Papua New Guinea

New Income Tax Act 

In March 2024 the Income Tax Act 2025 was passed. It is planned to take effect on 1 January 2026.  

Although the intent was broadly a simplification of the current act and an update in language used, the new act will represent a significant change in policy and will impact on all taxpayers operating in the country. 

The most significant changes include:

• Capital Gains Tax (CGT) to apply to interests in mining and oil and gas projects.
• Resources taxation: Whilst ring fencing of project income and expenditure is generally maintained, changes to depreciation calculations, including deductions for acquisition costs and the reduction in the additional profits tax uplift factor from 15% to 13%, may impact the resources sector. However, the impact of these provisions will be limited to those projects commencing after the new act takes effect. For existing projects, the resource taxation elements of the old act will continue to apply. 
• Taxation of employment benefits: The taxable value of certain benefits (in particular motor vehicle) has been changed and increased. There are also some additional benefits included. 
• Taxation of non-residents: non-residents operating through a PE in PNG will no longer be subject to tax through withholding (the old Foreign Contractors Withholding tax), PEs are required to file an income tax return and pay tax on a net income basis. PEs are also subject to a branch profits tax of 15%. There are also some changes to the existing WHT applicable for payments to non-residents with the intorduction of a broad technical fees provision replaceing the existing management fee withholding tax.

Although the act has been passed, there is still a requirement for subsidiary regulations to be drafted and released as well as amendments to the Taxation Administration Act in order to give full effect to the new regime. These changes should be in place before 1 January 2026, although there is no indication of current release of drafts or any consultation. 

If the matters above are relevant to your circumstances, then these potential changes should be considered and discussed with a PwC contact.

2025 National Budget and other legislative developments

The 2025 National Budget (released in November 2024) contained very limited tax changes due to the interest in presenting a new income tax act. 

There were no corporate income tax changes, nor changes in personal income tax. There were limited changes in Goods and Services Tax

MLI and MAAC ratified

At the end of August 2023, the Internal Revenue Commission announced that Papua New Guinea has ratified the Multilateral Administrative Assistance Convention (MAAC) and the Multilateral Instrument (MLI), establishing Papua New Guinea's presence within the realm of international tax collaboration. However, there have been no consequential amendments introduced to legislation.