Papua New Guinea

Taxable income is defined as the sum of assessable income minus allowable deductions. In practice, profits are calculated for tax purposes by reference to the profits reported in the financial accounts. Accounts must be prepared in accordance with PNG accounting principles, which follow the International Financial Reporting Standards (IFRS). 

Capital gains

The ITA2025 includes a capital gains tax (CGT) regime that will apply to disposals of taxable assets which are defined as: 

• a resource right; 

• information relating to a resource right;  

• a membership interest in an entity where more than 50% of the value of the interest is derived from a resource right or information; 

• an option or right to acquire an asset referred to in the preceding items above. 

The gain on sale is broadly calculated as the value of the consideration less cost subject to 15% tax. The ITA 2025 provisions allow for an uplift in the cost base of assets to fair market value as at 1 January 2026 for CGT purposes. 

However, profits arising on the sale of property acquired for the purpose of resale at a profit, or from the carrying out of a profit-making scheme, are taxable as ordinary income. 

Dividend income

Dividends received by resident companies from another resident company are exempt income. However, dividends received by resident companies from non-resident companies are only exempt if the resident company has participation interest in the non-resident company where 10% or greater interest in the voting power of the non-resident company. Dividends received by approved superannuation companies are also exempt income. 

Dividends received by other types of shareholders – resident individuals, partnerships and trusts and non-resident shareholders - are assessable income and subject to 15% dividend WHT unless a resident company is ultimately entitled to the dividend as specified by the resident partnership or trustee of the trust in an approved notice in writing.  

The 15% dividend WHT is a final tax in all cases. For non-residents, the rate is not reduced under any applicable double tax treaty. 

Stock dividends

In most cases, the payment of a dividend by way of the issue of shares is subject to the same taxation treatment as the payment of a dividend by way of cash or the distribution of other property. However, dividends paid by the issue of shares wholly and exclusively out of profits arising from the sale or revaluation of assets not acquired for the purpose of resale at a profit are exempt from income tax and dividends WHT. 

Interest income

Interest paid by a resident company or a PE of a non-resident entity to a resident individual, resident partnership or resident trust is assessable income and the person making the payment of or crediting interest in the account is liable to withhold and pay tax upon the amount.  

Royalty income

Tax is imposed on royalties and similar payments made to non-residents who do not have a PE in Papua New Guinea. The tax must be withheld by the payer on behalf of the payee and remitted to the IRC. The tax payable on royalties paid to a party who is not an ‘associated person’ is 10% of the gross royalty. 

Royalty payments to a non-resident ‘associated person’ are liable for a WHT of 30% of gross payments (subject to any DTT). 

The definition of ‘associated person’ is detailed and widely drawn. Broadly, it encompasses relatives, partners, companies under effective common control, and related trust interests. 

There is also a 5% WHT on mining, petroleum, timber, and fishing royalties to landowners. 

Partnership income

A partner’s share of the assessable income of the partnership less all allowable deductions to the partnership is includable in the partner’s assessable income for the year of income. Likewise, the partner’s individual interest in a partnership loss incurred in the year of income is an allowable deduction. Further, if income is exempt income to the partnership, this income will be exempt income to the individual partner relative to their individual interest.

Foreign income

PNG resident companies are liable for CIT on their income from all sources (i.e. including foreign-sourced income). A foreign tax credit may be available to offset foreign tax paid against PNG tax payable (see the Tax credits and incentives section for more information).

There are no provisions in Papua New Guinea that permit the deferral of the taxation of income derived outside Papua New Guinea. Subject to the operation of a DTT, foreign-sourced income derived by a resident of Papua New Guinea is subject to tax in Papua New Guinea in the year in which it is derived, irrespective of whether or not that income is repatriated to Papua New Guinea.