Papua New GuineaTax Obligations Detailed

In Papua New Guinea, employers face several key tax obligations, including salary and wages tax, superannuation contributions, and goods and services tax.

Salary and Wages Tax (SWT)

SWT is deducted from employees' pay and remitted to the Internal Revenue Commission (IRC). The tax is calculated on a fortnightly basis and is due on the 7th of the following month. All employees, including full-time and casual, must be declared. As of today, February 5, 2025, employers must ensure SWT for January 2025 is paid by February 7, 2025.

Superannuation Contributions

Employers with 15 or more employees must register with an authorized superannuation fund and make contributions for PNG citizen employees. The employer contribution is 8.4% of the employee's gross base salary (excluding overtime, bonus, and commission), while the employee contributes 6% of their gross base salary. Contributions for non-citizen employees are currently voluntary.

Goods and Services Tax (GST)

GST is a consumption tax levied at a rate of 10% on most goods and services supplied in Papua New Guinea. Businesses with an annual turnover of PGK 250,000 or more must register for GST. Businesses with a turnover below this threshold may voluntarily register. GST returns and payments are due on the 21st of the following month. The GST and GST65A filing relating to January transactions are due by February 21, 2025.

Corporate Income Tax

Resident companies are taxed at a rate of 30% on their taxable income, while non-resident companies are taxed at 48%. Commercial banks are subject to a 45% tax rate. The annual corporate income tax return is due by February 28 of the following year or April 30 if filed through a registered tax agent.

Personal Income Tax

The top personal income tax rate for residents and non-residents is 42% on taxable income exceeding PGK 250,000. Annual income tax returns are due by February 28 of the following year, or a later date if filed by a tax agent.

Other Taxes

• Dividend Withholding Tax: A 15% dividend withholding tax applies to profits repatriated overseas.
• Stamp Duty: Applies at varying rates to certain documents and transactions.

Tax Year

The tax year in Papua New Guinea runs from January 1 to December 31.

It's important to note that this information is current as of February 5, 2025, and might be subject to change. It is advisable to consult with a tax professional or the IRC for the most up-to-date information.

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.

In Papua New Guinea (PNG), the Goods and Services Tax (GST) is a value-added tax levied at a standard rate of 10% on most goods and services.

GST Registration

Businesses with an annual turnover exceeding PGK 250,000 (around USD 68,540 as of today's date) are mandated to register for GST. Smaller businesses can register voluntarily. Foreign entities operating in PNG and exceeding this threshold are also required to register.

Filing and Payment

GST returns and payments are due monthly, on the 21st of the month following the taxable period. The 2025 Budget proposed changes to extend the filing deadline for businesses with a turnover of up to PGK 1.5 million, though the implementation date isn't specified in the source material. Information about the specifics of the proposed extension was not found among the provided source. The 2025 budget also proposed reducing the GST refund time limit to four years from eight.

Rates and Exemptions

As of today's date, the standard GST rate remains at 10%. The 2025 National Budget introduces zero-rated GST on 13 essential household items, effective July 1, 2025. These include rice, tinned fish, tinned meat, chicken, tea, coffee, biscuits, noodles, flour, cooking oil, women's sanitary products, soap, and baby diapers.

Certain goods and services are generally exempt from GST, including:

• Financial services
• Medical services
• Educational services
• Public road transport

Zero-rated supplies (0% GST) include:

• Exported goods and services
• Supplies to prescribed foreign aid providers
• Certain supplies to resource companies
• Sales of a going concern

Other Tax Considerations for Employers in PNG

• Salary or Wages Tax (SWT): Employers are responsible for withholding SWT from employee salaries and remitting it to the IRC by the 7th of the following month. The SWT is calculated based on graduated tax rates.
• Corporate Income Tax (CIT): The corporate tax rate is generally 30%. Specific rates apply to commercial banks: 40% (on income below PGK 300 million) in 2025 and 35% from 2026 onwards; 44% (on income at or above PGK 300 million) in 2025, decreasing by 1% annually until 2034.
• Tax Clearance Certificate: A tax clearance certificate is required for any cumulative offshore transactions exceeding PGK 500,000 in a fiscal year.

This information is current as of February 5, 2025, and may be subject to change. It's always advisable to consult with a tax professional for the latest regulations and personalized guidance.

Papua New Guinea offers various tax incentives for businesses and individuals.

Corporate Tax Incentives

• Accelerated Depreciation: New industrial plants can depreciate up to 100% of the cost, with flexibility in the claimed amount each year (cannot create a loss). Applies to plant, buildings storing raw materials or finished products, with a useful life over five years. Agriculture and fisheries assets can be 100% written off in the first year. Dive boats for tourism also qualify for 100% first-year depreciation. Additional first-year depreciation of 20% applies to new plant (excluding residential property over PGK 100,000) used in manufacturing, construction, transport, storage, communication, or agricultural production, modifications for fuel conservation, and new non-oil-fired plants. Conversion to non-oil-fired plant receives 30%.

• Export Sales Exemption: 100% exemption on net income from exporting specific goods for the first three years. Years four to seven offer exemptions for export income exceeding the average of the first three years.

• Rural Development Incentive: A 10-year tax holiday for businesses in designated least developed areas. Losses can be offset against other business income. Applies only to non-resource companies.

• Double Deductions: Available for export market development costs, staff training, and overseas tourism promotion.

• Mining and Petroleum Incentives: Specific incentives exist for these sectors, including designated gas projects.

• Additional Incentives:

  • Manufacturers' wage subsidy.
  • Immediate deduction for solar heating plant costs.
  • 10-year tax exemption for new businesses in designated remote areas.
  • Specific deduction for environmental protection and cleanup costs.
  • Agricultural incentives include outright deductions for land clearing, pest eradication, worker accommodation, and water conservation/conveyance. 100% deduction for new agricultural plants, 20% accelerated depreciation for plants over five years.
  • 20-year carry-forward for primary production business losses. 150% deduction for free services to smallholder growers.
  • A 20% tax rate (instead of the usual 30% for residents, 48% for non-residents) applies to specific primary production income for up to ten years.

Individual Tax Incentives

• Dependent Rebates: Rebates are available for dependents, calculated based on gross tax. The first dependent qualifies for 15% (up to PGK 450, minimum PGK 45). The second and third dependents qualify for 10% (up to PGK 300, minimum PGK 30).

• SME Taxation: Simplified tax regimes for SMEs, including a 2% turnover tax for businesses earning less than PGK 250,000 annually, or a flat PGK 400 annual fee for turnover under PGK 50,000.

• Superannuation: Full tax exemption on superannuation withdrawals for individuals with over 15 years of service.

• First-Home Buyer Incentives: Stamp duty exemption increased to PGK 700,000 for first-time homebuyers. Income tax exemptions available on employer-supported housing loans up to PGK 700,000 for citizen employees.

Other Tax Incentives

• GST Zero-Rating: 13 essential goods, including rice, canned fish, cooking oil, and soap, will become GST zero-rated.

• Foreign Tax Credit: Credit available to offset foreign tax paid against PNG tax payable (limited to the lower of foreign tax paid or PNG tax payable on the foreign income).

• Tax Clearance Certificate (TCC) Relief: The TCC threshold for overseas remittances increased to PGK 1.5 million.

Application Procedures

Specific application procedures vary depending on the incentive. Consult the Internal Revenue Commission (IRC) for detailed information and relevant forms.

This information is current as of February 5, 2025, and may be subject to change. Always verify with official sources for the latest details.