the subcontractor shall withh old fro111 the aggregate a111ount such percentage of the aggregate am ount due as may be specified in the Petroleum Ag reem ent and the a111011nt so withheld shall be paid to the Co1111nissioner and payment thereof shall It ave the effect provided for in subsection 2". Page 12 of 32 SUIT NO .: C M n >IXAJIOOIZO}J M A£RS K ()IU/.Lflll,. IVSINwfPO RE Pf£ Lm VS n 1eco,,1MISSIO,\'t.·1t.c£f\'£RAL www.GhTaxClub.com

p. 13Source page 13It is clear from the wording of S ectio11 27(1) that it mu st be read in conjunction with Sectio11 27(2) to gather its true mean ing and effect. What then does subsectio11 2 provide? It prov ides as follows : "(2) Wlten a11 amou11t has bee11 withheld from an aggregate amount due to the subco11tractor pursuant to subsection (1) of this section, the s11bco11tractor shall 11ot in respect of that aggregate amou11t be liable for tax u11der the provisio11s of any other law i11 force 1n the R epublic of Ghana ........ " As the above provisions make specific reference to amounts due to a subcontractor from a person liable to mak e payments in respect of work or services under a "Petroleum Ag reem ent", it should be necessary to resort to the relevant provisions in the PA attached to the No tice of Appea l as Exhibit MDS 2. Article I 2 is the provision in the PA w hich deals w ith "TAXES AND OTHER IMPOSTS. " I shall reproduce the relevant portions of this Article for the sake of clarity. Article I 2 (/) states as follows: "No tax, duty,fee or other itnpost shall be i111posed by the State or any political subdivision on the Contractor, its subco11tractors, or its affiliates in respect of activities related to Page 13 of 32 SUIT ,VO .; CMff AXJOJ()()/1011 MAERSK QRHJ..SHIP IV S INGAPORE PT£ J, TD VS TIIE COMMISSIONER •GENeRAl www.GhTaxClub.com

p. 14Source page 14Petroleum Operations and to tire sale and export of petroleum other than those provided in this Article." Article 12(3) "Save for withholding tax at a rate of five percent (5%) from the aggregate amount due to any Subcontractor if and when requiretl by Sectio11 27(1) of the Petroleum Incom e Tax law, Co11 trllctor shllll not be oblige,/ to withhold any a,nount i11 respect of tax from any sum due from Co ntractor to any Sub co11tractor ". The Appe llant's position is that on a true and proper interpretation of A rticles 12.1 and 12.3 of the PA and Sections 27(1) and 27(3) of PN D C L 188 a fiscal enclave is created for EN I and its Subcontractors by which the jurisdiction the tax laws of Ghana is "ousted" as far as ENI and its Subcontractors including the Appellant are concerned. They argue that this position is further strengthened by Sections 27(4) and 27(5) of PN DCL 188 which provide that the repealed Internal R evenu e Ac t, 2000 (Act 592) does not apply to a contract for the supply of goo ds or the provisions of work or services in connection with Petroleum Operations. T he Respond ent for his part, contends that the Appellant's view is misconceived. He says that under Section 39 (5) of P N DCL 188, wh ich was the law in force at the time the PA was executed between the GoG, GNPC and Heleconia, the R espondent was vested with power Page 14 ol 32 SU IT NO ., CM/T,l,'(J(//()0/1011 MA£RS K l>RJLJ.SH JP tvSt,VGAPORE PT£ I.TV VS T/IF. C OMMISS IONER-G£NF.RAL www.GhTaxClub.com

p. 15Source page 15to apply the general tax laws such as Act 592 in add ition to PN D C L 188 to all persons unless a person was specifically exempted under S ection 41 of P N DCL 188. He argues further that Article 12(1) of the PA does not preclude the state or its political subdivisions from imposing tax on the Contractor or its subcontractors. What Article 12 (1) seeks to do is to only restrict the state or its political subdivisions from impo sing other taxes that are not specifically mentioned in Article 12 on activities related to Petroleum Operations as well as the sale and export of petroleum. Those taxes, Respondent argues do not include CIT. Now, the point worth noting first and foremost is that the provisions or the terms of the PA or any other contract for that matter, cannot "oust" the applicability of the general tax laws of Ghana to any person natural or juristic, as the Appellant seeks to contend. By Article 11 of the 1992 Co nstitution, the tax laws of Ghana are enactme nts made under the authority of Parliament. l therefore agree entirely with the contention of the Respondent that the provisions of any tax law are superior to those of the PA and that the provisions of the former w ill prevail in the event of any inconsistency between the two. The provisions of the PA are therefore to be read as subject to PN D CL 188 which give teeth to Article 12 (I) and (3) of the PA. That said, I think a combined reading of the above quoted provisions presents a clear and unassailable meaning that once 5% of the payments due the Subcontractor for work and services provided under the PA , is Page 15 of 32 SUIT NO,: CMllA .,'(/()/()()/1011 MAl:..RSK f)RJI.I.SIIIP IV SINGAPORE PT£ I. TO I":\' TIJE C 0MMISSlO :W-.·R.(;EN£1UL \ www.GhTaxClub.com

p. 16Source page 16withheld by the Contractor, the Subcon tractor is not liable to pay tax under any other law, on that aggregate amount unless and until the occurrence of any of the events listed under Section I 35(2) of Act 896, nam ely; a) Th e end of the agreem ent or relevant clauses in tl,e agreement b) Tl,e first alteration of the agree,nent after the co1n111e11ce1ne11t of tl,is Act a,u/ c) Th e relinquishm ent by the person of the person 's rigl,t to m odified ta .. 'C treatme11t Con sequently, I am unable to agree with the Re spondent that the App ellant was not w ithin the contemplation of the Parties to the PA and therefore cannot claim any benefits thereunder. I am fortified in this view by S ection 5 of the Co ntracts Ac t, 1960 (A ct 25) w hich is the enactment that regulates contractual relationships in this country. It provides that: "A provisio11 in a contract 11,ade after the co111111e11ce111e11t of this A ct which purports to confer a be11efit 011 a perso11 w ho is not a party to the contract, wl,etl,er as a designated person or as a m e111ber of a class of p ersons, 111ay, subject to this section and sections 6 a,ul 7, he enforce,/ or relied 011 by that person as though that perso11 were a party to tl,at contract". Page 16 of 32 SUIT.VO .: O I/TAX//Jf/}0/1011 M AE R.W/ ORIU .SIIIP IV S IN GAl'OR£ PT£ LTD l(f Tl/Ii COMMISSIONER -GEN E/UL www.GhTaxClub.com

p. 17Source page 17I must say that I have no quarrel with the R espondent's contention that the Appellant is not a party to the PA. Howe ver, Article 12(3) of the PA specifically names Subcontractors as persons who are linked to the Parties' contract by virtue of the works and services they provide under the PA . In his article titled "THE CASE FOR THE ENFORCEAB ILITY OF THIRD PARTY CONTRACTUAL RIGHTS IN GHANA /197!/ VOL. V/ll 2 UGLJ 76-79 "the em inent jurist Date -Bah observed that; "It is an i111portant function of tlte law of contract to build up confidence in business111e11 that they ca11 depend 011 the courts to enforce promises made for their benefit. To ref use to enforce such pron,ises on behalf of third party beneficiaries is thus to under111i11e the ilnportant function of contract law". It is conceded that the doctrine of privity of contract concretizes the right of a contracting party to only deal with persons he voluntarily chooses to deal with. As noted by Date - Bah in his article (supra), in the absence of this doctrine, unforeseen persons otherwise described as "incidental beneficiaries" could emerge to claim or sue a contracting party on some benefit they could have received had he performed his side of the bargain. It is for such reasons that the doctrine seeks to exclude incidental beneficiaries from enforcing the terms of a contract to wh ich they are not Parties. But the Appellant in this case cannot be described as such. Having been expressly mentioned in Article 12 {1) Page 17 of 32 SU IT NO .: C MffAX/01()()/1011 MAER S A· ORIUSII/P IVS tNGA PO Rt.· PT£ I.TD VS 'fll£COMM IS,\'IONE.'R·G£ N l::JUI. www.GhTaxClub.com

p. 18Source page 18and (3) of the PA , the Appellant, even though not a Party is clearly an "intended" and not an "incidental" beneficiary under the PA and I indeed have no doubt that the Appellant was within the contemplation of the Parties at the time of signing the PA . To that extent, I agree with the Appe llant that A rticle 12 (/) and (3) of the PA created a leg itimate expectation that no tax or impost will app ly to the incom e of the Appellant other than the 5% withholding tax for works and services rendered as S ubcontractor under the PA . This f believe wou ld have minimized the grossing up o f the cost imp osed on the Con tractor for the services provided by the Appellant. Anothe r provision in point is A rticle 26 (2) of the PA which solidi lies the iiscal stability clauses as far as they relate to the Co ntractor and by extension the Appel lant as Subcontractor in the following tem1s: "Tlte State, its departm ents and agencies shall support this Ag reem ent lllUI shall take no action which prevents or imp edes the due exercise and perfonnan ce of rights and obligations of the Parties hereunder. As of the Effective D ate of this A greem ent and throughout its ter111, the State guarantees Co ntractor the stability of the ter1trs an,/ conditions of this Agreem ent as well llS the fiscal and contractual (ra111ework hereof specifically including those ter111s and conditions and that fram ework that are based upon or subject to the provisions of the laws an,I regullltions of Ghllnfl (flnd any i11terpretlltio11s thereof ) i11c/udi11g without limitation the Petroleum Inco,ne Page 18 ol 32 SV IT NO : O IHA.J</OJ<>0/1011 MAEH.Sf< DRILLS/1/P IV.~/1\"GAPORE PTE LTD J':$' Tll£C0,'1.'1IS$.ION£R-C£1\•£RAL www.GhTaxClub.com

p. 19Source page 19Tax Law, the Petroleum Law , the G N P C law and those other Law s and regulations and decrees that are applicable hereto . This Agree111ent and the rights and obligations specifietl herein 11u1v not be modified, an,ended altered or supple,nented except upon the execution and delivery of a written agree,nent executed between the Parties. Anv legislative or administrative act of the State or anv of its agencies and subdivisions which purports to varv anv such right or obligation shall to the extent sought to be applied to this Agree11ient, constitute a breach of this Agree,nent bv the State". Consequently, any legislative change or administrative act that adversely affects the rights or obligations of the Contractor and by extension its Subcontractors by virtue the above provisions amo unts to a breach of the PA by the State. Also instructive is the fact that S ection 135 of Act 896 seeks to insulate the provisions of P N DCL 188 that are covered by a binding Agreement from the general provisions of Act 896 ,in so far as that Agreement has not ended, been altered or relinquished as stated in Section 135 (2) above. It is based on the foregoing that I must agree that the Respondent cannot impose income tax unde r any tax law on the Appellant's income emanating from services or work carried out in the OCTP block under the PA. Page 19 of 32 SUIT NO .: CMllA)(/()100/1011 MAERSK DRII.Lr;l(/P IV SINGA PORE PT£ lTD V.~ TIii;" COMM JSSION£ R.Gh~NE RA I, www.GhTaxClub.com

p. 20Source page 20It is however important to emphas ize the reach of the Fiscal Stability Clause embodied in Article 12 (I) and (2) of the PA . This is highlighted in the word ing of Section 27(1). The said section makes it clear that wha t is to be withheld is any amount due to a Subcontractor '·in respect of work or services for or in connection with a Petroleum Agreement". [Emphasis mine] What this mean s is that the amount to be withheld by the Contractor and paid to the Respondent as Final Tax on behalf of the Appellant as Subco ntractor, relates solely to the amount or aggregate amounts due the Appe llant specifically for "work or services" provided by Appellant under the PA as Subcontractor for that specific period. I do not think the provisions of Section 27 (}) and (2) absolve the Appellant as an Entity or even as a Subcontractor from liability under the general income tax laws of the country just by reason of having performed a service under the PA during the period of assessment. It has not been the contention of the Appellant that it was incorporated exclusively to provide services as a Subcontractor to ENI under the PA . On its own showing, it is "a company incorporated under the laws of Singapore and registered under the laws of Ghana as an External Company and engaged in the business of providing services to the Upstream Petroleum lnduslty in Ghana ". It therefore goes without saying that any income accruing to the Appellant in Ghana that is unrelated to its activity as Su bcontractor under the PA is subject to tax. Page 20 of 32 SUIT ,,•o,: CMflA..'(/(J/00/2011 MAERSK ORII.LSIIIP II' SINCAPOR_E PTE LTD J'S Tll£CQ.',Mf/SS/ONER-C£NERAL www.GhTaxClub.com

p. 21Source page 21These taxes by necessary implication, include taxes imposed on the Appellant as a Corporate Entity i.e. C IT. Once it is income generated from Ghana , the Respondent is authorized to assess same and to impose tax in deserving cases. As an External Company engaged in the business of providing services to the Upstream Petroleum Industry in Ghana, the Appellant is not a Contractor within the meaning of the PA but a Permanent Establishment in this Country and therefore falls under the general tax laws of Ghana . It is only when the Subcontractor wears that garb of Subcontractor under the PA that it may seek shelter under the favourable provisions accorded the Contractor under Section 27 of P N DCL 188. To my mind, the privileges afforded under Section 2 7(1) and (2) of P N DCL 188 and Article 12(1) and (3) of the PA are specifically designed to ultimately mitigate the cost exposure of the Contractor and not the Subcontractor, who in any event is not a party to the PA. The Appellant on ly comes in to perform a temporary service for the Contractor under the PA. It is then and only then that it can seek shelter under the provisions of Section 27 of PNDCL 188 and Article 12 of the PA. It therefore goes without saying that any income accruing to the Appellant in Ghana that is unrelated to its activity as Subcontractor under the PA is subject to tax. This fact is made clear by Section 3 (1) of Act 896 which provides that: Page 21 of 32 SUIT NO.: CM/TAXIO ll}()/201} MA .ERSK f)Rlll.SIIIP IV SINGAPORE PTJ;~ lTD I-':\' TIIE CO M ,\flSSIONE:H.<;ENE NA I,. www.GhTaxClub.com

p. 22Source page 22"The assessable i11co111e of person for eac!, year of assessment is tlte i11co111e of that person from a11y employ111e11t, business or i11vestme11t •... b) /11 the case of a 11011-resident person, i) The inco111e of that person from t!,e employm ent , business or i11vesh11e11t for t!,e year, to the extent to which that i11co111e has a source i11 this coun try a11d ii) ~Vh ere the person has a GJ,a11aia11 per111a11e11t establishm ent incom e for the vear that is connected with the permanent establishm ent, irrespective of tl,e source of i11co111e" Indeed Section 1 of P N D C L 188 (on w hich the Appellant heavily relics) states that: "Every person carrying 011 petroleum operations sl,a/1 subject to tl,e provisions of this law, pay for each year of assess111e11t a tax 011 his chargeable inco111e calculated in the mann er provided i11 this Part." It bears emph asis that the fact that the Appellant provides services as a Subcon tractor under a PA or is engaged in Petroleum Operations does not change its status as a Perman ent Establishment in this country. In their elucidating book on the 'LAW OFT AXA TIO N IN GHA NA' /5'" Edition/ the authors K1111b11or, Ali-Nakyea anti Owu su D emitia exp lain at Page 88 that: Page 22 of 32 St IT \0.: c .,1nAXAJ104/1011 .11.AENSK ORILL.\'/111' /11 S I/VGA POfltr PTC I.Tl) VS n1ECO M ,l(ISSI01\'£R-CEN£1UL www.GhTaxClub.com

p. 23Source page 23" ... Act 896 i111poses taxes on the income of a non-resident if the income either has a source in Ghana or if tlte non-resident has a Ghanaian permanent establislunent, i11co1ne that is connected with that pennanent establislunent irrespective of source of . " income ... . Having been assessed for the period 2015 to 2018, it was fit and proper for the Respondent to apply the provisions of Act 896 in its assessment of the Appellant. In any event Section 39 (5) of PNDCL 188 (which I do not agree is spent as far as the provisions relating to withholding tax under the PA is concerned) provides that the general tax laws of Ghana w ill continue to app ly unless the then Secretary excluded a contractor by legislative instrument. r note that the said provision specifically mentions Contractor and not Subcontractor, but even if it is interpreted to include Subcontractors, there is no evidence that the Appellant was so exempted. Indeed one wonders how the Appellant can reasonably argue that "its who le income is subject to final withholding tax per the provisions of the PA and PNDL 188 and that the Appe llant is not liable to pay C IT and BPT''. {See Paragraph 25 of Notice of App eal/ I say so because under Section I of PNDCL 188 which was the law which was in force at the time the PA was executed (and on which the Page 23 of 32 SUIT NO .: liHllA,'(/()/00/1011 MA£RSJ< DRIU.$11/P JV SINGAPO R E />TE: LTD VS HIE C OMM IS.\'IQNl;R.(J£N £RAI. www.GhTaxClub.com

p. 24Source page 24Appellant heavily relies), even the Cont ractor was made liable for the payment of Petroleum Tax. The said section provided as follows: "Every person carrying 0 11 petroleum operations shall subject to the provisions of this law, pay for each year of assessm ent a tll.x 0 11 his chargeable incom e calculated i11 the n1a1111er provided in part /"'. This tax obligation imposed on the Contractor is reinforced by Article 12 (2) (ii) of the PA which provides that: '' l 2.2 Co 11tractor shall be subject to tlte followi11g: i) R oyalty as provided for in Article I 0.1 (a) ii) Incom e TllX i11 accordance with the P etroleum b1co111e Tax law 198 7 (PN DCL 188) .... " Perhaps, it will be useful to state in passing that Petroleum Income Tax is the Petroleum sector version of C IT imposed on Co ntractors involved in Petroleum Operations. It cannot therefore be reasonably argued that the gross income of the Appellant, (who relies on the benefit conferred on the Contractor under the PA ) is free from further taxes after the final 5% withholding tax. As earlier noted the Appellant as a Permanent Establishment in this country, is liable to be routinely assessed and taxed by Respondent in deserving cases and like every other corporate entity in Ghana, the Page 24 of 32 SU/rNO .: CMtrA.J"</0100/101' MAF.RSK OR/Ll-SIIIP 1'1 SIN(',,t1POR£ PT£ LTD VS Tl/£ CO .\l~IISJ'I0.'11,lEH-CENE RAL www.GhTaxClub.com

p. 25Source page 25.. Appellant is liable for the payment o f C IT and/ or other taxes not connected services under that specific P A. Even assuming without necessarily admitting that the law specifies that the Appellant's whole income is subject to final withholding tax of 5% under the PA and no more , the incom e of the Appellant is still liable to be assessed as that is the on ly way by wh ich the R espondent can verify whethe r or not the Appellant's incom e is exclusively related to that speci fie service under the PA under consideration here. U nfortunately, the Appellants argum ents, particularly those canvassed in its Paragraphs 21 to 25 seem to suggest that upon the Con tractor, withholding 5% of the aggregate amount due, the Appellant should by law be deemed to have discharged all its tax ob ligations as an entity in this country. That how ever cannot be right as the 5% withheld on behalf of Appellant as S ubcontractor of EN I cannot constitute the be all and end all of the Appellant's tax obligations. Based on the forego ing I find that it was well within the rights of the R espondent to assess and to impose other taxes (including C IT and BPT) whic h are not specifically covered by Section 27(1) and (2) of PN D CL 188 on the Appellant. 11 is also necessary to point out that I fail to see how S ections 27(3) and (4) of A ct 188 helps the case of Appellant, as all it seeks to do is to exclude the applicability of the relevant provisions of the Incom e Tax D ecree, 1975 (SMCD 5) to the Appellant's tax liabilities, w ith specific Page 25 of 32 SU IT NO .: C ,Jl.flAXlflllJ0/1011 MAERSK ORJL lSIIIP IV St,WMl'QRE PTE LT1> VS Tll£COM MISS IONl;'R·CE/\'6RAl www.GhTaxClub.com

p. 26Source page 26reference to ··work or services·· provided in connection with petroleum operation under the PA on ly. A s a Permanent Establishment in Ghana , the Appellant comes under the general tax laws of this Coun try first and foremost and it is only after he performs a service which entitles him to seek shelter under Section 2 7 of PN DCL I 88 and Article I 2 of the PA that he can demand for that service to be treated as such. Gro und (i) of the Appeal therefore onl) succeeds to the extent that the Respondent is barred from imposing any income taxes under any other law on the Appellant's incom e emana ting from services rendered in the OC T P block under the PA . 2. Ground (iii) 1¥rongful assessment of Appellant to Corporate Income Tax (CIT) and Branch Profit Tax (BP T) under Act 592 and the Incom e Tax. 2015 (Act 896) U nder this ground the Appellant complains that the Re spondent breached the PA by subjecting it to the assessment and subsequent imposition of C IT and BPT. I have already noted that the Appellant is not exempt from being assessed by the Re spondent in respect of CIT under any circum stance. Th e same applies to BPT in my considered opinion. For it is only upon such assessment that the Re spondent will be in the position to determine whether or not Appellant is liable to pay these taxes. Page 26 of 32 SUIT ,WJ. : CM ITAJ'(J0/0fJ/1011 \/A£R.\'#i DRJLLSIIIP JI Sl.\'<i.◄POR£ PT£ L TI> 1'3' TIIEC0.\.tltlSSJOS£R..(;£,\'£RAL www.GhTaxClub.com

p. 27Source page 27The Respondent relying on S ections 5,6, 7,8 and 9 of Act 592 and Sections 2,3,4 5 and 6 of Act 896 argues that any income attributable to business, employment, or investment which has a source in Ghana is subject to tax and is taxed separately. According to the Respondent , BPT is tax imposed on a non-resident person that has a permanent ­ establishment in Ghana. This tax is treated like dividend tax and taxed in the same manner as tax on dividend paid by a resident company incorporated in Ghana to its shareholders on the returns of their investments. At page 55 of their book LA W OF TA XA T ION IN GH ANA (supra) the authors explain that a person's chargeable income is, by virtue of Section 2 of Ac t 896, the person's total assessable income for the year from investment, employment and business respectively less the total amount of allowable deductions. They further observe at Pa ge 8 7 that Sectio11 6 of the law makes a person's gains and profits from investment part of that person's income for tax purposes. Sectio11 6(2) of Ac t 896 provides that: A person wh o is ascertaini11g the profits and gains of that perso11 or a11other person from t111 i11vestme 11t for a year of assessm ent or for part of the year shall (a) lnclutle in the calculation of an am ount specified in respect of dividends ..... ' Page 27 of 32 Sl//TNO.: CM ffAX/0/00/1021 .U.AtRSK DRILI.SlflP /VS INGAPOR£ PT£ I. Tl) 11s TIJE~ COMA tlSSION6R-GE 1\'f:RAI, www.GhTaxClub.com

p. 28Source page 28Now, once branch profit earned by the shareholders of A ppellant is income connected with the Appellant as a Permane nt E stablishment registered under the tax laws of Ghan a and the same accrues in or is derived from Gh ana, it stands to reason that the same should be taxable just as dividends paid 10 the shareholders of a Ghana ian registered company are taxable. The trap the Appellant seem s to have fallen in with respect. is the misapprehension that the tax imp osed on the Appe llant in respect of its specific business activities (under the PA ) extends cover taxes payable by its shareholders. It is trite learning that a company is an entity, separate and distinct from its ow ners for this reason tax imposed on shareholders of a compan y cannot be deem ed taxes levied on the company as an entity. Ground (iii) is therefore dismissed as lacking merit. 3. Grounds (iv)(v) and (v) ~Vrong/iil computation and imposition of PA YE taxes. reiection of VRP Os and erroneous reconciliation o(figures These grounds will also be considered together as the pith of the Appellant's compl aints under these grounds is the failure of the Respondent to take into account certain payment s and overpayme nts resulting in an undu e increase in the Appellant's tax liability. In respect of these particular grounds, I am in total agreement with the Appellant that an Independent Auditor be appo inted to reconcile the figures as that is the only mean s by which the veracity of the Page 28 of 32 SU IT NO ,: C M/l'AXtfJ/00/2011 MAF.HSK OIUU.SUIP JV S li\'(iAPQRE PTE LTn VS TU E CO MMI SS IQNC R .CE1\'£RAL www.GhTaxClub.com

p. 29Source page 29Appellants' claims may be ascertained. Thankfully this Co urt is empowered under Order 54 Rule 9 of C l 47 to make orders in this regard. Grounds (iv)(v) and (v) are therefore allowed. Co nclusio11 Based on the foregoing, the instant Appeal is allowed in part. But before I conclude, a few comments about the Reliefs sought by the Appellant. F irstly, I think it is quite obv ious from my analysis so far that I do not think the declaratory reliefs sought in R elief\· (i) (ii) (iii)(iv)(v)(ix) are maintainable. I therefore see no need to rehash reasons for coming to this conclusion here. Likewise, I believe it is quite clear that the merits of Reliefs (.x) and (xi) can only be effectually determined after receipt of the Auditor's Report. Turning to the Appellant's prayer for damages for breach of the provisions of the OCTP, I must confess my uncertainty as to whether the Appellant as a third party to the OCTP can claim damages for a breach of its provisions. This uncertainty exists despite my finding that the Appe llant is an intended beneficiary of the PA. But even if the Appellant can properly do so, I think this Court should be slow in awarding damages against Respondent for mistakes committed (if at all) in the ordinary course of his duties. The reason for this view should not be too hard to discern-a tax audit is a process adopted by the R espondent to ensure a fair assessment and imposition of taxes. It is not calculate to inconvenience the taxpayer. Just like the Appel lant, the Re spondent is entitled to ensure that that the appropriate taxes are paid. Page 29 of 32 SUIT NO.: G\fllA,"(/()/00/2012 MAERSK ORJ I./.SJl/1> IV SINGAPORE Pr1;· I.TD VS Tl/£ C0.HM/ SS IONI-:R-(,.£NE RAL www.GhTaxClub.com

p. 30Source page 30Co nsequently, except in cases where the Re spondent's conduct is found to be clearly arbitrary, unreasonable and calculated to oppress the taxpayer, dam ages should not be awarded. In m y op inion, that is one of the surest ways by w hich to ensure that the Re spondent effectively perform s his statutory functions without fear that such legal consequences could flow from genuine errors committed in that process. DE C ISION In the premises, I. R elief (i) dismissed 2. Relief (ii) dis11,issed 3. R elief (iii) dismissed 4. Relief (il1 dismisse,I 5. R elief (v) dismissed 6. In respect of Relief (vi), it is ltereby declared tit at tlte Respondent is barred fro,11 i11tposi1tg any incom e tax under any otlter tax law 011 tlte Appellant's incom e emanating fro111 its services carried out in tlte Offsltore Cape Tltere Points Block under tlte P etroleum Agreement except under tlte relevant provisions of tlte Petroleum Income Tax law, 1987 (PN D C L 188) and £Ni's P etroleum Agree111e11t (PA ). 7. /11 respect of reliefs (vii) and (viii) it is ltereby Ordered tltat a11 i11depende111 au,litor to be agreed upon by rite Parties i11 Page 30 of 32 SUIT N O .: CMffA ~'tlOl{J0/1021 M AtRS K OR ILLSIIIP ,.. SINGAPORE P TE LTV J'S meco .,tMISSJ0,V£R..C£.NE RAL .. www.GhTaxClub.com

p. 31Source page 31consultation with the R egistrar of this Co urt be and is hereby appointed to reconcile f accounts between the parties in respect of the App ellants VAT INHIL liability PAYE , and Withholding Tax figures, in order to ascertain the App ellant's actual tax liability (if at all) Th e parties are hereby Ordered to furnisft the R egistrar of this C ourt witft all relevant docum ents, wit/tin 7 days of tl,e Auditor's appointment/or onward trans,nission to the A uditor to enable tftem co,nmence their work. Tlte Auditor upon being furnisfted witft tlte said docum ents is afforded 21 days wit/tin w/zicft to complete t/zeir work. Up on such completion tfte Auditor is ordered to file t/zeir report at the Registry of tit is Co urt and the R egistrar is to cause copies of sam e to be served on the parties. The R egistrar is to serve H earing N otice on Parties to appear before this C ourt upon submission of Auditor's report. 9. R elief (ix) is dis,nissed. 10. D eter111ination of reliefs (x) and (xi) are deferretl until submission of A uditor's report. 11. R elief (xii) is dis111issed. 1ssue of Costs is deferred until subm ission of Au ditor's report. (SGD) AK UA SARPOMAA AMOAH (MRS ) JUSTICE OF THE HIGH CO U RT Page 31 of 32 SU IT NO .: CMflAXIO J(J()/1011 AU£HSK DR//,1,j'IIIP JV SINGA PORE P Tt LTD VS Tll€COMl•IISS IONER •G£Nf.:RAL www.GhTaxClub.com

p. 32Source page 32Statutes referred to: High Co urt, Civil Procedure Rules (CI 47) Th e 1992 Co 11stitutio11 of Ghana Th e P etroleum /11co111e a Tax law, 1987 (PND C L /88) Th e R evenue Admi11istratio11 Act, 2016 (Act 915) Th e Value Added Tax Act, 2013 (Act 870) Th e /11ter11a/ R evenue Act, 2000 (Act 592) Th e /11com e Tax D ecree, /975 (SM C D 5) Th e Co ntracts A ct, 1960 (Act 25) Statetl editio11 LAW OF TAXATIO N IN GHANA /5th Editio11/ TJIIRD PARTY C O N TRACT UA L RJGHTS IN GH ANA /1971/ VOL- V III 2 U GLJ 76-79 ~ERTll-lED TRUE COP\ ~~--~-----REGISTRAlo 1:1 COURT 'OMMERCIAI. OIVISlO~ LCC -.\CCV Page 32 of 32 .\'UITNO. : CMtrAJ/AI//JIJ/1(/11 MAC/fSK ORJL LSl/lf' /I' Sll•ICAl'Olf£ ,rt: LTV I'S' nt£ C0.'1,.,ISSION£/f,<;£N£IUL www.GhTaxClub.com