Papua New Guinea Tax Regime

Papua New Guinea operates a source- and residence-based income tax system administered by the Internal Revenue Commission (IRC). Resident companies are taxed on worldwide income; non-residents on Papua New Guinea-sourced income only, generally through a permanent establishment. The general corporate income tax rate is a flat 30%, with a separate, elevated rate schedule for commercial banks and a 15% remittance tax on the after-tax profits of non-resident branches repatriated abroad. The economy remains heavily weighted toward extractive industries — petroleum, gas and mining — which are governed by dedicated project-development agreements and additional profits taxes layered on top of the standard corporate regime. Administration is centralised, the currency is the PNG kina (PGK), and the tax framework draws heavily on Australian-derived income tax concepts reflecting the jurisdiction's legal history.

1.1 Sources

Primary legislation includes the Income Tax Act 2025, which took effect on 1 January 2026 and replaced the Income Tax Act 1959, together with the Income Tax Regulation, the Goods and Services Tax Act 2003, the Tax Administration Act, and sector-specific instruments such as the Oil and Gas Act and the Mining Act governing resource-project taxation.

1.2 Recent developments

The standard corporate income tax rate has remained stable at 30% for resident companies and non-resident permanent establishments. A differentiated rate schedule applies to commercial banks: 35% on taxable income up to PGK 300 million, with rates on income above that threshold scheduled to progressively reduce from 43% toward 35% year by year through to 2034, reflecting a phased normalisation of bank taxation. The IRC has continued to strengthen compliance and audit capability, with increased attention to transfer pricing in the resource sector, employer withholding compliance, and GST registration enforcement as the government works to broaden the non-resource revenue base alongside continued LNG and mining receipts.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

A company is resident in Papua New Guinea if it is incorporated in the country, or if it carries on business in Papua New Guinea and has either its central management and control there or its voting power controlled by PNG-resident shareholders. Resident companies are assessed at the standard rate of 30% on worldwide trading profits and other assessable income, other than specifically exempt income. Non-resident companies are taxed at 30% only on income attributable to a Papua New Guinea permanent establishment or otherwise sourced in the country. Commercial banks are taxed on a graduated basis: 35% on taxable income up to PGK 300 million, with a reducing scale on the excess trending toward 35% by 2034. There is no separate small-company rate outside specific incentive regimes.

A non-resident's permanent establishment must also pay a remittance tax of 15% on after-tax branch profits that are repatriated (or deemed repatriated) out of the country, in substance operating like a branch profits tax additional to the 30% entity-level charge.

2.2 Dividends and participation

Dividends paid by a resident company to another resident company are generally subject to dividend withholding tax, though an inter-corporate exemption is available where the recipient is a resident company holding shares in the paying company, subject to conditions preventing dividend-stripping. Dividends paid to non-residents are subject to dividend withholding tax at the domestic rate, reduced under Papua New Guinea's limited treaty network. There is no separate participation exemption regime comparable to OECD-style holding-company jurisdictions; relief instead operates through the inter-corporate dividend rules and, for foreign-source dividends, through foreign tax credit relief where the recipient is PNG-resident.

2.3 Income determination and deductions

Taxable income is calculated as assessable income less allowable deductions, following accounting profit as adjusted for tax law. Business expenses incurred in gaining or producing assessable income are generally deductible, including interest, rent, repairs and normal operating costs; capital expenditure is instead recovered through depreciation allowances at rates set by regulation for different asset classes, with accelerated allowances available for approved development projects and primary production. Entertainment expenditure, most fines and penalties, and expenditure of a capital, private or domestic nature are non-deductible. Bad debts are deductible when written off if previously brought to account as assessable income. Resource-sector taxpayers (petroleum and mining) compute income under separate project-based rules including uplift on exploration and development expenditure.

2.4 Interest limitation

Thin-capitalisation rules restrict the deductibility of interest on debt exceeding prescribed debt-to-equity safe-harbour ratios for related-party and non-arm's-length financing, with different ratios historically applied to resource-sector companies (reflecting their capital intensity) than to other sectors. Interest that fails the safe harbour, or that is not on arm's-length terms, is disallowed to the extent of the excess, and related-party interest more broadly is tested for market conformity under the transfer pricing rules.

2.5 Losses

Trading losses may generally be carried forward and offset against future assessable income, subject to a time limit (traditionally up to 20 years for companies undertaking primary production and qualifying activities, and a shorter period for other companies) and to continuity-of-ownership or same-business tests that can restrict carryforward where there has been a substantial change in the underlying ownership of a loss company. There is no loss carryback and no general consolidated-loss surrender outside project-specific resource arrangements.

2.6 Group taxation

Papua New Guinea does not operate a general tax consolidation or group relief regime permitting the surrender of losses between related companies. Each company is assessed separately, and intra-group transactions — including management charges, financing and cost allocations — must be conducted on arm's-length terms and are subject to specific transfer pricing and anti-avoidance scrutiny. Resource-sector joint ventures are instead taxed under project-specific fiscal terms negotiated with the state, which can include state equity participation and additional profits taxes rather than group relief.

2.7 Controlled foreign companies and international rules

Papua New Guinea does not operate a comprehensive CFC attribution regime of the OECD BEPS Action 3 style; foreign-source income of resident companies is instead taxed on remittance or accrual under general assessable-income principles, with double taxation relieved through foreign tax credits up to the PNG tax otherwise payable on the same income. The general anti-avoidance provisions in the Income Tax Act empower the Commissioner General to disregard or recharacterise arrangements entered into for a dominant purpose of obtaining a tax benefit, and are applied alongside transfer pricing rules to resource-sector and cross-border structures.

2.8 Transfer pricing

Related-party cross-border (and, in the extractive sector, some domestic) transactions must be priced on an arm's-length basis, with the IRC empowered to adjust profits where pricing departs from what independent parties would have agreed. Documentation expectations increasingly follow OECD Transfer Pricing Guidelines methodology, particularly for large resource-sector taxpayers, though formal three-tier master file/local file/country-by-country documentation obligations are less codified than in OECD member jurisdictions. Advance pricing arrangements are available administratively on a case-by-case basis for major project taxpayers.

2.9 Incentives

Tax incentives target priority sectors: accelerated depreciation and, for petroleum and mining projects, uplifted deductions on qualifying exploration and development expenditure; tax holidays and reduced rates for approved agricultural, tourism, manufacturing and rural-development projects under gazetted incentive schedules; and double deduction for selected staff training and export-market-development expenditure. Additional profits tax applies in the resource sector once project returns exceed a prescribed threshold rate of return, layering an extra charge onto the standard 30% corporate rate at high profitability levels.

2.10 Pillar Two

Papua New Guinea has not enacted Pillar Two global minimum tax legislation and is not presently applying an income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax. In-scope multinational groups headquartered elsewhere should nonetheless monitor whether their PNG operations attract top-up tax exposure under a parent jurisdiction's IIR or UTPR, since the absence of a domestic minimum tax does not exempt PNG income from foreign top-up taxation by other jurisdictions in the group's structure.

2.11 Branch income and reorganisations

A non-resident company's Papua New Guinea branch (permanent establishment) is taxed at the standard 30% rate on profits attributable to the branch, determined broadly on the same basis as a resident company, with the additional 15% remittance tax applying to after-tax profits repatriated or treated as repatriated to the foreign head office. There is no general tax-free domestic reorganisation regime comparable to European reconstruction relief; asset transfers, mergers and corporate restructurings are analysed under ordinary disposal and market-value rules unless specific project or statutory relief applies, meaning capital gains and depreciation recapture consequences should be modelled carefully before any restructuring involving PNG entities or resource-project interests.

3.1 Residence and rates

Resident individuals are taxed on worldwide income; non-residents on Papua New Guinea-sourced income. Residence follows physical presence and domicile-style tests, with an individual present in the country for more than half the tax year ordinarily treated as resident. Salary and wages income is taxed under a progressive schedule with a tax-free threshold followed by increasing marginal rates up to a top marginal rate of 42% applied to higher income bands; non-residents are generally taxed from the first kina of PNG-source income without the benefit of the resident tax-free threshold. Employers withhold salary or wages tax under a pay-as-you-earn style system on a fortnightly or monthly basis.

3.2 Capital income and business income

Papua New Guinea does not levy a general, freestanding capital gains tax on individuals outside specified categories (such as gains on disposal of certain business assets or property that are captured as ordinary assessable income where the taxpayer is in the business of dealing in such assets). Interest, dividends and royalties derived by resident individuals are assessable income, generally net of withholding tax already deducted at source, which is then creditable against the individual's final assessment. Self-employed and business income is assessed under the same general deduction principles as apply to companies, with allowable business expenses reducing assessable income.

3.3 Social security and payroll

Employees and employers contribute to approved superannuation funds under the Superannuation (General Provisions) Act, with minimum statutory contribution rates split between employer and employee (broadly in the range of a combined 13–14% of salary, weighted more heavily to the employer). Employers must register with the IRC for salary and wages tax withholding and remit deductions monthly; a training levy applies to larger employers to fund workforce development. There is no separate national health-insurance payroll levy.

3.4 Inbound individuals

There is no net wealth tax, no inheritance tax and no gift tax in Papua New Guinea. Expatriate employees working under approved employment contracts are subject to the same salary and wages tax rules as residents once resident, though non-resident individuals are taxed from the first kina without the tax-free threshold and cannot access resident-only rebates. Work permit and foreign-employment approvals are administered separately from tax registration but are commonly coordinated for inbound assignees, particularly in the resource and construction sectors where fly-in-fly-out arrangements are common.

Papua New Guinea imposes withholding tax on dividends, interest and royalties paid to residents and non-residents, together with a management fee withholding tax on payments to non-residents for management services and a mining/petroleum-sector withholding regime on payments to non-resident contractors and sub-contractors. Papua New Guinea's tax treaty network is limited relative to OECD economies, with a small number of comprehensive treaties (including with Australia, and a handful of other partners) reducing withholding rates on qualifying payments; in the absence of a treaty, domestic statutory rates apply in full. Relief at source or via refund generally requires evidence of tax residency in the treaty partner state and beneficial ownership of the income.

The 2.4% gross-income charge on overseas shippers and charterers carrying passengers, livestock, mail or goods out of Papua New Guinea is a distinctive feature of the regime; the IRC may exempt an overseas shipper where the shipper's home jurisdiction extends a reciprocal exemption to PNG shippers. Because the treaty network is thin, most cross-border payments to non-treaty-country recipients bear the full domestic withholding rate, which materially affects financing and licensing structures for inbound investors.

5.1 General anti-avoidance and substance

The Income Tax Act contains a general anti-avoidance provision empowering the Commissioner General to cancel a tax benefit obtained under an arrangement entered into with a dominant purpose of avoiding or reducing tax, including through recharacterisation of the arrangement or reconstruction of the parties' tax position as if the scheme had not been entered into. Resource-sector arrangements, related-party financing and cross-border service arrangements attract particular scrutiny under this provision, applied alongside the thin-capitalisation and transfer pricing rules described above.

5.2 Exchange of information and disclosure

Papua New Guinea participates in international tax cooperation frameworks and exchanges information with treaty partners and under multilateral instruments to which it is party, supporting the IRC's ability to verify cross-border transactions and offshore holdings of resident taxpayers. There is no domestic mandatory disclosure regime equivalent to the EU's DAC6, but the IRC's audit function increasingly draws on beneficial-ownership and cross-border data obtained through exchange-of-information channels, particularly for resource-project financing structures and related-party service arrangements involving offshore affiliates.

6.1 Goods and services tax

Goods and Services Tax (GST) is levied at a standard rate of 10% on the supply of most goods and services and on imports, broadly modelled on the Australian GST. Certain supplies are zero-rated (including exports and specified basic foodstuffs) or exempt (including certain financial services and residential rents). Registration is compulsory once turnover exceeds the statutory threshold, with voluntary registration available below it. Registered persons file periodic GST returns (generally monthly for larger taxpayers) and may claim input tax credits for GST incurred on business inputs, subject to standard record-keeping and tax-invoice requirements.

6.2 Resource-sector and other taxes

Additional profits tax applies to petroleum and mining projects once the project's internal rate of return exceeds a prescribed threshold, layering an extra charge onto the standard 30% company rate for highly profitable resource projects; royalties and development levies are also payable to national and provincial governments and landowner groups under project development agreements. Stamp duty applies to specified instruments including property transfers and share transfers. There is no net wealth tax, no payroll tax at the national level beyond salary and wages tax withholding, and no VAT-style tax separate from GST. Excise duties apply to fuel, tobacco, alcohol and selected imported goods.

7.1 Filing, assessment and audit

The tax year is generally the calendar year, though companies may apply to adopt a substituted accounting period aligned with a different balance date. Corporate income tax returns are filed annually with the Internal Revenue Commission, with instalment payments of estimated tax due during the year and a final balancing payment on assessment. The IRC conducts risk-based audits, with heightened focus on transfer pricing, thin capitalisation and withholding tax compliance for cross-border payments, particularly in the resource sector. Taxpayers must retain records supporting their returns for a statutory retention period and produce them on request.

7.2 Rulings, appeals and penalties

Taxpayers may seek private binding rulings from the IRC on the application of the tax law to a specific arrangement, providing a measure of certainty for significant transactions and project structuring. Objections to assessments are made to the Commissioner General in the first instance, with further appeal rights to the Review Tribunal and ultimately the National Court on questions of law. Penalties apply for late lodgement, late payment and understatement of tax, with additional tax and interest charges accruing on outstanding liabilities; voluntary disclosure ahead of audit selection can mitigate penalty exposure.

Because instalment obligations are based on estimated current-year liability, taxpayers should review estimates during the year to avoid under- or over-payment penalties on the final assessment; resource-sector taxpayers with project-specific fiscal terms should also track royalty and additional-profits-tax timing separately from standard company tax deadlines.

9.1 Entity choice

The private company limited by shares, incorporated under the Companies Act, is the standard vehicle for inbound investors, offering limited liability and straightforward incorporation through the Investment Promotion Authority and Companies Registry. Foreign investors in restricted sectors may need certification from the Investment Promotion Authority. Branches of foreign companies are permitted and are commonly used for time-limited construction, engineering and resource-services contracts, but attract the additional 15% remittance tax on repatriated profits, which often makes local incorporation more efficient for longer-term operations.

9.2 Structuring and incentives

Resource-sector investors should structure around project development agreements, which set out the applicable fiscal terms (royalty rates, state equity participation, additional profits tax thresholds) specific to the project and can differ materially from the generic statutory regime. Non-resource investors in agriculture, tourism, manufacturing and rural development should evaluate gazetted incentive schedules for accelerated depreciation, tax holidays or reduced rates. Financing structures must be tested against thin-capitalisation safe-harbour ratios, and cross-border management and technical service fees should be reviewed for management fee withholding tax exposure before contracts are finalised.

9.3 Worked effective-rate illustration

A Papua New Guinea resident company (non-bank, non-resource) earns EBITDA of PGK 10,000,000, books depreciation of PGK 1,500,000 and interest expense of PGK 800,000 that is fully within the thin-capitalisation safe harbour and therefore fully deductible. Taxable income is 10,000,000 − 1,500,000 − 800,000 = PGK 7,700,000. Corporate income tax at the standard 30% rate is PGK 2,310,000, leaving after-tax profit of PGK 5,390,000. If the full after-tax profit were distributed to a non-resident parent with no treaty relief and the entire amount were treated as remitted, the 15% remittance tax would apply to the PGK 5,390,000 distributed, giving remittance tax of PGK 808,500. The combined effective burden is (2,310,000 + 808,500) / 7,700,000 = 40.5% of taxable income before any dividend withholding tax on the distribution itself, illustrating why the remittance tax is a first-order consideration for foreign-branch and repatriation planning in Papua New Guinea.

9.4 Compliance

Expect annual company income tax returns, monthly GST returns for registered taxpayers, fortnightly or monthly payroll withholding remittances, and — for resource-sector taxpayers — separate royalty, additional-profits-tax and project-reporting obligations under the relevant development agreement. Investment Promotion Authority certification and sector-specific approvals should be renewed on schedule, and thin-capitalisation and transfer pricing positions for related-party financing and service arrangements should be documented contemporaneously given the IRC's increasing audit focus in this area.