Papua New Guinea
Goods and services tax (GST)
The GST rate is 10% and applies to most goods and services supplied in Papua New Guinea. Exported goods and services attract a zero rate of GST. The supply of some goods and services are exempt, including medical, educational, and financial services. Land is excluded from GST, but buildings and other improvements are subject to the tax.
An import GST deferral scheme is also available. Taxpayers wishing to participate in the import deferral scheme are required to apply for approval by the IRC and must have a good history of tax compliance in order to qualify.
Directors of companies that fail to comply with GST obligations are personally liable for a penalty equal to the outstanding tax liability that the company ought to have remitted to the IRC.
The majority of manufacturing inputs (including plant and machinery) attract no customs duties, and other customs duty rates are being progressively reduced. The remaining rates for customs duties vary depending on the nature of the good being imported and are assessed on the total value of the goods imported, including cost, insurance, and freight (CIF). Customs bonds may be issued for the temporary importation of goods that are to be re-exported within 12 months.
Although customs duties are now minimal in many cases, some goods, most notably motor vehicles, now attract excise tax. Private motor vehicles can attract excise tax of up to 40%, whereas work vehicles attract excise tax of 10%. Excise taxes can also apply to some domestically produced goods, including refined fuel products, alcohol, and tobacco. The tobacco excise tax is increased 5% biannually (10% annually).
Land tax is imposed annually by provincial governments on the unimproved value of the land, and the power to levy land tax is vested exclusively with the provincial governments. In Papua New Guinea, land tax is difficult to implement and faces major geographical and social problems.
Stamp duty applies at varying rates on documents and certain transactions. Of particular note is duty charged on the conveyance of property, which rises to a maximum of 5% where the value of the property being transferred exceeds 100,000 PNG kina (PGK). The duty is payable by the purchaser, and a 5% duty on the unencumbered value of land may also be payable where there is a transfer of shares in certain landholding companies.
Other dutiable transactions include share transfers (including some share buy-backs), which are subject to a rate of 1%. The Collector of Stamp Duties has the power to amend assessments and refund overpayments of stamp duty.
The Stamp Duties Act was amended to implement a rental income compliance system. The amendment effectively makes it compulsory for a landlord to provide their Taxation Identification Number (TIN) on lease documents, as lease documents will not otherwise be stamped.
Stamp duty is payable on documents executed outside Papua New Guinea that relate to property or matters done or to be done in Papua New Guinea.
Export duty on timber logs (not sawn timber or plantation logs) is calculated with reference to the freight on board (FOB) value per cubic metre of exported logs and rates that increase as the value of the exported logs increase.
Levies are imposed from time to time on the export of specified spices (e.g. vanilla).
Salary or wages tax (SWT)
Businesses paying salary or wages to employees are required to withhold SWT (calculated at the prescribed marginal rates) and remit to the IRC on the seventh day of the month following the month of payment.
Salary or wages is defined as remuneration paid to employees in cash or kind, including benefits such as accommodation and transportation.
Normal employment-related receipts and benefits also include any remuneration paid as consultancy fees or fees for professional services, where the remuneration is paid wholly or substantially for personal services performed in Papua New Guinea.
Directors are personally liable for any unpaid SWT obligations of their companies. Directors who fail to ensure their company complies with its SWT reporting obligations may be penalised at a rate of 20% of the unpaid tax liability per annum. After three months of non-payment of outstanding SWT, directors will not be able to obtain a remission of penalties imposed.
Contributions to employee superannuation funds
Contributions to employee superannuation funds are compulsory for entities with 15 or more permanent employees. The employer’s compulsory contribution is 8.4% of each employee’s gross basic salary. The employee’s minimum contribution is 6.0%.
Membership is generally compulsory for citizens. Non-citizens are currently exempt; however, this is under continuing review.
Contributions must be paid to an authorised superannuation fund. Contributions paid to an authorised fund are tax-deductible to the extent that they do not exceed 15% of the relevant employee’s gross taxable salary. Contributions to non-resident funds are not tax-deductible.
The training levy is abolished effective from 1 January 2018.
Previously, all businesses whose annual payroll exceeded PGK 200,000 were subject to a 2% training levy, calculated on the sum of the taxable salaries, including benefits, of all personnel. Qualifying expenses incurred in training PNG citizen employees were creditable up to the actual amount of the levy. The training levy, if payable, was not tax-deductible.
A departure tax is collected by airlines issuing tickets for persons departing Papua New Guinea.
Gaming machine tax
Papua New Guinea imposes a 74% tax on gross revenue from gaming machines.
Resource project production levies
Production royalties of 2% are payable to the national government on the net smelter return from mining operations. These royalties are tax-deductible. A royalty, at the rate of 2% of the wellhead value, is also payable from the production of petroleum and gas operations. Holders of new petroleum development licences are entitled to treat royalties as income tax paid. However, new petroleum projects will also pay a tax-deductible development levy calculated at the same rate of 2% of the wellhead value.
Mining projects are also required to pay a production levy to the Mineral Resources Authority calculated at a rate between 0.25% and 0.5% of the assessable income from production.