MAJOR DEVELOPMENTS
The 1997 National Budget, handed down in November 1996, highlighted the following tax changes:
q The existing unit trust provisions were amended, and new
provisions were introduced for property unit trusts and landowner resources trusts;
q A new gas tax regime was introduced to tax gas operations in
PNG at 30%, and new amended provisions were introduced to align the taxation of petroleum operations with gas operations in the future;
q The stamp duty provisions previously in place to provide stamp duty concessions on citizen-owned group reorganizations have been amended to make the conditions for application more lenient;
q A new gaming tax of 20% on gross profits derived by operators in the gaming industry will apply as of December 1, 1996;
q Tariff reform has been proposed;
q The introduction of value-added tax (VAT) has been proposed
effective January 1, 1998.
INCOME TAXES ON CORPORATIONS
1.Rates
The rate of income tax for corporations incorporated in Papua New Guinea for the year ended December 31, 1997, is 25%. Corporations that are not resident in Papua New Guinea will, for the year ended December 31, 1997, pay income tax at the rate of 48% on their Papua New Guinea-source income. Resident corporations deriving assessable income from mining operations are taxed at 35% (operating on a special mining lease) or 25% (operating on a general mining lease). Resident and
nonresident corporations deriving assessable income from petroleum operations are taxed at 50% on such income. Resident and nonresident corporations deriving assessable income from gas operations are taxed at the rates of 30% and 48%, respectively, effective January 1, 1997. A trustee of a resident trust estate is taxed on the net income of the
trust estate at the rate of 28%.
Unit trusts are taxed at 30% if certain requirements are met. Property unit trusts are taxed at the rate of 30%. Landowner resources trusts approved by the Minister for Finance are taxed at the rate of 25%.
Normal corporation income includes dividend income, but
resident corporations receive a rebate of income tax on dividend income (net of related expenses) from other corporations whether resident or nonresident in Papua New Guinea.
2.Local Income Taxes
None.
3.Capital Gains Taxes
There is no general capital gains tax in Papua New Guinea. The existing law provides, however, that the assessable income of a taxpayer includes any profit arising on sale of property, or any profit arising from the carrying out of a profit-making enterprise.
4.Branch Profits Tax
Nonresident corporations are taxable on Papua New Guinea-source income at the rate of 48%. No withholding or remittance taxes are levied on branch profits that have suffered income tax. However, see items 15 and 28.
5.Foreign Tax Reliefs
A resident corporation is entitled to a credit in respect of foreign tax paid on income other than dividends, but the credit allowable is not to exceed the average rate of Papua New Guinea tax payable on the foreign-source income. There is no relief for underlying tax.
6.Classification of Corporations
Corporations are classified for Papua New Guinea tax purposes as resident or nonresident corporations, and as public or private corporations.
A resident corporation is one that is incorporated in Papua New Guinea or, if not incorporated in Papua New Guinea, carries on business in Papua New Guinea and has either:
q Its central management and control in Papua New Guinea;
q Its voting power controlled by shareholders who are residents of Papua New Guinea.
Resident corporations are taxable on worldwide income. Nonresident corporations are subject to tax only on their Papua New Guinea-source income.
A public corporation is, broadly, one in which either shares are listed on a stock exchange and the 20 largest shareholders have less than 50% of voting rights or dividend entitlement, or the corporation is ultimately controlled by such a public corporation or public corporations.
Corporations that are not public corporations are classified as private corporations. Private corporations generally are subject to the same rules as public corporations except that a dividend may be deemed to have been paid on noncommercial loans, gifts, excessive remuneration, and other benefits provided to a director, shareholder, or other associated person of the company.
7.Payment of Taxes
Except for mining, petroleum, and gas corporations, corporate income tax is assessed and paid in the year following the income year. If notified by the Taxation Office, corporations pay 搉otional tax?based on income of the year preceding the income year but may elect to pay by three equal install
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