Papua New Guinea individual income tax rates are progressive up to 42%.
Taxable income (K) Tax on band (K) Rates of Tax on excess
7,000 Nil 22%
18,000 2,420 30%
33,000 6,920 35%
70,000 19,870 40%
250,000 91,870 42%
Taxable income (K) Tax on band (K) Rates of Tax on excess
Nil Nil 22%
18,000 3,960 30%
33,000 8,460 35%
70,000 21,410 40%
250,000 93,410 42%
Dependent deductions from tax payable allowed per scale for up to three dependents.
Income tax is payable by Papua New Guinea residents on their worldwide income. Non-resident individuals pay tax on Papua New Guinea sourced income only. Residence is determined with reference to domicile, place of fixed abode and length of time in Papua New Guinea. Resident person means a person who resides in Papua New Guinea and includes a person:
i) whose domicile is in Papua New Guinea, unless his permanent place of abode is outside Papua New Guinea
ii) who is in Papua New Guinea for more than 183 days in the year of income, unless his permanent place of abode is outside of Papua New Guinea and he does not intend to take up residence in Papua New Guinea; or
iii) who is a contributor to a prescribed superannuation fund.
Income tax is payable on assessable income less allowable deductions. Assessable income includes employment income, business income, rents, interest and dividends.
Deductions are allowable for expenditure incurred in earning assessable income (self-employed income/business profits) with limited deductions against employment income. Limited personal allowances are also available.
Employment-related earnings are subject to tax deductions at source. Self-employed individuals and those with non-salary/wage income are required to pay provisional tax based on the previous year's tax liability.
Tax Filing status - An individual whose only Papua New Guinea taxable income consists of fully taxed salary and wages is not required to file an income tax return unless specifically requested by the tax authorities. Persons in receipt of more than PGK 100 in other income are required to file a return.
Taxable income - All employment income and benefits are taxable in full. Salary and wage income is a separate subset of special rules, including the legal imposition of an assessment period of 2 weeks instead of a 1-year assessment period. Profits derived from the carrying on by an individual of a trade or profession generally are taxed in the same way as profits derived by companies.
Investment income in the form of dividends received from Papua New Guinea companies is subject to a 17% withholding tax and is a first and final tax for Papua New Guinea resident and nonresident individuals.
Interest income and net income from rentals of resident individuals is assessed to income tax at the marginal rates of tax.
Capital gains - There is no capital gains tax in Papua New Guinea. Capital gains are taxable only if they are realised as part of a profit-making scheme or undertaking or if related to the ordinary business of the taxpayer.
Tax Deductions and tax allowances - Dependent rebates are available if a salary and wages declaration was filed. An employee can complete a variation declaration form and nominate the qualifying expenses to claim against the allowance; however, a deduction can be taken only with the approval of the tax authorities.
Other taxes on individuals:
Capital duty - No
Stamp duty - Stamp duty is imposed on a variety of written instruments in Papua New Guinea, at rates that vary depending on the type of document. Exemptions may apply.
Capital acquisitions tax - No
Real property tax - No
Inheritance/estate tax - No
Net wealth/net worth tax - No
Social security contributions - Citizen employees are required to contribute 6% (deducted from the base salary) to the authorised superannuation fund. As from May 2010, non-citizen employees may also be required to contribute. Taxable benefits are not subject to social tax contribution in Papua New Guinea.
Administration and compliance:
Papua New Guinea Tax year - Papua New Guinea tax year is the calendar year
Tax Filing and tax payment - Payments of estimated tax liability for the current year are required. These provisional tax payments are due on 30 September. The tax liability raised through notification of provisional tax is legally enforceable but is adjusted when an income tax return is filed the following year. Income tax returns are due on 28 February each year for a 31 December year end, but this may be deferred if filed by a registered tax agent.
Penalties - Penalties apply for the late filing or payment of income tax.
Papua New Guinea company tax rate for resident companies is 30%. Tax rate for most non-resident companies is 48% and for an authorised superannuation fund, the tax rate is 25%.
The tax year usually runs from 1 January to 31 December although alternative fiscal years are permitted.
Company tax is payable by Papua New Guinea (PNG) resident companies on nonexempt income derived from all sources. Non-resident companies are required to pay the tax on income sourced in Papua New Guinea.
Resident companies are those that are incorporated in Papua New Guinea, or carry on business in Papua New Guinea and either have central management and control in PMG or voting power controlled by shareholders who are Papua New Guinea residents.
A provisional tax system results in the estimated tax liability of a Company being paid during the year of income. The payments of provisional tax are due in three equal installments on 30 April, 31 July and 31 October.
CAPITAL GAINS TAX
There is no capital gains tax in Papua New Guinea. However, where a capital asset was bought for the sole purpose of resale or as part of a profit-making scheme, any profits or gains are included with other taxable company income.
BRANCH PROFITS TAX
Where a branch of a foreign company operates in Papua New Guinea, the profits of the branch are subject to PNG corporate tax at the rate of 48%.
FRINGE BENEFITS TAX (FBT)
There is no tax payable by the company on fringe benefits. Instead, any benefits provided to employees are included in their personal income at notional values and are subject to tax.
This is imposed on transfer of shares, transfer of properties and partnership agreements.
These include customs, excise duties, training levy and timber export tax.
DETERMINATION OF TAXABLE INCOME
The taxable income of a company is determined by ascertaining assessable income less allowable deductions. Generally, expenditure and/or losses are deductible provided they are incurred in gaining or producing assessable income. Items of a capital or domestic nature are non-deductible.
Rates of depreciation for assessment purposes under the Income Tax Act are determined by the Commissioner General of Internal Revenue.
The deductions of depreciation are allowable in addition to repairs and maintenance on assets concerned. The two most common methods used are diminishing value and prime cost method. Respective indicative rates are: construction 3% and 4½%, plant and equipment 10% and 15%, motor vehicles 20% and 30%, and furniture and fittings 7½% and 11¼%.
STOCK / INVENTORY
Trading stock on hand at the beginning and end of each income year must be taken into account in determining assessable income. The closing value adopted becomes the opening value at the beginning of the following year. The taxpayer has the once only option to value stock at cost, market value, or replacement value. Valuation methods include FIFO and average cost.
Interest is deductible where it is incurred in gaining or producing assessable income.
Tax losses may be carried forward for 20 years provided there is at least 51% continuity of ownership or no substantial change in the nature of the business. Loss carry-back and inter-group company transfers are not permitted. Primary production losses may be carried forward without limitation.
FOREIGN SOURCED INCOME
Resident corporations are taxed on their worldwide income in Papua New Guinea. However, income derived by a resident company from a treaty country may not be taxed in Papua New Guinea, subject to the treaty provisions.
- Flexible depreciation for manufacturers where industrial plant not previously used in PNG is eligible for increased depreciation of up to 100% of cost.
- 100% initial depreciation for agriculture and fishing industries. Expenditure on new plant or articles used in agricultural production, commercial fishing activities, boats, ships and ancillary equipment fitted to boats, and ships to be used solely as dive boats or for scuba diving or by snorkeling tour operators qualify for a 100% initial depreciation deduction.
- Manufacturers who manufacture new products are entitled to a wages subsidy payment for up to five years, based on a percentage of relevant minimum wage of each full time citizen employee.
- Initial year accelerated depreciation is available on the capital cost of certain new assets, converting existing oil-fired plant to non oil-fired plant or for improving the efficiency of fuel-using plants.
- For petroleum, mining and gas operators, special provisions apply to determine deductions allowable for exploration and development costs.
- In primary production, outright deductions are allowed for certain capital expenditure including clearing and conserving land for agriculture.
- In the tourism industry, accelerated depreciation is allowed for certain eligible assets. A 20% concessional company tax rate is available for 15 years subject to certain conditions.
- Qualifying new businesses set up in specific rural areas are exempt from income tax on their net income from carrying on rural development industry for 10 years after the date of commencement of business.
Other tax concessions available (conditions apply):
- Research and Development incentives*
- A higher accelerated and flexible depreciation*
- Double deductions on certain allowable expenditure*
- Infrastructure tax credits *
- Export sales exemption for income derived from exports of prescribed goods*
* Based on 2009 National Budget, subject to Parliamentary approval.
FOREIGN TAX RELIEF
A credit is allowed for tax paid on foreign income against tax payable in Papua New Guinea but limited to the tax payable in Papua New Guinea on such income.
RELATED PARTY TRANSACTIONS
Papua New Guinea has deemed dividend provisions and transfer pricing rules which give the Internal Revenue Commission the power to impose arm's-length (market) prices on transactions.
Non-resident withholding tax is deducted from interest, dividends, management fees, professional fees, royalties, etc paid to non-residents. Interest, dividends and, in some cases, business withholding taxes are also applicable to payments to residents.
Generally, Authorised Dealers (being the commercial bankers) are licensed to transfer funds in and out of the country (PNG) subject to certain conditions. However, payments of K200,000 or more per annum require a tax clearance from the Internal Revenue Commission.
Goods and Services Tax (GST), a consumption tax is charged at a rate of 10% on most goods and services in Papua New Guinea, the major exceptions being certain financial services, residential dwellings (depending on the circumstances), educational and health services, exported products and services, goods and services to foreign aid providers, supply of unprocessed oil from a field in PNG, travel and tourists' pre-purchased travel and accommodation within PNG, and supplies to certain projects.
Taxable transactions - Goods and services tax (GST) is imposed on the sale of goods, the provision of services and imports. The GST tax system operates as in most parts of the world, where GST is imposed on taxable supplies made by a registered business and a credit is allowed for GST paid by that business for its inputs.
GST Rates - The standard rate of GST in Papua New Guinea is 10%. Certain transactions and/or entities are zero rated or exempt.
GST Registration - Residents and nonresidents that make taxable supplies of goods or services in excess of PGK 100,000 in PNG are required to register.
Filing and GST payment - The Goods and services tax (GST) legislation contains reverse charge provisions, whereby GST may be imposed on supplies made to a PNG resident outside PNG. A Goods and services tax (GST) return and payment must be completed and lodged on or before the 21st day of the following month.
Papua New Guinea
Income Tax Rate
Papua New Guinea
Corporate Tax Rate
Papua New Guinea
Sales Tax / GST Rate
Last Update: Nov 2010
ANTIGUA & BARBUDA
BOSNIA & HERZEGOVINA
BRITISH VIRGIN ISLANDS
CENTRAL AFRICAN REP.
CONGO, DEM. REPUBLIC
CONGO, REPUBLIC OF
ISLE OF MAN
PAPUA NEW GUINEA
TURKS AND CAICOS
UNITED ARAB EMIRATES
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