Papua New Guinea

A company will be deemed a resident for CIT purposes if it meets either the (i) incorporation test or (ii) the management and control test.

Incorporation test

A company incorporated in Papua New Guinea is automatically regarded as a PNG tax resident. However, the operation of the law of another country and a relevant DTT may result in a company also being treated as resident in another country.

Management and control test

A company is a PNG tax resident if it is managed and controlled in Papua New Guinea, regardless of where it is incorporated. Generally, a company is managed and controlled in Papua New Guinea if key decisions affecting the company are made at directors’ meetings held in Papua New Guinea. This also includes a company incorporated outside Papua New Guinea that trades in Papua New Guinea and has its voting power controlled by resident shareholders.

Dual residence

An entity may be a tax resident of both Papua New Guinea and another country by application of domestic legislation. A DTT entered into between Papua New Guinea and another country may contain a tiebreaker test to determine the country of residence for the purposes of the DTT.

Permanent establishment (PE)

The concept of 'permanent establishment' – defined in Section 8 of ITA 2025 – is central to the taxation of non-residents deriving PNG-source income. This is discussed in detail under ‘Taxation of non-residents’ in the Taxes on corporate income section.

A PE exists where a non-resident carries on business through a fixed place in Papua New Guinea, including the following specific types of PE:

• Fixed place PE: office, branch, factory, warehouse, workshop, place of management, mine site, oil/gas well, quarry, or similar location (excluding a mere representative office).

• Service/consulting PE: furnishing of services (including consultancy) through employees or personnel for more than 183 days in any 12-month period.

• Construction PE: building, construction, assembly, or installation project (including supervisory activities and connected work by associates) continuing for more than 90 days in any 12-month period.

• Substantial equipment PE: use, maintenance, or installation of substantial machinery/equipment for more than 90 days in any 12-month period.

• Agent PE: dependent agent who habitually negotiates or concludes contracts or maintains stock for regular deliveries on behalf of the principal.

Importantly, Section 8(6) of ITA 2025 provides that if a non-resident has a PE in Papua New Guinea under the terms of an applicable DTT to which they are resident but does not meet the domestic PE criteria under the other subsections of Section 8, they will nonetheless be treated as having a PE for the purposes of the Act. This means the DTT's PE definition can expand (but not contract) the domestic scope in cases where a treaty applies.

In practice, foreign investors and service providers must therefore assess their activities not only against Section 8's domestic triggers but also against the specific PE article in any relevant DTT (typically Article 5 in PNG's treaties with Australia, Canada, China, Fiji, Indonesia, Korea, Malaysia, New Zealand, Singapore, or the United Kingdom).