Papua New Guinea Tax & Business Guide - Deloitte

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Basic facts
Population 5.9m Inflation 1.3% (2005)*
Main languages Melanesian Pidgin, English GDP per head US$917*
Currency Kina (PGK) GDP growth 3.0% (2005)*
Economic communities Asia Pacific Economic Co-operation, WTO
GDP sources 35.3% agriculture, 37.4% industry, 27.3% services
*Economist Intelligence Unit.
Political environment

Papua New Guinea is a constitutional monarchy with a parliamentary democracy modelled on the UK. The Crown is represented by the governor-general, who is nominated by the national parliament. Sir Paulius Matane was sworn in to this position in June 2004. The National Executive Council, presided over by the prime minister, has executive powers; the prime minister is proposed by parliament and appointed by the head of state. Sir Michael Somare, the leader of the National Alliance (NA), was elected prime minister by parliament in August 2002.

The next elections will be held in 2007.
Foreign trade and investment
Exports US$2.9bn (2005)* Imports US$1.6bn (2005)*
*Economist Intelligence Unit.

Leading export markets: Australia, China and Japan.

Major exports: Gold, crude oil and copper ore.

Australian companies are the most active in developing Papua New GuineaÌs mining and petroleum sectors. Australia is committing significant human and financial resources through a five-year assistance programme, the Enhanced Co-operation Programme (ECP).
Business and financing
Business forms Private companies, public companies, joint ventures

All foreign business entities must have approval from the Investment Promotion Authority (IPA) before commencing operations in Papua New Guinea. Investment is generally through a company or branch. Joint ventures are common in the resource industries.

Papua New Guinea has an exchange control regime, which has been relaxed in the recent past, and there is a system of tax-clearance requirements for outward remittances.
Labour environment
Unemployment rate n/a Minimum wage PGK 24.20 (weekly)

Wages are set by a government body known as the Minimum Wages Board. The Board has also introduced a minimum wage for youths aged 16Ò21 amounting to 75% of the minimum rate.

In the public sector, nearly 100% of the labour force is unionised through the Public Employees Association (PEA) and other occupational-based unions such as teachers, police and nursesÌ associations.

Salary rates are relatively low by developed-country standards and employment of expatriates in senior management positions is still common.
Taxation
Corporate tax
Main rate 30% (non-resident corporations 48%)

Resident companies are subject to tax on their worldwide income; non-resident companies are taxed only on income sourced in Papua New Guinea. A company is resident in Papua New Guinea if it is incorporated there, or if it conducts business in Papua New Guinea and its central management and control is there, or if the voting power is controlled by shareholders who are residents of Papua New Guinea. The corporate tax rate is 30%, but non-resident corporations, other than petroleum mining companies, are subject to tax at 48%. Petroleum mining companies are taxed at 50%, with the exception of designated frontier areas where lower rates apply.
Individual tax
Progressive rates to 47%

A person whose domicile is in Papua New Guinea is regarded as resident unless the person has a permanent abode elsewhere. Otherwise, a person who is present for more than half of the income year is resident unless the individual has an abode elsewhere and does not intend to take up permanent residence in Papua New Guinea. Income tax is charged at progressive rates to 47%. Dividends are taxable at the same rates as other income. Some taxable benefits are assessed at low rates compared with actual cost.
Capital gains
Generally not taxable

Gains of companies and individuals are generally not subject to tax. However, where an item is purchased for resale at a profit, the gain could be treated as trading income.
Indirect tax
GST standard rate 10%

A goods and services (GST) tax applies at a rate of 10%. The transfer of land, exported services, various medical supplies, supplies of fine metal and supplies to prescribed foreign aid providers, resource companies and charitable organisations are all zero-rated for GST purposes. Financial supplies, as defined, are exempt. There is no exemption or zero rating for food items. The turnover threshold for registration is approximately US$30,000 and the tax is broadly based.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Companies pay advance tax in three instalments during the tax year, based on the tax assessed in the previous year. Companies and individuals must file a tax return by a date notified annually, normally on or before February 28th following the year-end. Tax on wages and salaries is collected by withholding.
Additional tax information
Withholding taxes Dividends 17%, Interest 15%, Royalties 10% (30% if paid to an associated person). Withholding tax rates may be reduced under the provisions of an applicable tax treaty.
Tax treaties Papua New Guinea has concluded nine tax treaties with major trading partners.
Dividends Dividends are taxable on companies and individuals at the appropriate corporate or individual income tax rates.
Revenue protection There are transfer-pricing rules.
Groups There is no provision for group taxation.
Incentives Pioneer industries; exports; primary production; rural development; accelerated depreciation.
Other taxes Customs and excise duties, Export taxes, Goods and services tax, Stamp duty, Training levy.