Employer Tax Contributions

Tax Type	Rate	Base
Salary or Wages Tax (PAYE)	Progressive rates (0% - 42%)	Employee's gross salary and wages
Superannuation Contribution	Employer: 8.4%; Employee: 6%	Employee's gross base salary (excluding overtime, bonus, commission)
Skills Development Levy (SDL)	3.5%	Gross emoluments paid to all employees

Filing & Compliance

• Register as a group employer with the Internal Revenue Commission (IRC) within seven days of making a salary or wage payment exceeding K277.
• Remit Salary or Wages Tax (SWT) by the 7th of the month following the payroll month.
• Submit Skills Development Levy (SDL) monthly returns to the TRA office on or before the 7th day of the month following the payroll month.

In Papua New Guinea, employee tax deductions, known as Salary or Wages Tax (SWT), are determined by a progressive tax system with specific regulations for various allowances and benefits.

Salary or Wages Tax (SWT)

• Tax-Free Threshold: PGK 20,000
• Progressive Rates: The SWT uses progressive tax rates, increasing with income. As of 2024, the top marginal tax rate is 42%. Rates and brackets are subject to change. A 25% rebate is available for allowable deductions up to the amount of SWT paid during the income year.
• Fortnightly Calculation: SWT is calculated and deducted fortnightly, regardless of the actual payroll frequency (weekly, monthly, etc.).
• Declaration Forms: Employees must complete declaration forms at the start of employment and when circumstances change. This informs the employer and the Internal Revenue Commission (IRC) about deductible expenses and allowances to ensure accurate tax calculations. Incomplete or inaccurate forms may result in taxation at the top marginal rate.
• Annual Return: Employees whose sole income is from salary or wages are not required to file an annual income tax return. Those with additional income sources (interest, rental income, etc., exceeding K100, excluding taxed dividends) must file a return.

Allowances and Benefits

• Cash Allowances: These are fully taxed. The allowance is added to the employee's salary, and SWT is calculated on the combined amount. Examples include housing and vehicle allowances. A tax variation may be requested from the Commissioner General under specific circumstances.
• Benefits Provided Overseas: The full cost of benefits provided to employees outside Papua New Guinea is considered taxable income and added to the employee's salary for SWT calculation.
• Non-Deductible Benefits for Employers: Employers cannot claim tax deductions for entertainment expenses or payments for public utilities, domestic services, security services, and club memberships provided to employees.
• Housing: Employer-provided housing is taxed based on prescribed rates. Tax variations may be applied for via the IRC.
• Motor Vehicle: Vehicle allowances are fully taxable. Employees can claim rebates for business-related vehicle expenses through their annual income tax return.
• Security: Employer deductions for security services are not permitted. Cash security allowances are fully taxable when paid to the employee. If the employer pays for the security services directly on behalf of the employee, it is non-taxable.

Dependent Rebates

Employees can claim dependent rebates, factored into the national tax rates. Variation declaration forms can be submitted to nominate qualifying expenses against the allowance, but deductions require approval from the IRC.

Superannuation

Papua New Guinea has a mandatory superannuation scheme. Both employers and employees contribute a percentage of the employee's salary to a superannuation fund, which provides retirement benefits. Specific contribution rates and details are available from relevant authorities.

Other Deductions and Rebates

A 25% rebate for employment-related expenses is available. Employees can apply to the IRC for a variation in SWT deductions based on anticipated work-related or other deductible expenses. Supporting documentation is necessary. General deductions for losses and expenditures incurred while earning assessable income are allowed, excluding capital, private, or domestic expenses.

Employer Responsibilities

Employers are responsible for deducting and remitting SWT to the IRC monthly. They must also file an annual reconciliation with the IRC. Shortfalls in tax remittances are recovered from the employer, not the employee.

Information is current as of February 5, 2025, and subject to change.