GhanaWeb Feature
The Ghana Revenue Authority is currently in limbo regarding a withhholding tax of $400,000 that it is unsure whether to take or not from The Edward Osei Boakye Trust Fund.
The money is a percentage of a $2.5 million rent payment made to the Trust by Yaw Boakye who is the son of the late Edward Osei Boakye of Boakye Mattress fame.
The confusion of the GRA stems from the fact that it is yet to establish whether to treat The Edward Osei Boakye Trust Fund as a not-for-profit and a charitable organisation or not.
Yaw Boakye had initially agreed to pay the $2.5 million accumulated rent on a commercial property of his late father situated in Accra to custodians of his late father’s Trust due to an ongoing legal tussle regarding the Will of the deceased business mogul.
The $2.5 million figure was arrived at by the two feuding parties under a consent judgment delivered by the Supreme Court in 2014. However, while paying the said amount to the Trust, Yaw Boakye insisted on keeping a withholding tax of over $400,000 which he believes should go to the GRA and not the Trust.
GhanaWeb has intercepted correspondence between lawyers of Yaw Boakye and the Ghana Revenue Authority seeking clarity on whether The Edward Osei Boakye Trust Fund ought to pay taxes on the $2.5 million rent payment they received.
In a letter dated June 13, 2022, Patrick A. Sogbodor, a lawyer for Yaw Boakye wrote to the Commissioner General of the GRA, Reverend Amisshaddai Owusu-Amoah, with the headline “REQUEST FOR CLARIFICATION ON TAXABLE STATUS OF A TRUST.”
Parts of the correspondence read “our client seeks some clarification on the taxable status of a Trust registered in the Republic of Ghana as The Edward Osei Boakye Trust Fund. The Trust receives income from our client in the form of rent and our client’s concern is whether same is exigible for the purposes of withholding tax under the provision of Section 115 of the Income Tax Act, 2015 (Act 896).
“The said Edward Osei Boakye Trust Fund currently maintains that it is exempt from deductions for the purposes of withholding tax and our client accordingly seeks clarification and or confirmation of the exempt status of the said Trust.”
Response from GRA Commissioner-General
The Commissioner-General responded to the request of Mr Boakye’s lawyers in a letter dated June 21, 2022, and signed for the Commissioner-General by Dominic Naab who is the Assistant Commissioner.
In the response to Yaw Boakye’s lawyers, a copy of which is in the possession of GhanaWeb, the Commissioner-General stated unequivocally that having reviewed the operations of The Edward Osei Boakye Trust Fund, it sees it as a not-for-profit organisation.
“The Commissioner-General’s understanding is that the income and properties of the Trust shall be applied solely towards the promotion of the purpose of the Trust such as granting of scholarships to deserving individuals up to the university and other charitable ventures for the benefit of the handicapped,” part of the response from the Commissioner-General read.
Under a sub-heading titled Conclusion, the Commissioner-General said “the withholding tax in respect of the investment income is exempt from tax as indicated under subsection 4 of section 97 of Act 896. It is hoped that the clarification would help provide enough guidance.”
Meanwhile, GhanaWeb checks at the Non-Profit Organization Secretariate (NPO) revealed that The Edward Osei Boakye Trust Fund was only given an NPO licence on July 28, 2022, despite being in existence for more than a decade.
GRA makes U-turn
Despite the earlier emphatic statement from the Commissioner-General that The Edward Osei Boakye Trust Fund is a charitable organization under Section 97 of the Income Tax Act 2015 (Act 896), it appears to have now backtracked.
In the latest correspondence to lawyers of Yaw Boakye, the GRA said it would now conduct checks from other institutions on the status of the Trust before a final determination is made.
In a letter dated July 5, 2022, Commissioner Julie Essiam who signed on behalf of the Commissioner-General stated, “ The Commissioner-General has carefully reviewed your letter and would like to provide appropriate response after all facts in connection with the Trust and necessary checks from other institutions on the status of the Trust have been considered. The Commissioner-General would in due course get back to you on the matter as requested.”
What the tax law says about NGO’s
Section 97 of the Income Tax Act, 2015 (Act 896) provides that;
4. The income accruing to or derived by a charitable organization is exempt from tax.
5. Subsection (4) does not apply to the business income of the charitable organization.
According to the law, “On the issue of Value Added Tax (VAT), rental income of a charitable organization arising from rental of commercial property, sections 35 and 37 and exemptions schedule of Value Added Tax, 2013 (Act 870) do not exempt commercial properties from Value Added Tax.”
For now, The Edward Osei Boakye Trust Fund has received the full $2.5 million without paying any tax since the GRA is still unsure what step it should take.
The fight between Yaw Boakye and the Edward Osei Boakye Trust Fund
Business mogul Edward Osei Boakye of Boakye Mattress fame died in 2006 and at the time of his death, the building in contention was uncompleted.
The first court case in relation to the building was filed on October 17, 2008, by the trustees challenging the validity of a letter purportedly written by the executors of the estate of the late businessman, allegedly allowing Yaw Boakye to complete and take over the building.
The trustees lost at the High Court, but won at the Court of Appeal in 2011 after the second-highest court of the land held that per the will and testament of the deceased, the building was supposed to be given to The Edward Osei Boakye Trust Fund, which is managed by the trustees.
The Court of Appeal, therefore, ordered Yaw Boakye to cease all construction work on the property and also vacate it. Aggrieved by the decision of the Court of Appeal, Yaw Boakye filed an appeal at the Supreme Court but while the appeal was pending, the parties decided to settle the matter based on terms of the settlement which was adopted by the Supreme Court as consent judgement in the case involving the parties.
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