Papua New Guinea

Residents of Papua New Guinea (PNG) are taxed on their worldwide income. A foreign tax credit may be available to offset foreign tax paid against PNG tax payable (see the Foreign tax relief and tax treaties section).

Non-residents are generally taxed only on their PNG-sourced income. A non-resident's PNG-sourced passive income, including dividends, interest, and royalties, may be subject to withholding tax (WHT). The payer of the dividend, interest, or royalty must withhold the relevant amount of the tax and remit this to PNG's Internal Revenue Commission (IRC).

Personal income tax rates

Income derived by individuals, including salary or wages income, will generally be taxed at the following rates:

The rates for residents are as follows:

* PNG kina

The rates for non-residents are as follows:

Small Business Tax

PNG maintains a Small Business Tax regime that only applies to individuals and excludes employment income and income from professional services. The regime simplifies tax compliance obligations for the SME (e.g. goods and services tax [GST], personal income tax [PIT]) where tax is calculated and paid on the following basis:

• 2% of turnover for an SME that derives less than PGK 250,000 in an income year, or
• a PGK 400 annual fee for a business with a turnover of less than PGK 50,000.

Once a taxpayer elects out of the SME regime, or exceeds the threshold, they will be taxed as an individual (i.e. at marginal tax rates).

The changes are intended to encourage the development and increased compliance of SME businesses in Papua New Guinea.